Re: [NTISP] ** ADSL Connections **

David Payer ( (no email) )
Tue, 15 Dec 1998 09:18:07 -0600

>The phone company in our area is launching ADSL (Asymmetric Digital
>Subscriber Line) in January. This technology is essentially a
>Frame-Relay connection for the end-user at a fraction of the cost
>I am looking for some ideas on how to price the bandwidth?

George, get ready for the price war.

Phone companies are doing an all out attack to get network traffic.

They are using XDSL, which has ZERO CIR and selling it very cheap. Here is
Des Moines/USWest area a 256K circuit (actually 640K because the phone
company has not figured out how to turn it down) goes for a total of
$40/month for the circuit and $20 a month for the IP traffic. TOTAL = $60
month. It appears a godsend to people wanting bandwidth. But there are

The phone company only uses a portion of their ATM network for this so
congestion will be a serious reality. Also, it is DHCP so you only have a 4
hour lease on IPs unless you get a static IP.

Here a ONE MEG circuit with IP connectivity (like a T1) is under $100
/month. Total. With 5 static IPs, the cost goes up to $135/month.

You cannot compete on cost. They will wipe you out. I have lost dedicated
phone line customers to this. I have changed my tactic. Support them with
their new connection. Many offices have little IP experience.

I see the ones who will be hurt by this will be those who have a good
portion of their business in leased lines (56k/ fract T1, T1,etc) People
here are moving to DSL for the cost alone, they can live with less than
perfect connections for a cheap cost.

I have priced out being a "megacentral" for USWEst so I can resell DSL. I
have estimated the break even point is 200 customers ( @ $20 IP cost/month).
Then you can pay for the equipment, the ATM connection and the extra
bandwidth needed. I don't see real profitiability until you reach 400+
customers. After 100 customers you need a Cisco 7500 series router ($20K+)
and some serious bandwidth to suppor them.

So if you offer this service. Don't compete on price. Go for relations that
provide value added service. If you price too high, people will go with the
phone company but if you are a part of their support, they will keep you for
other services.

David Payer
OMNI Internet

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