DSL market gets some sanity

DALLAS--The failure of several high-profile data LECs is actually a good thing for the DSL market, because surviving carriers will be able to price service more realistically, according to panelists at Business Week’s Broadband Connections conference.

Noting that the typical price of $40 per month made no economic sense and seemed to be randomly chosen based on cable-modem pricing, the industry has done itself a disservice by underpricing DSL to grab market share, said John Stephens, co-founder and chief technical officer of Cayman Systems.

“We’re at $40 because there is a fault in the financing,” he said. “There is a compelling value there, and I think we have to market it better. I’d much rather see us move the prices to a much more rationale level.”

In fact, Stephens sees some value in raising prices specifically to reduce demand, which will give the industry time to work on provisioning issues that have hampered carriers.

Mark Floyd, chairman of Efficient Networks, which was recently acquired by Siemens, disagrees, saying that raising prices may be logical but wiping out demand will ultimately hurt an industry that is over capacity.

“The horse is already out of the barn as far as public recognition of DSL,” he said.

Already, some carriers--most notably SBC Communications--have raised prices on basic DSL service. While many carriers say they have more demand than they can handle, the number of people willing to pay more than $40 is not very great, said Joseph Laszlo, senior analyst with Jupiter Communications.

“Up at the high end where prices are, you don’t get a whole lot of households that are willing to go for it,” Lazlo said. However, he still thinks there is an opportunity for carriers to create more demand by developing creative marketing.