DSL in the dumps, analysts say

A growing chorus of analysts is questioning the pace at which Verizon and, to a lesser extent, AT&T have backed off selling basic DSL services in order to push their higher-speed Internet offerings and their video services.

Teresa Mastrangelo, principal analyst for broadbandtrends.com, raised this issue in late 2007 in a Telephony column, saying Verizon's lack of investment in faster DSL services for areas where it isn't offering its FiOS fiber-to-the-premises network is creating a new digital divide that ultimately will hurt the company.

Last week, Information Gatekeepers went a step further, saying both AT&T and Verizon had slowed their high-speed line sales in the fourth quarter of 2007. Verizon's high-speed access line sales hit 264,000 lines — almost all on FiOS and the lowest total Verizon has posted for a quarter since 2003. “AT&T added 396,000 high-speed access lines in the fourth quarter, its lowest total in 2007 and one of its lowest totals in the last several years,” reported IGI.

Simon Leopold, analyst for Morgan Keegan, also noted Verizon's puny DSL sales. “In aggregate, Verizon missed our 284,000 estimate [for total high-speed access line sales], yet the downside was led by the astoundingly low DSL additions [19,000 lines] versus our 51,000 estimate,” he wrote.

For now, data revenues and booming wireless revenues are masking the wireline drop-off, said Paul Polishuk, president of IGI. But as wireline revenues decline, the two telecom giants are likely to face a “real test of will for the telcos' management” as they wait for their fiber and video investments to pay off, Polishuk said.

Neither AT&T nor Verizon would comment on the analysts' speculation, although each has maintained in the past that DSL remains part of the product mix.