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CLECs winning DSL battles; RBOC's winning war.

The CLECs appear to have the momentum in winning digital subscriber line (DSL) customers from RBOCs. While losing some battles, however, RBOCs--with the inherent advantage of lines, equipment and customer base--could well win the war. RBOCs hold a clear advantage in DSL subscribers with 600,000, compared to about 150,000 for CLECS, according to Cahner's In-Stat Group research firm in Scottsdale, AZ. This gap is expected to close, as CLECs complete their national infrastructure and focus on acquiring more customers. SBC Communications, a RBOC, leads the DSL provider market with 300,000 DSL subscribers. Covad Communications leads CLECs with 100,000.

Among the CLECs' recent DSL market expansions, Atlanta-based Edge Communications is launching DSL service in Washington, Northern Virginia and suburban Maryland. The company plans to reach 24 top markets across the U.S. in the next two years.

Another CLEC, New Edge Networks of Vancouver, WA, has installed DSL network equipment in 160 other locations, bringing to more than 510 the total sites in 28 states. The company focuses on communities with populations of less than 250,000. US LEC of Charlotte, NC, recently extended DSL to 16 of its markets in the South and East.

Another indicator of CLEC growth is the demand for local loop phone lines, which reached 146,000 for the first six months of 2000, according to Morgan Stanley Dean Witter. NightFire Software of Oakland, CA, which cites the statistic, says that its products were used to make an estimated 40% of those orders.

The CLECs, however, appear to be no long-term threat to the RBOCs. Verizon, the national ISP recently formed by the merger of RBOC Bell Atlantic and GTE, has reduced its DSL rates for residential and business customers by at least 20%, and waived modem fees for all new subscribers. In the Northeast and Midwest, Verizon is offering a free modem to small business and residential customers. The CLECs could thus be undercut by the RBOCs' cheaper DSL pricing.

RBOCs may also choose to work with the CLECs--as is the case of SBC's recently forged agreement with NightFire Software, to establish direct connectivity between SBC's companies and CLECs using the software company's hosted loop ordering service. The agreement "will enable us to quickly and cost-effectively procure DSL lines for our customers," says Tony DiStefano, CEO of Arrival Communications, a Western U.S. CLEC and NightFire customer. The RBOC, however, also stands to benefit from the increase of loop orders.

"At the end of the day, CLECs do not own the network, nor do they own the customer," says Mike Lowe, senior analyst for Cahners. "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."
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Title Annotation:Industry Trend or Event
Comment:CLECs winning DSL battles; RBOC's winning war.(Industry Trend or Event)
Author:Kelly, Sean
Publication:Communications News
Geographic Code:1USA
Date:Nov 1, 2000
Words:461
Previous Article:WLL down but not out.
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