DSL penetrates the business market . . . slowly

Many early providers of DSL disappeared during the telecom meltdown, but the technology has continued to evolve and grow in popularity.

Double-digit subscriber growth is still the norm for most U.S. providers (see chart). And new DSL flavors, such as single-pair high-speed DSL (G.SHDSL ), which is beginning to appear, might make DSL more popular with business users.

The truth is that while overall DSL numbers have exceeded analyst expectations, DSL adoption by business users has been disappointing. At the end of the first quarter of 2002, only 23% of the about 4.9 million DSLs deployed in the U.S. were business class, according to TeleChoice.

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Many early providers of DSL disappeared during the telecom meltdown, but the technology has continued to evolve and grow in popularity.

Double-digit subscriber growth is still the norm for most U.S. providers (see chart). And new DSL flavors, such as single-pair high-speed DSL (G.SHDSL ), which is beginning to appear, might make DSL more popular with business users.

The truth is that while overall DSL numbers have exceeded analyst expectations, DSL adoption by business users has been disappointing. At the end of the first quarter of 2002, only 23% of the about 4.9 million DSLs deployed in the U.S. were business class, according to TeleChoice.

There are several reasons for DSL's disappointing performance in the business market, says Matthew Davis, an analyst with The Yankee Group. One major hindrance has been the plummeting price of T-1 lines. T-1s have become so inexpensive, Davis says, that in many cases there isn't enough of a pricing difference between a T-1 and a business-class DSL for a customer to justify switching to DSL.

A second hurdle is cable burrowing its way into the business broadband market.

"Our surveys show that more and more businesses are using cable, even though the cable companies say they're providing a mostly residential service," Davis says.

Davis estimates that as many as 650,000 businesses were using cable broadband services by the end of last year.