DSL

DSL Prime Editorial: Verizon's Potential

DSL Prime examines the state of Verizon and finds much to applaud, but issues a plea for cheaper DSL ($30 per month) and points to other threats to the broadband dream.

by Dave Burstein DSL Prime [October 24, 2001]

My friend Steve at Verizon just got his first day off since 9/11, just one of the thousands who have been working seven days each week. Telco employees have time and again proven their abilities—as peace comes, we hope they'll turn their efforts toward wiring America for the fast internet.

Only 30 percent of DSL subscribers are now in the U.S., and that will go under 20 percent in the next few years.

Verizon hits a million
"Just wait till you see what we can do!" Jeff Waldhuter told me in 1999 as the rollout began. The capabilities of a U.S. telco can be extraordinary, although it turned out to be much harder than anyone predicted to scale to the millions of customers and tens of thousands of trained employees.

Doubling installs this quarter
At least 230,000—and probably more—are expected to sign with Verizon before the end of the year, well up from the 120K to 130K in previous quarters.

"We're going to beat cable"
Pete Castleton said that to The New York Times in 1999, but the goals have been hard to meet. The new team, Keiko Harvey, Senior Vice President and Veronica Pellizzi, Group President, Verizon Advanced Services are convinced the problems are in the past, and they've returned to that target. "We have a better service" and "we will catch up with cable's head start."

For years, I've been asked the question of whether cable or DSL will win, and always answered it was up to the will of the companies. Verizon now is saying they're ready to compete.

Service getting better
Verizon now makes many appointments in under two weeks, and many operations problems have been reduced. There's still a way to go, but they're convinced they've turned the corner. We're looking forward to some conversation with the operations people when we get back and will bring you more details. For the U.S. industry, the improved operation at Covad, SBC, and Verizon is very important news

Questions to answer

• Verizon Avenue was reported by Variety to be planning movies from the basement for the summer, but obviously that was optimistic.
  
  
• Seidenberg last year predicted Verizon would offer DSL to "90 percent of our customers in 2002"; what will it take to make that happen?
  
  
• Finally, while the three month $30 price is welcome, when will Verizon cut the regular price to $30, as originally planned and is happening around the world?

NorthPoint suit getting serious
U.S. Trustee Lynn Schoenman sees possible damages as high as $4B, as she staged an auction for the chance to fund the suit. DSL Prime made a significant error when we reported that Angelo, Gordon would be providing the financing for NorthPoint's suit against Verizon. In fact, Judge Thomas Carlson has now chosen an even better offer from Monarch Global Capital Associates, who will provide $7.5M for 5-6 percent of the proceeds and will not charge interest on the money. At least two other firms made similar offers, offering $millions to back their attorney's belief NorthPoint will win the case.

Verizon's failure to expand out of region is killing to their defense. The NorthPoint purchase was intended to extend Verizon out-of-territory, with a strong consumer offering. Verizon had previously promised to compete with SBC and BellSouth as part of merger agreements, and had active plans to do so.

Verizon contends the deal was killed solely because of NorthPoint "material" financial problems, but Verizon's failure to reach for consumers out-of-territory implies a change in strategic plan. It is presumably more than coincidence that Verizon's retreat was matched by SBC's virtual canceling of their "national-local" strategy, and the dismantling of their 30 city sales effort. Note that both raised their DSL prices a few months later, despite dramatic drops in costs. That's damned persuasive evidence competition has broken down, whatever the rhetoric.

Editorial: Broadband must be video speed
An open letter to Andy Grove, Les Vadasz, Steve Ballmer, Will Poole, Joe Nacchio and Mike Powell
You've dreamed publicly about video over the Net, and have the clout in Washington to help make it happen. Current DSL and cable deployments are not being designed for video, and current government policy does not encourage it. Video of reasonable quality requires reliable data rates of a megabit or more, which is the Canadian definition of broadband.

The bills in Congress only specify 375K, without reliability. That's fine for receiving your e-mail faster, but the technology is here for the Third Internet, fast enough to watch. Use the respect you've earned to help us all—make Congress and policymakers target broadband at reliable delivery at video speeds. If you don't speak up now, the dream we share—any program, any time, anywhere—may take an extra decade to achieve. db

We are journalists, not investment advisers; invest at your own risk and do further research.

Copyright 2001 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

"The power of the printing press belongs solely to those who own the presses"
—A.J. Leibling

The Internet is the cheapest printing press ever invented.

Related articles:
	[Aug. 30, 2001]	DSL Subscriber Numbers Analysis: 2nd Quarter 2001 Worldwide
	[Aug. 2, 2001]	DSL Prime and Verizon's Numbers Game
	[Apr. 21, 2000]	DSL and Cable? Give Peace A Chance