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DECEMBER 7, 1999


The ABCs of DSL
Recent FCC rule changes should spell relief for those stuck in the Net's slow lane. Here's a guide

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Sure, the Internet is a boon to entrepreneurs, but sluggish dial-up connections keep many from using the medium to its fullest. That may all change over the next year in the U.S., thanks to a recent Federal Communications Commission order. To promote competition, the FCC told local phone companies last month to open more of their copper-wire networks to alternative carriers that specialize in DSL (digital subscriber line) service, a type of high-speed Internet access. That should bring the now high cost of DSL squarely within the reach of small businesses. (The FCC order is expected to take effect in mid-January.)

The arcana of phone deregulation may seem irrelevant to many entrepreneurs, but if long-distance or mobile services are any examples, customers will soon face a vast array of confusing choices. With that in mind, here's a short course in DSL.

DSL is a relatively new broadband technology that carries data signals up to 20 times faster than 56K dial-up modems on the high-frequency portions of phone lines that also transmit voice. Unlike with dial-up services, DSL users don't dial a phone number to log on to the Net. Like cable-modem service, a DSL line is continuously open. DSL requires two modems, one at the customer end and one at the phone company end (called a DSLAN), which communicate constantly with each other. DSL providers don't usually sell their services directly to consumers — they typically resell them through Internet service providers such as America Online and Mindspring.

NO SECOND LINE. For the past couple of years, local phone companies have benefited from their control of the voice lines into homes to deliver DSL service — primarily to consumers' homes and home-based businesses — over their existing lines. Customers who wanted to get DSL service from Baby Bell competitors were required to install another line. The FCC order will let competing DSL providers rent only the portion of the existing line that they need — not an entire second line. Presumably, they'll pass the savings to subscribers, and local phone companies will cut their rates to compete. "We are hoping the order will ensure as many companies as possible will compete in these markets, and we are hoping the increased competition will lower prices," says Staci Pies, attorney adviser for the common-carrier bureau of the FCC.

DSL prices could drop 20% to 50% as a result of the FCC order. Until recently, high-speed Internet access has mostly been available for big businesses in the form of so-called T1 lines. Premium T1 service can cost more than a $1,000 a month. Small-business DSL, which generally allows up to 10 computers to connect, is also costly, ranging between $200 and $300 a month. Covad Communications in Santa Clara, Calif., one of the three largest independent DSL providers (along with Northpoint Communications and Rhythms NetConnections), says its basic service for consumers and home offices could fall as low as $40 a month from around $60 today for 24-hour Internet access with no per-minute charges. "We should be a lot more successful selling our product," says Dhruv Khanna, general counsel and co-founder of the company.

Entrepreneurs shouldn't look for an immediate price break on high-speed Internet access, though. After FCC order is finally enacted, it may take nine months or more to implement, according to the agency. That's because the competing DSL providers and phone companies each have a period of several months to negotiate the precise terms of their new line-sharing fees. Entrepreneurs should also bear in mind that installation and configuration charges will still be levied. Many DSL providers charge between $100 and $300 for installation, which includes setting up line splitters, DSL modems, and an Ethernet network interface card, which allows your computer to communicate with the DSL modem in the phone company's central office.

UNCONNECTED CORNERS. In many cases installation can be done in less than a day. However, Englewood (Colo.)-based Rhythms NetConnections says the process occasionally takes a week or more, depending on customer location and how quickly phone companies respond to requests to open lines. DSL services aren't available in every corner of the nation because each carrier must physically install its transmission equipment in each of the approximately 5,000 central switching offices of the local telephone companies. Covad, for example, says it has equipment in only 1,000 of these. Another factor limiting availability is that transmission slows when a customer is more than four miles from a switching office. Nevertheless, the FCC order is likely to bring DSL within reach of lots more Americans.

One caveat: Signing up with a new DSL service isn't as simple as changing your long-distance provider (though this is likely to change in the next few years). That's because DSL is normally sold through ISPs, and changing ISPs often involves the attendant complications of switching e-mail addresses and Web-hosting services. There are technical concerns as well. Jim Anderson, director of product management for fast access for Atlanta-based Mindspring explains that changing providers frequently requires physically switching the wires connecting your business to another provider's DSLAN equipment at the phone company's central office. In any case, the next year should start bringing relief for exasperated entrepreneurs who struggle with slow Internet connections.

By Jeremy Quittner in New York

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