Naked DSL

Qwest became the first RBOC to offer DSL to customers of its primary line voice competitors, a practice at least one other RBOC has been resisting.

Qwest began offering a DSL service on Feb. 28 that allows customers to purchase the broadband Internet access service regardless of whether they have a voice phone line with Qwest. BellSouth filed a petition with the FCC in order to halt regulators in some states in its territory from forcing it to unbundled DSL from voice for fear of losing primary access line and perhaps VoIP revenue to competitors.

Qwest’s “naked” DSL costs $33 to $50 per month for download speeds of 1.5M bit/sec and upload speeds of 896K bit/sec. The service is discounted by $5 when purchased in a bundle with other services, such as wireless and satellite video.

Qwest says it decoupled DSL and voice due to customer demand to substitute their primary voice access line with wireless, yet maintain a landline for broadband Internet access. The move may allow Qwest to achieve its goal of 1 million DSL subscribers by year-end, up from 637,000 in 2003.

But is it a smart competitive move?

Up to now, RBOCs have been requiring DSL customers to also be voice customers so the RBOC can retain primary access line revenue. DSL is also the broadband connection by which RBOCs will provision VoIP into small businesses and residences.

Indeed, analysts see Qwest’s move as potentially harmful to its ability to retain primary access lines. Some believe it increases the risk of primary line substitution and the opportunity for other edge VoIP providers to increase their market share.

Qwest doesn’t see it that way. It claims that its “stand-alone” DSL offering will complement its plans to extend consumer VoIP into 14 western states by year-end by offering the service to Qwest voice and non-voice customers alike.

Qwest currently offers VoIP to DSL residential customers in the Minneapolis/St. Paul, Minn., area.

It may also presage a future in which the primary RBOC access line into the home or business is the broadband connection. In order to stave off incursions from the cable companies and cable modems – which currently enjoy an almost 2-to-1 broadband penetration advantage over DSL – RBOCs may be forced to offer “naked” DSL with voice as a secondary application on the connection, vs. the primary service as is now required.

But some analysts note that even if Qwest maintains the customer’s voice connection through VoIP, it loses revenue from the subscriber line charge and enhanced services.

Perhaps. But Qwest’s move is a bold one, and time will tell if the RBOC is giving up its lifeline… or the ghost.