Charles Hoffman, president and CEO, Covad

Jan 10, 2003 12:00 PM, Jim Barthold

For Charlie Hoffman, the old '60s saying that tomorrow is the next day of the rest of your life generally rings truer than for most. As Covad's leader, he's watched a DSL provider industry that went from great promise to great despair from which it hasn't really returned. Still, tomorrow is the first day of the rest of Covad's life, so Hoffman is optimistic.

What's wrong with DSL? Why hasn't it taken off in the U.S. like it has overseas?

The Bell companies didn't really exploit the DSL opportunity very early until people like Covad came along. You're seeing a lot more advertising and more buzz about DSL now, and I think we'll be catching up to cable in the next few years.

The cable guys think otherwise. They're calling DOCSIS 2.0 a "DSL killer."

Penetration of high-speed Internet is only 12%. There are still 50 million people in the U.S. on dial-up. Those people will move to broadband, and they'll select cable or DSL. There's lots of growth potential.

You extended co-branded residential service deal with AT&T. Does that mean you're going to concentrate more on residential services?

Our main focus is small business, and that's the great bulk of our revenues, but in residential there's still lots of growth potential. Look at all those AOL customers just starting to get into it.

But how many will move to broadband as long as prices stay high and applications stay low?

Last summer we initiated a price reduction down to $39.95 that increases our market potential by a lot. Eventually it's going to get to $29.95. DSL has better potential to do that than cable because the cable companies all have huge debt.

But what about the lack of killer applications? Why bother with paying even slightly more for a broadband service that delivers only speed?

As AOL and the others get into this, they see their job as creating compelling content that will induce people to go to broadband and stick to broadband while they let people like Covad take care of all the messy back-end stuff. AT&T is the same way. By bundling with other services, there are good reasons why people would want to go to broadband.

Maybe a good enough reason to circumvent the whole DSL thing and go right to deep fiber?

Who can afford that? What are the applications that consumers are going to buy to justify that? It's a huge infrastructure build that I just can't see anyone doing. Anything that uses copper we can do. That's the real potential here, because there's no big infrastructure to build. We already have a nationwide network that's built and paid for. We don't see anything on the horizon that's going to hurt.