Customers, Service Providers Eschew Business DSL

Business customers have increasing reason to doubt Digital Subscriber Line service, and some experts are even steering them away from the technology.

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Business customers have increasing reason to doubt Digital Subscriber Line service, and some experts are even steering them away from the technology.

With leading business-class Digital Subscriber Line (DSL) carrier Covad Communications in serious financial trouble and once high-flying NorthPoint Communications on the sidelines nursing a bankruptcy, customers arent sure where to turn.

"We already had NorthPoint provision lines to some of our branch offices, and we were thinking of moving those over to Covad," said Bob Hanna, senior vice president and co-founder of Burst! Media, an Internet advertising supplier. "Well, theyre not in such great shape either, so its like jumping from the frying pan into the fire."

Hannas company relies on DSL, technology that supports high-speed data over copper telephone wires, to keep branch offices connected to the headquarters. But weekly outages are a constant headache. "For those applications where connectivity is mission-critical, where I cant afford to not have connectivity, I would never have DSL," he said.

Covad is the exclusive supplier for Speakeasy Network, a Seattle-based Internet service provider (ISP) that provides both business and consumer DSL. Kat Oak, a representative of Speakeasy, said the companys call centers have been inundated by customers concerned about what could happen if the situation at Covad becomes grim. "We have a lot of customers worried about it and asking if we have contingency plans, especially since Covad is our main vendor," Oak said.

Business ISP Digital Telemedia has gone so far as to urge customers to switch from DSL. Chief Executive Carter Burden recommended that users transition to more expensive T1 (1.5-megabit-per-second) service "to prevent the possibility of service interruption."

Covad, which had to adjust its third-quarter earnings due to nonpayment by the ISPs that resell its DSL service, has postponed its fourth-quarter results while it investigates 2000 revenue. But Covad Chairman Chuck McMinn said the company still has money. "There was uncertainty, and the market doesnt like that — and we expected the market was going to react negatively," McMinn said in reference to Covads Feb. 20 stock slide. "In December, we felt we had enough money to get us through the end of 2001 and into 2002, and that hasnt changed."

None of this will really matter two years from now, said Allan Tumolillo, senior vice president at telecom analyst firm Probe Research. He believes the Federal Communications Commission hasnt developed a way to promote competition with the Bell companies, and the competitive carriers have yet to come up with a successful business plan.

"The entire competitive carrier industry in the U.S. has shown no positive income since its inception," Tumolillo said. "The Covads and NorthPoints and Rhythms [NetConnections] are dead, and the only thing worth writing about them is their obituaries."