Posted: 12/1999
Data CLECs Move Upstream; Access is No Longer
Enough
By Ken Branson
National data competitive local exchange carriers (CLECs) are preparing for the day when digital subscriber line (DSL) becomes a commodity. With varying approaches, they're lining up value-added services for delivery to their target customers.
For example, Covad Communications Co., Santa Clara, Calif., and NorthPoint Communications Inc., San Francisco, have announced strategic relationships with iBeam Broadcasting Inc., Sunnyvale, Calif. Covad's relationship includes an investment in iBeam--though company officials won't say how much. NorthPoint describes its relationship with iBeam as a partnership. In both cases, the companies will deploy iBeam's servers in their networks and bring streaming video content to their wholesale customers, enabling them to help their customers get content quicker and cleaner than would be possible through the public Internet. The third national data CLEC, Rhythms Netconnections Inc., Englewood, Colo., teamed with iBeam earlier this year to deliver the first live web-based broadcast.
"[Data CLECs] need to do the upstream services," says Craig Clausen, vice president at New Paradigm Resources Group Inc., Chicago. They need to offer "VPN (virtual private network), other variations on the DSL theme, web hosting, site development, e-commerce transactions. The pipe itself is not the commodity, it's what you shove through that pipe that counts."
Officials of the three companies differ over how long it will take before DSL service is commoditized.
"It's just a question of timing," says Abhi Engle, product manager of Covad's broadband services. "Right now, we have the keys to what is the most valuable real estate on the Internet, and that's the last mile. But over about one or two years it will become a commodity."
Whitey Bluestein, chief development officer at NorthPoint, thinks it's far too soon to talk about commoditization of DSL access. "We see more demand than anybody has the capacity to handle," Bluestein says. "We recently surveyed 300 businesses in Boston. Of those with Internet access, 90 percent had a dial-up connection. One had DSL."
Robert Kelley, Rhythms' director of innovation products, sees incumbent LECs (ILECs) leading the way toward commoditization. "[ILECs] will do all the pioneer marketing about what DSL can do. Our role will be to come to business customers, once they're sold on DSL and talk about the really important things."
However, NorthPoint, like Covad and Rhythms, is looking for new value to add and new ways to add it. Microsoft Corp., Redmond, Wash., took equity stakes in NorthPoint and Rhythms earlier this year, and the development of broadband value-added services is part of both deals.
All three companies got their start by wholesaling to Internet service providers (ISPs), and wholesaling is still an important part of all their strategies. But Covad recently launched an aggressive national advertising campaign aimed at consumers, touting the advantages of DSL. Rhythms, in addition to its wholesale business, sells directly to businesses. NorthPoint's Bluestein says his company will stick to its wholesale knitting, but even NorthPoint is marketing DSL service directly to consumers at Radio Shack stores, owned by Tandy Corp., Fort Worth, Texas.
