Study says offering services will propel DSL industry

Although the DSL (digital subscriber line) industry appears to be at a standstill, Boston-based Pioneer Consulting’s recent study revealed that the industry will move forward if companies add to their offerings.

According to Mike Lowe, senior market analyst broadband emerging access for Pioneer, charging for access alone results in typically not enough money to cover even the payback on equipment. The study – Enabling Value-Added Services Over DSL Networks: Market Opportunities for Service Providers and Equipment Suppliers – suggests that providers should offer value-added services along with their telephony offerings to produce a quicker return on investment (RoI).

“You can’t really increase rates because you have to stay competitive with other providers,” Lowe said, “so you start adding these value-added services.”

Lowe said that he sees value-added services, such as voice over DSL or broadcast television over DSL, as the only thing that will get the industry out of what he calls a vicious cycle of data-only subscribers and not enough money to pay for them.

He offered that these DSL-based value-added services have proven to be in demand from not only the business market, but the residential market as well.

“If [consumers] are already paying $40 a month for cable and you can pay the same for broadcast television over your DSL network … you are not spending anymore money than before,” he said. “(The difference with value-added services) is that you get one bill, one service provider, probably a discounted price for the bundle and a little bit more ability to tailor your services to your own desires.”

The Pioneer study not only boosted the DSL industry, but also looked at where it has stumbled in the past. Lowe said that one of the main issues is that DSL has previously not produced a significant RoI. He added that there have been several technical limitations.

“Things like digital loop carriers carry the signal (out to rural and suburban areas),” he said. “(The problem is) DSL lines cannot pass through them. Until recently, 40 per cent of American subscribers could not get DSL because they were behind a digital loop carrier.”

He noted that DSL by nature has distance limitations, and typically does not extend past 12,000 feet from a central office.

Whatever the limitations, it has not hindered Nortel Networks from enabling value-added services as part of its offering.

According to Alan White, Nortel’s senior manager of broadband access product marketing, Nortel is attacking value-added bundled services in two ways; by building equipment that specifically accommodates those needs, and by establishing partnerships with companies like Jetstream, a San Jose, Calif.-based developer of bundled voice and data delivery systems, to complete an end-to-end solution.

“The DSL industry as a whole, including service providers, equipment vendors and even the ISPs, it is a well-known fact that they are not making a lot of money in basic consumer Internet access,” White said. “You have to move beyond basic consumer Internet access in order to produce revenue strands that will make a strong business case.”

White said Nortel agrees that providing value-added services will result in a quicker RoI, and said the discovery is one of the pillars of Nortel’s current marketing plan.

“The whole idea is that just enabling DSL on a copper pair does not produce revenue,” White said. “It is how many times you can use that same copper pair in order to put multiple services and in order to present to that customer a bundle of services over that same copper pair.”

Pioneer’s report conducted case studies of several companies including mPhase and Enron/Blockbuster in order to determine what the offering was, who were the players, what equipment was required and whether it was successful or not.

Lowe said the key findings were that there is a significant market for value-added services, and that bundled services can work. He added that the study also concluded that for value-added services, smaller independent telcos are a better bet than some of the larger ones, and that it is possible for a telco to sell services that are not necessarily telephony-related.

A full copy of the study can be purchased through Pioneer Consulting at, for US$3,650.

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Jim Love, Chief Content Officer, IT World Canada

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