Those Who Jump Hurdles Will Win Free DSL Race.

Business Editors

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--June 7, 2000

Service providers will fall short on free DSL promises if they are unable to overcome challenges that are currently inherent to the industry, according to Cahners In-Stat Group, a high-tech market research firm.

Despite public enthusiasm, free DSL has proven to be less glamorous than once heralded. While the service itself will be free, consumers will still have to purchase DSL modems. Additionally, subscribers will be subjected to a constant barrage of advertisements and bandwidth-hogging streaming messages that could slow down network performance.

Moreover, free DSL will be provided at slower ADSL speeds, with providers hoping to upsell end-users to higher speeds later. Even if consumers accept these conditions, they will have to wait a while before they can get free DSL service, as providers are still in the early testing phase and have yet to deploy in any market.

Companies such as Digital Broadband Group, iNYC and Staruni are optimistic and claim to have thousands of users lined up for service, however, In-Stat foresees that free DSL providers will have a difficult time meeting expectations.

Kate von Goeler, Industry Analyst for In-Stat's Internet Strategies Service believes that "there are trends within the Internet industry that suggest free DSL may have a brighter future." Free DSL should become more viable as provisioning costs and retail modem prices continue to drop.

In addition, providers are not solely dependent on advertising revenues as opportunities abound for cross and upselling additional services and increased access speeds.

According to Mike Lowe, Senior Analyst for In-Stat's Advanced Carriers Service, "Current obstacles make free DSL an uncertain proposition over the long haul.

"At the very least, it will require a 'home run' on the part of providers to make free DSL a reality. Nevertheless, if providers meet the challenges, free DSL providers will have a real impact on the rapidly growing DSL and broadband markets."

In-Stat has also found that:

-- The DSL market will experience exponential growth, amounting

to approximately 5.4 million ADSL and 3.1 million SDSL 

subscribers by 2003, a 77% growth year-over-year.

-- At present, it costs $150 to $200 per year plus initial

installation costs to support a single DSL user, a cost that

cannot be supported solely by advertising revenues.

-- Broadband Digital Group was the first to announce free DSL and

reports that it currently has 700,000 registrants for its

service.

In-Stat's report, Free DSL (No.TX0003SP) examines the challenges and opportunities of the free DSL model and its potential impact on ISPs and telecommunications carriers. To purchase this report or for more information, please visit http://www.instat.com/catalog/cat-ia.htm - is0002sp or call Courtney McEuen at 480/609-4533; [e-mail]. The report price is $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.