IP Democracy: Cheap and Naked DSL on Its Way

This is old news already, but USA Today’s Leslie Cauley has this item today about the upcoming offers of cheap and naked DSL services from AT&T. Starting within six months, AT&T will offer lower speed (768 kbps) DSL service priced at an incomparably low $10 for new high-speed customers — that rate will apply to consumers who also purchase AT&T voice service.

In addition, the giant telco will also start selling company-wide naked DSL service, service that is sold on a stand-alone basis, not paired with AT&T’s voice service. The naked DSL option will be priced at $19.95/month, cheaper than virtually all other high-speed Internet options.

Both of these new DSL services flow from the agreement AT&T struck with the FCC in order to get its BellSouth merger approved. The real question is what impact this new pricing structure will have on AT&T’s telephone subscriptions.

Vonage thinks that the naked DSL subscriptions will give its competitive VoIP option a boost — for around $45, customers can purchase both unlimited local and long distance Vonage service plus DSL, a savings of at least $10 to $20 per month over AT&T’s existing voice plus DSL service combo.

If that’s the case, then AT&T could be looking at accelerated line losses. The telco has already lost 21.1 million local line customers since late-2000 (see chart at end) and if the naked DSL option serves to lure any additional customers to competitors, then look for the company to start losing more customers in late-2007, early-2008. The company has been losing lines at a clip of around one million per quarter (more or less) over the past year.

On the other hand, the $10 DSL service option (for new customers only — a relatively small population) could help mitigate any line losses resulting from the naked DSL option. Although cheap and naked services offerings sounds kind of, well, sexy, for AT&T they’re serious business propositions.

Posted by Cynthia Brumfield on January 15, 2007 11:17 AM to IP Democracy