Baby Bell Aims to Lure More Dial-up Users to DSL by Offering Speed Bursts

OCTOBER 01, 2004
By Alan Breznick, editor, Cable Datacom News

Beating U.S. cable operators to the punch, BellSouth has started trying out an on-demand broadband service that will let Internet access subscribers temporarily crank up their data transmission speeds whenever they wish.

One of the most innovative players in the broadband business, BellSouth is testing the on-demand concept in up to 750 homes in southeast Florida. As part of the scheduled three-month trial, which started in the Miami/Fort Lauderdale area in August, the regional Bell is offering customers an always-on, 56 kilobits per second (kbps) DSL connection with the ability to upgrade to as high as 3 Megabits per second (Mbps) speed at a moment’s notice.

On-demand subscribers need only click on a “Turbo Button” icon in the corner of their screen to make use of this special “Turbozone” feature. Subscribers also enjoy the higher speeds when BellSouth or a content partner wants to provide faster downloads from its Web site. Similar to the phone company’s dial-up service, the on-demand service costs trial customers anywhere from $5 to $15 a month, depending upon their bundle.

In taking this step, BellSouth is following the lead of such innovative cable operators as Canadian MSO Videotron Ltd., which launched a similar product in May, and Chilean MSO VTR, which began a similar service last fall. But no major U.S. cable operator has publicly embraced the idea yet because the industry deeply fears cannibalizing its main cable-modem offering.

With an eye on a possible commercial rollout next year, BellSouth aims to use the unnamed on-demand service to lure more dial-up Internet users to full broadband levels. The company, which closed the first half of the year with 1.7 million DSL subscribers, still has more than 1 million dial-up data customers.

“It’ll bridge that gap between dial-up and DSL,” said a company spokesman. “This helps them take that first step… Once they try DSL on, we expect them to further migrate up.”

BellSouth also hopes to wring more cash out of dial-up users who occasionally desire more speed but are still resistant to upgrading to full broadband service because of the cost. Tentative plans call for charging a burst, or per-usage, fee of perhaps $1 a pop above a certain maximum number of bursts each month. But, as part of the field trial, the company is still tinkering with the pricing.

“A lot of customers want the ability to pay a set price for slower DSL speed but want the option for higher DSL speed when they need it,” the spokesman said. “We definitely think there’ll be a lot of demand.”

BellSouth is taking this leap into the on-demand business after enjoying surprisingly strong success with its FastAccess DSL Lite service, introduced slightly more than a year ago. In late July, the Bell said the lower-speed DSL service, which offers data download speeds of 256 kbps and upload speeds of 128 kbps for as low as $25 a month, accounted for about one-third of its total subscriber gains during the second quarter.

Then, in April, BellSouth added a third broadband product to its portfolio when it launched FastAccess DSL Xtreme. This upper-tier product offers download speeds of up to 3 Mbps and upload speeds of up to 384 kbps for as low as $45 a month. In its second quarter earnings report, the company said this product had already drawn over 100,000 customers, more than 70% of which had upgraded from a lower tier.

Of course, the company still has its original broadband product, BellSouth FastAccess Ultra, which delivers speeds of up to 1.5 Mbps downstream and 256 kbps upstream for as little as $40 a month. But, more aggressively than most cable operators, the Bell has clearly decided that speed tiers are the way to go.

“It’s been very well received,” said the company spokesman, referring to the new tiering strategy. “Customers want to feel like they have control.”

Overall, BellSouth picked up 120,000 DSL customers in the spring quarter. That’s up 16.5% from the year-ago period although down 23.1% from the first quarter.

BellSouth is also jumping into the on-demand game at a time when the regional phone companies are gaining broadband ground on their cable rivals for the first time. In the second quarter, Cable Datacom News publisher Kinetic Strategies Inc. estimates, North American DSL providers added 931,000 new residential subscribers while North American MSOs added just 916,000 cable modem customers.

At the same time that it’s testing on-demand data, BellSouth is also trying out voice-over-Internet- Protocol (VoIP) service in its southeast Florida territory. In about half of the 750 on-demand trial homes, the company is offering VoIP service as well.

For about $60 a month, IP telephony trial customers receive unlimited local and long-distance service, plus two lines, unified messaging and call routing. BellSouth is pricing the service at the same level as its standard voice package. “The customer maintains his old POTS (plain old telephone service) and pays no extra money,” the company spokesman said.

In addition, BellSouth is now conducting lab tests of a proposed IP video service that would use various copper loop technologies to carry standard digital and high-definition TV (HDTV) programming. Company engineers are investigating the use of copper-pair bonding and DSL 2+ technologies, plus more advanced compression and storage techniques, to deliver download speeds of 12 Mbps to 24 Mbps, enough for several standard digital and HDTV channels.

Although it’s not clear exactly where or when BellSouth will start testing IP video in the field, it’s a safe bet that it will happen in the three states — Alabama, Florida and Georgia — where the phone company already delivers its Americast digital cable service. Using fiber-to-the-curb technology, BellSouth offers this 175-channel service in 14 clusters of new housing developments throughout the three states.

“We’re looking to roll that into some market trials and test the experience that customers have with IP services,” the company spokesman said. “You’ll probably see some trials in the next few months.”

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