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Is it worth small businesses moving from residential to business DSL?, Part 2

Mar 21, 20062 mins

* Term commitments and the SMB market

Recently, we discussed Steve’s rather surprising move from residential to business DSL. And while we’re sticking by our proverbial guns that forcing this move could be considered questionable, it turns out that for Steve it was not a bad move.

The reason had to do with term commitments. If you’ll recall from our last newsletter, Steve – actually Distributed Networking Associates, Inc. – was already paying for a business phone line. And in one of the SMB bundles, BellSouth offers a 25% discount on all services if one commits to a three-year term. The bottom line was that the discount on the business phone line and the discount on the business DSL service made the price equivalent to what Steve was already paying.

In general, our advice would be to run like crazy from anything committing to a term in this market with its rapidly falling prices. However, the BellSouth agreement specified that the SMB would keep some form of service for the three years, and the discount would apply to whatever services were ordered. It also did not specify fixed prices for each service. Rather, the discount applies to whatever the going rates are. Additionally, the cancellation fees are relatively nominal. And, when Steve compared the undiscounted prices for the business services with and without the term discounts, one comes out ahead – even paying the penalties – in less than a year.

That said, we’re still not sure that Steve’s fortuitous circumstances mirror the problem that was described in the first place. To begin with, one must assume that teleworkers are unlike Steve in that they do not have a business POTS service in place. In fact, looking down the road a bit, it may well turn out that the broadband data access becomes the primary access and telephony is an add-on.

If you would like to dig into a closely related discussion, please see the related discussion of Internet Neutrality in the Convergence newsletter here.

So even though Steve’s problem has a nice band-aid on it for the time being, the fundamental issue remains.

Jim has a broad background in the IT industry. This includes serving as a software engineer, an engineering manager for high-speed data services for a major network service provider, a product manager for network hardware, a network manager at two Fortune 500 companies, and the principal of a consulting organization. In addition, Jim has created software tools for designing customer networks for a major network service provider and directed and performed market research at a major industry analyst firm. Jim’s current interests include both cloud networking and application and service delivery. Jim has a Ph.D. in Mathematics from Boston University.

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