DSL Decline

There’s been a lot of talk lately about efforts to pump more power and speed into DSL. Whether its bonding VDSL2 pairs, bonding ADSL with cable, reallocating upstream and downstream bandwidth, reducing noise on the line or just giving the signal a little boost, everyone’s interested in squeezing more speed out of DSL.

And with good reason: The DSL rolled out with such excitement in the 90s gets less attractive every day. At Verizon Communications in particular, DSL net adds are plummeting as the carrier focuses on fiber-to-the-home. AT&T’s net broadband adds are also falling, particularly in the former BellSouth territory (though the company’s triple-play rollout is mainly based on DSL). For these reasons, analyst Teresa Mastrangelo says it won’t be surprising if the total number of DSL subscribers industry-wide starts descending as soon as next quarter.

This is what Information Gatekeeers analyst Clif Holliday called “the telco’s dilemma” in a research note last month. By switching from a double-play to a triple- or quad-play focus, he said, the Bells have slowed their penetration of the broadband market. It takes a lot longer to roll out FTTx than DSL, which is allowing cable companies to extend their lead in the broadband penetration race. As a result, whereas Holliday once predicted telcos would catch up to cablecos in broadband subscribers in 2008, he now predicts it won’t happen until 2011.

Of course, this is a tradeoff AT&T and Verizon have to make in order to increase both long-term customer retention and, more importantly, per-user revenue. And some would say that the level of maturity in the DSL market at this point makes it perhaps less appealing than ever to pursue.

But it’s also true that the cable companies will be able to capitalize on the gains they are making now in broadband. The broadband customers that Cox and Comcast are scooping up now while the Bells are busy with fiber can more easily be converted to cable triple-plays than they can be to telco triple-plays. Cox and Comcast are sticking their feet in a lot more doors while the Bells are taking their time securing seats on the couch.

E-mail me at ed.gubbins@penton.com