Naked DSL drives AT&T broadband growth

A new direction points to a life after landlines

Though only a few years ago multiple state regulators tried unsuccessfully to force BellSouth to offer standalone DSL service, the company's current owners have embraced the idea.

Nearly 30% of AT&T's 491,000 total net broadband subscriber additions in the first quarter were from so-called “naked DSL.” About half of those naked DSL offerings were bundled with a wireless service. In fact, as Paul Bonenfant, analyst for Morgan Keegan, pointed out, AT&T's all-you-can-eat wireless plans may be encouraging customers to shed their landlines for mobile phones.

While a DSL/mobile bundle might not be the most lucrative offering for a telecom provider, it may be a more fertile ground in which to grow revenue than landlines. According to Teresa Mastrangelo, principal analyst for broadbandtrends.com, AT&T may be finding that those who kept landline voice service only to obtain DSL were paying minimum basic rates, say $12 a month, whereas those whose primary phone is mobile likely pay much more than that per month. Freed of that landline fee, the customer might be willing to spend more on mobile upsells, Mastrangelo said, adding that longer term, AT&T sees “being able to get more average revenue per user out of the wireless side.”

Carriers without a mobile offering are forced to try to add value on the landline side. For example, SureWest Communications, which recently sold its wireless division, has sought to add value to its fiber network with the recent addition of a remote home-monitoring service.

But even for those without an in-house mobile play, naked DSL can be a strategic move. Last November, Embarq, which relies on partners for both mobile and video service, began offering naked DSL to customers who call to cancel their landline service as a way to retain the landlines that are so key to the company's strategy. It's unclear what effect that offering has had. In this year's first quarter, Embarq lost 120,000 access lines, 47,000 more than it lost a year earlier. Some of that erosion resulted from conversion to broadband services, the company said. Its high-speed Internet connections were up 21% from a year earlier.