AT&T makes big consumer DSL push

AT&T today announced it would begin making a massive consumer broadband push in its local markets, bundling Covad’s wholesale DSL lines with local and long-distance voice over the same lines. Eventually, the company will add wireless service to the package.

With the agreement, AT&T will take over the leasing of the local lines from Covad. In turn Covad has installed line splitting equipment in COs it shares with AT&T, hooking its ADSL DSLAMs into AT&T's network. Currently AT&T is Covad's second largest wholesale customer, behind EarthLink.

AT&T has launched the broadband bundle in local markets in New York state and plans to offer it in several more of a 13-state local footprint by the end of the year. While AT&T previously offered DSL services through Covad, the broadband option is independent of its other voice and wireless services, and AT&T has done little to market it in the past. An AT&T spokesman said the carrier was waiting for its local services to reach a critical mass of markets, which makes introducing line-sharing economical. Until then AT&T decided to keep the services separate, offering Covad DSL independent of its voice services.

“We’ve deliberately taken a very prudent approach to broadband,” the spokesman said. “No one had ever done line-splitting for a large volume of customers before, and until now we didn’t have the need to do so. Now that we have significant more volume though, we felt it was time to take a more aggressive stance.”

AT&T’s announcement comes on the heels of Verizon’s major bundling deal, announced last week. By next year, Verizon Communications will package ADSL, local and long-distance voice, Verizon Wireless service and EchoStar’s DISH Network satellite broadcast television services in one bundle. Several other carriers are making similar moves.

“It’s very clear that customers want bundling,” the spokesman said. “That’s one of the main reasons we’re going forward with this package.”

Though bundling is nominally intended to lure customers with lower prices, AT&T’s starting package in New York does little to undercut many of its competitors. AT&T is charging $40 per month for regular DSL service and $50 per month for faster premium service, with a $20 per month discount for the first three months of service. Many of the RBOCs have dropped their monthly prices to $35 or less with local voice services.

With AT&T's marketing machine behind the offering, Covad expect's its business with the carrier to grow substantially in the next year.

"This could be quite significant to us," said Charles Hoffman, CEO of Covad.