Regional DSL Report: Boston

Amid the pain of failing DSL providers, one business-oriented ISP is thriving. The key differentiator is being able to charge more than the DSL service costs.

by boston.internet.com Staff [December 15, 2000]

Count another victim of the devastating environment for retail digital subscriber line carriers: Digital Broadband Communications of Waltham, Mass., today said it is firing 85 percent of its workers and seeking a buyer.

Unable to secure investment cash needed to build its network of high-speed Internet and data connections, Digital Broadband said it would lay off 450 of its 526 employees.

Valeri Marks, who just five months ago became CEO of the privately held, 21-month-old company, said the 76 remaining employees would for now continue to serve all 1,000 customers in seven Northeastern states. Marks said the company is "looking at all strategic options," including a merger or acquisition. She said "lots of discussions are underway" with possible buyers but declined further comment.

Marks also declined comment on the fate of Digital Broadband's contract with the Massachusetts Community Network, an agency created last year to make Massachusetts the first state to provide cheap broadband Internet access for every one of its schools and public buildings.

A brushfire is clearing deadwood from the sector of DSL resellers, even faster than the resellers themselves burned through venture cash in an effort to build their DSL networks.

HarvardNet of Medford Mass., last week quit the DSL business and fired 280 of 480 workers. In the last month, NorthPoint Communications (248 workers), Covad Communications (400), DSL.net (141), and New Edge Networks (135) all slashed their workforces, while Flashcom declared bankruptcy.

The winners, big and small
Industry observers agree that deep-pocket DSL players—especially the old Baby Bells like Verizon and SBC Communications—have a huge edge in today's marketplace.

But it's not only the giants who are winning.

One local digital subscriber line carrier says it's benefiting from the DSL market implosion: Vitts Networks of Manchester, N.H., which in recent days has been fielding service calls from former customers of wayward competitors HarvardNet and Digital Broadband Communications.

Vitts chairman and CEO Christopher Oliver said that unlike his troubled competitors, whose businesses are often limited to "low-end circuits" like DSL and Web hosting, his company is finding success by providing a wider array of data services.

Vitts offers more than 1,000 New England business customers a menu of managed network choices, starting with high-speed networking over either copper-based DSL or fiber-optic lines.

The company also allows corporations to link multiple offices by designing and installing local- and wide-area networks; hosts Web servers and media-streaming services; and installs network security services like firewalls and virtual private networks. It also touts its 24-hour support system.

Oliver said Vitts has focused on business customers, from small and mid-sized concerns to Fortune 500 clients, rather than consumers.

Vitts started in 1996 as a small data-service provider in southern New Hampshire and has expanded to cover all of New England, except Connecticut. The company deploys through 300 central phone-switching offices in New England and intends to grow to 400 in the coming year.

Oliver said Vitts, which has 350 employees, expects to keep hiring through 2001 as it expands its regional network.

The company is privately held. Backers include Cabletron Systems, Safeguard Scientifics and Exelon, but it releases details about neither funding nor revenues.

Oliver, a former longtime Cabletron Systems chief technical officer, blames the failure of many DSL providers on their adherence to business plans resembling those of failed dot-com retailers: grow big and fast, no matter the cost of "buying" customers.

Set the right price
He said Vitts has lost contracts to DSL-only rivals that competed on price alone, offering low-ball prices to build their customer base rapidly.

"A typical price for a fully managed, business-class DSL service is $300 to $600 per month for a small- or medium-sized business," he said. "Some of the price points I heard from customers of these other companies were half that price. Nobody can stay in business offering a product for less than it costs."

Vitts "has taken a more traditional approach to business," Oliver said. "We're not just somebody trying to play a trend that seems to be popular at a given time." He added that the company built its network for two years before beginning to offer services to customers.

Whether Vitts can thrive in a brutal market remains to be seen, but its turtle-like model has already moved past some of the sector's fast-starting hares.

—End