Verizon's New DSL: No Threat To Cable, Says Expert

Verizon Communications' impressive new 1.5 Mbps downlink/384 Kbps DSL uplink won't be enough for DSL providers to overtake cable-modem service in the broadband sweepstakes, according to one expert who surveys the overall broadband market.

"DSL will never catch up," said Bruce Leichtman in an interview. "Cable started 2003 with a 5 million [subscriber] lead and ended with a 6.5 million lead." Leichtman, who is president and principal analyst of the Leichtman Research Group, in Durham, NH, conceded that DSL offered by leading telephone companies is picking up momentum in recent months, but cable's lead is too strong for the telephone companies to hope to overhaul broadband cable.

On Tuesday, Verizon announced it will add a new high-speed 1.5Mbps/384Kbps DSL tier for consumers this quarter, to be followed by another offering of 3Mbps/768Kbps this summer. The former regional Bell operating company (RBOC) also announced it will offer VoIP service this summer. Pricing for the VoIP service and the higher speed DSL service will be released later, the company said.

In a statement, Verizon threw down the gauntlet at its cable competitors: "Our ability to offer customers a compelling array of local, long-distance, wireless, broadband and video services is unmatched by our cable competitors. Expanding our DSL service will allow us to offer even more innovative packages that include services like voice over IP."

Verizon is scheduled to deliver another weapon in the broadband wars this summer, when its BroadbandAccess high-speed wireless service will be offered on a nationally. BroadbandAccess has broadband speeds, but its $80 monthly fee will appeal more to business users than to consumers.Leichtman said the broadband industry is relatively easy to follow, because 19 of the 20 largest providers are public companies and report reliable statistics on their subscriber base. "Both DSL and cable broadband had their best year ever last year," said Leichtman. "Cable broadband began the year with 11 million subscribers and ended with 15.9 million. DSL began with 6.1 million and ended with 9.1 million."

The market-share figures remained relatively static, Leichtman said, with cable logging 64 percent at the beginning of 2003, and 63 percent at the end. DSL went from 36 percent to 37 percent. "Cable is a victim of its own success," he observed.

Leichtman said the RBOCs--also including BellSouth, Qwest, and SBC--settled on a successful growth formula by competing with cable broadband on price.

The competition between the telephone companies' DSL offerings and the cable companies' broadband modem services is illustrative of policy promulgated by FCC chairman Michael Powell, who believes the two market segments should slug it out with each other. Others, however, believe that consumers would be better served by multiple segments of both telephone and cable industries competing for subscribers.

A recent study by the Pew Internet & American Life study said that DSL has 42 percent of the home broadband market. Leichtman noted that Pew counts individuals, while he counts subscribers reported by the public companies.0