Baby Bells Predicted Winners in DSL Battle.

Business Editors/High-Tech Writers

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Aug. 8, 2000

Despite aggressive campaigns by Competitive Local Exchange Carriers (CLECs), Regional Bell Operating Companies (RBOCs) will ultimately prevail in the race to capture DSL subscribers, according to Cahners In-Stat Group, a high-tech market research firm.

In the face of stiff competition from alternative DSL wholesalers such as Covad Communications, Rythms Netconnections and Northpoint Communications, RBOCs will rely on a tremendous existing customer base and substantial financial muscle to stake their claim in the DSL space.

However, this does not mean total domination. In-Stat believes that while RBOCs will retain significant share, the pie will be split a number of ways.

According to Mike Lowe, senior analyst for In-Stat's Advanced Carriers Service, "The Baby Bells are not 'home free' by any means. Competitive Carriers have already won a significant share of the small business market -- that should help keep them in the game for some time to come."

However, in the long run, the CLECs will not have enough leverage to dominate.

Lowe stated that "at the end of the day, CLECs do not own the network, nor do they own the customer. As wholesalers, they are somewhat beholden to their retail partners, and as users of the RBOCs' networks, they are potentially at the mercy of the incumbent carrier."

In-Stat has also found that:

-- At the end of Q1 2000, RBOCs held a strong advantage over

CLECs in terms of subscribers acquired. Combined RBOCs claimed

over 600,000 subscribers, while CLECs boasted of over 150,000.

This gap is expected to close, as CLECs complete their

national infrastructure and begin to concentrate more on

acquiring customers.

-- Of the RBOCs, SBC is the clear leader, having acquired over

300,000 subscribers by the end of Q1 2000. This is largely due

to their Project Pronto Initiative.

-- Covad Communications, capitalizing on their early entry

advantage, is the leader among CLECs, with over 100,000

subscribers.

In-Stat's report, DSL Service Providers and Their Rollouts (No. TX0006SP) examines the industry that DSL has become, focusing on the leaders and the issues. To purchase this report or for more information, please visit http://www.instat.com/catalog/cat-tx.htm#tx0006sp or call Courtney McEuen at 480/609-4533; [e-mail]. The report price is $1,995 USD.

Cahners In-Stat Group (http://www.instat.com/) covers the full spectrum of digital communications research from vendor to end-user, providing the analysis and perspective that allows technology vendors and service providers worldwide to make more informed business decisions.