Bell South's Bright Future

An activist coalition called Voices for Choices says Bell South proves that the pro-Tauzin crowd has lied to Congress for years. While the other three ILECs are cutting back or abandoning DSL, Bell South proves that deployment is possible.

by Jim Wagner and Wayne Kawamoto [January 4, 2002]

Wall Street analysts across the board were pleased at Bell South Corp.'s (NYSE:BLS) announcement Thursday it had met digital subscriber line (DSL) estimates for 2001, netting 405,500 new customers and covering 70 percent of its 63 markets with high-speed capability.

With 620,500 customers, made up of 80 percent residential users and 20 percent business-class services using its 1.5 Mbps asymmetrical DSL (ADSL) offering, BellSouth has proven that DSL is still a viable product for the nation's telecommunications providers and shouldn't be abandoned.

That stands in marked contrast to the other three Baby Bells, Verizon Communications (NYSE:VZ), Qwest Communications (NYSE:Q) and SBC Communications (NYSE:SBC)—who have either abandoned DSL entirely or significantly slowed their deployment rate in their coverage areas.

What's the secret of BellSouth's success?

According to BellSouth executives, successful self-installs (called virtual truck rolls) and a heavy emphasis on remote terminals are the cause. Remote terminals (RTs) are mini-central offices (CO) that let telcos extend the range at which they can provide DSL service.

RTs, said Ralph de la Vega, outgoing BellSouth president of broadband and Internet services, played a key role in the company's 188 percent DSL growth rate for the year, a rate higher than any other DSL or cable provider in the nation.

"BellSouth has a make up of customers such that 61 percent are served by central offices and 39 percent out of RTs and we had to get at that 39 percent to be able to hit our target," de la Vega said. "By design, BellSouth, for over a decade now, has been designing the maximum loop length behind RTs to be 12,000 feet so when customers get to that point, they get terrific line speeds."

At 39 percent, RTs substantially expand BellSouth's DSL presence outside of the normal coverage area provided by COs, which reach out 15,000 feet only if there is top-notch copper wiring connected to the consumer's home. De la Vega plans for that number to increase, as the company continues work on RT deployment around its coverage area, which is located in the Southest area of the U.S.

Also helping the Bell's cause is the promotions run in the fourth quarter that gave customers an incentive to sign up for broadband Internet. A free DSL modem (the program ends at the end of the month) and the first month of DSL free helped convince people to upgrade from dialup or migrate from cable.

BellSouth's success is a lesson the other incumbents should take to heart. For one reason or another, the other three have been slowing down their DSL deployment around the country, a strategy that could backfire.

• SBC has all but given up on Project Pronto, an initiative that was supposed to eventually cover 80 percent of its coverage area throughout the Midwest and Southwest. Executives blame the government for too-stringent regulation that makes expansion too costly to continue.
• Qwest abandoned the DSL market entirely after reporting it would see zero growth in 2002, handing over its high-speed management to the Microsoft Network (NASDAQ:MSFT) and focusing more on business T-1 services.
• Verizon has been slow to embrace an aggressive RT deployment, focusing instead on keeping the customers it has happy, many of which have complained loudly and often of service outages and poor customer service.

De la Vega, who is taking over as president of BellSouth Latin America, is confident BellSouth will continue its RT deployment throughout the U.S., eventually covering 76 percent of the market and resulting in a total of 1.1 million customers by the end of 2002.

BellSouth started the fourth quarter of 2001 on a bit of a bad note. DSL acquisitions (like much of the high-tech industry), either through its own retail offering or that of its affiliate Internet service provider (ISP) or competitive local exchange carrier (CLEC) partners, were lagging, partly due to the events of Sept. 11.

De la Vega downplayed recent events, saying history shows DSL growth is cyclical in nature; customer acquisitions are generally slower in the third quarter and pick up in the fourth. He expects the same to happen in 2002.

Bell South proves ILECs are liars
In response to Bell South's announcement, Steve Ricchetti, co-chairman of the Voices for Choices coalition issued the following statement:

"This represents a howling repudiation of virtually everything that BellSouth and the three other local phone giants have told Congress for years.

Their entire lobbying campaign to pass Tauzin-Dingell and roll back a key consumer protection in federal telecom law was predicated on one idea: that current telecom law does not allow them to adequately deploy their high-speed Internet service. Yet now—by its own admission—BellSouth admits that it is not only deploying high-speed service aggressively, but is winning customers faster than any high-speed provider of any kind in the country!

There is a stark truth in today's announcement: It shows that the Bells have simply not been straight with lawmakers when they say they need legislative relief to deploy broadband.

The race to provide consumers with different types of high-speed access is vibrant and strong. Congress should not choke off competition with special interest bills like Tauzin-Dingell."

Voices for Choices is a coalition of associations and companies that support fair competition in local telephone service and high-speed Internet access. Members include: The Association for Telecommunications Services (ALTS), CompTel, Citizens Against Government Waste, Small Business Survival Committee, Liberty Mutual, Worldcom, Sprint, and AT&T.

The Voices for Choices anti-Tauzin bill ad can be viewed with Real Player (T1 speed) on the Voices for Choices website here.

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