DSL

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Why are DSL Resellers in Trouble?

Members of the ISP-DSL list discuss why it's tough to be in the DSL business. As ISPs fail to pay their bills, and the CLECs start to suffer, some are calling for the government to act.

[December 8, 2000]

On the ISP-DSL list in December, RSB inquired,

"Can someone give me a good explanation of what's leading so many DSL resellers into bankruptcy?"

A number of respondents blamed anti-competitive practices on the part of the big guys:

[AN offered] "Hmm: buy for $44, sell for $42 to $50, but then pay for a staff… it's just not possible. More margin has to be maintained by the ISP. The only way that I see to do this is by the LEC offering UNEs at a rate that's actually reasonable; $25 a month is not reasonable. How can a LEC claim that selling a UNE at three times the cost of an alarm circuit—which they have sold for years and never complained about—is reasonable?"

[MKS agreed] "It all comes down to the crooked workings of the telcos, allowed by a Clinton-controlled FCC that refuses to step in despite the overwhelming evidence of anti-competitive practices. The telcos know they can't keep up if we are in the market, so instead of working smarter and harder, they are simply doing what they always do: eliminating the competition.

Running us out of business by screwing up the lines, screwing up the billing, or by selling services to our customers for cheaper than they will sell them to us. I've got a circuit that goes down once a day, and has for over three weeks now."

[KS observed] "The margin on DSL is so small because you have to keep the price low enough to be competitive. DSL resellers have to pay for the connections, pay for the equipment on their end, and make sure they have enough bandwidth in their own Internet connection to handle their DSL and dialup customers. My price was the lowest in my area. But on the cheapest line I was only making $2 a month."

Others concluded that there's hope—that small, slow, and steady wins the race:

[RK added] "Every time we looked at going into DSL, it was clear that it would kill us unless we were a facilities-based DLEC. It takes one hell of a business plan, execution, and cash reserve to make anything work with DSL. If you can build out a state or a region, I think you have a much better chance at success than trying to be everywhere and anywhere."

[VB agreed] "The ones that are making it aren't reselling someone else's DSL. With just fourteen customers here in this rural area, I'm making money from DSL as a DLEC."

—End

 

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