WORLDCOM, COVAD ADOPT DIFFERENT BROADBAND VIEWS

IXC chooses satellite; DSL provider opts for T-1 service

Covad Communications and WorldCom are attacking small and medium-sized business customers from different broadband directions. WorldCom is using two-way very small aperture terminal (VSAT) satellite service to complement the DSL capabilities it acquired from Rhythms NetConnections. Meanwhile, Covad's reselling discounted T-1 to extend its DSL reach.

VSAT adds to WorldCom's delivery mosaic because “there are some places where you can't get DSL or it's expensive to backhaul a T-1 or people are just price-sensitive about the cost of a T-1,” said Ralph Montfort, WorldCom's director of Internet access.

Covad believes a T-1 pricing model that starts at $749 per month — as much as 30% less than the price offered by some of the ILECs that will own the lines Covad plans to resell — will overcome those sensitivities.

WorldCom will ratchet Hughes Network Systems' residential Direcway satellite service into business-class quality for single telecommuters and small office/home office users early next year, followed by multiuser customers in the third quarter. Single users will get a 21-inch dish, a satellite modem and data speeds of 600 kb/s downstream and 128 kb/s upstream. Multiusers get a dish, a satellite router and a choice of 600/800 kb/s or 1 Mb/s downstream and 128 kb/s upstream.

Prices will be “comparable to business-class DSL” which costs $120 for 128 kb/s symmetrical service for single users and $160 for 384/128 kb/s service for multiusers, Montfort said.

However, the satellite services will “be priced at a premium… because you're getting more bandwidth on the downstream side and a whole bunch more coverage in terms of the available population it can serve,” he said.

Brownlee Thomas, research director for Giga Information Group, sees the WorldCom offering as an alternative for customers willing to overlook satellite's inherent transmission latency problems.

“If you go for satellite, it's because you know you're not going to get anything else,” she said. “You have to need this.”

Covad hopes its T-1 offering offsets that need.

“Let's face reality here: DSL is not available to all the offices that want it,” said Todd Kiehn, Covad's senior product manager. “We combine the availability of ILEC T-1 services with the affordability of our DSL services and can hit a sweet spot within the small business budget.”

It works if Covad focuses on businesses that can't get DSL because “small businesses don't traditionally have huge budgets to spend on technology,” said Amy Harris, analyst for IDC. She said Covad's resale model is “fraught with difficulties, [but] Covad has probably worked through most of those issues.”

Kiehn brushed aside resale concerns, noting, “since we're not attacking the core ILEC T-1 business, which would be medium-sized and above, this is a customer they may not have had in aim anyway.”

Covad's DSL experience will help, said Matt Davis, senior analyst for The Yankee Group. “They can continue to lease facilities from the ILECs and use some of the experience that they gained to move forward with T-1,” he said.

Both providers are banking on broadband demand.

“We're getting small offices and single users Internet access with whatever means we can make available,” Montfort said. “We're finding some combination of DSL, T-1 and Internet VSAT fills their needs the best.”