DSL Responds to Cable

"They've been calling it the cable killer," says Jim Murphy, president of DSL Extreme, of his company's latest offer. Read on, and judge for yourself.

by Alex Goldman ISP-Planet Associate Editor [January 30, 2004]

Canoga Park, Calif.-based DSL Extreme made headlines recently with its low-end DSL offer of what was then full-rate DSL for $29.95 per month in SBC areas (see A National DSL Rollout).

The company's latest offer addresses the high-end of the DSL market: 6 Mbps down and 604 Kbps up for $59.95 per month. Jim Murphy, president of DSL Extreme, admits that most users do not get those speeds. But users who are a few thousand feet from the CO and are getting 4.5 Mbps or even 3.5 Mbps are thrilled with the speed and the price, he says. The offer is currently only available to DSL Extreme customers in the SBC area of California.

It's odd that nobody's offered this before. The infrastructure can handle it, and, as Dave Burstein has constantly pointed out, the cost to ISPs of higher bandwidth is very little. "The only thing that happens with higher speed is that we see usage spikes that we attribute to our high bandwidth customers," says Murphy.

Murphy adds that on a monthly basis, usage doesn't change much. People get what they want faster, but they tend not to download more.

Of course, if everyone downloaded a large file at the same time, the network would not deliver to anyone, but the phone system is designed the same way. At those times when everyone has picked up the phone, such as on 9-11, or, in Canoga Park, during earthquakes, the phone system has not been able to deliver all calls. The nation's Internet infrastructure is designed the same way.

One intelligent aspect of the offer is that the modem is a "free lease," which means that the customer gets the CPE for free but has to return it if they cancel the service. "People usually charge for equipment or give it away," says Murphy. "We used to sell modems, but if somebody complains about a modem, it's their equipment. We protect the customer by ensuring that they get the equipment as long as they use the service, and we protect ourselves by saying that we get it back if they cancel."

Costs in the DSL industry need to be brought down, as Murphy anticipates a deflationary future. "DSL is bringing in lower tier prices. If you look at the broadband industry as a whole, DSL prices are decreasing and cable prices are increasing. If you've had cable for a while, and you see rates going up or at least not going down, you may be ready to change."

But cable customers are not the focus of the new offer. "We're trying to get dialup customers on to broadband. There's a customer base for the 6 Mbps plan, but will the average customer notice the bandwidth difference? For the average customer looking to save big bucks, we figure the $24.95 plan will be the most popular choice."

The company offers its $24.95 plan in SBC areas. It used to offer service over the MCI-owned Rhythms network but no longer does so.

For the future, the company is improving its dialup service. Its own-branded X-Dial service uses Propel's acceleration product. "We evaluated many products and found the most stable was Propel," says Murphy.

It was a careful rollout, in which 60 beta testers got the product, and when DSL Extreme found they were pleased with it, the company rolled out the product to its other customers. Murphy says his company is not promoting accelerated dialup in ads, though.

Instead, in radio and banner ads, the company is promoting its various broadband offers. Murphy is enthusiastic about the results, but points out that advertisers have to know what they want to achieve.

"Chicago, Detroit, and Cleveland are our current targets. We look at it in terms of cost per customer acquisition," he says. It looks like all the math is working in DSL Extreme's favor.

— End