Advanced solutions frustrate DSL providers - Company Business and Marketing

CommunicationsWeek International, Oct 9, 2000 by Michelle Donegan

It was a rough summer for some Internet service providers in SBC Communications Inc.'s 13-state territory in the United States. The uphill struggle to get digital subscriber line (DSL) circuits from the incumbent was steeper than usual, and the ISPs blame the difficulties on rampant ineptness at San Antonio, Texas-based SBC's newly formed subsidiary Advanced Solutions Inc. (SBC-ASI).

The creation of SBC-ASI was one of the conditions for the U.S. Federal Communications Commission's approval of SBC's merger with Ameritech last year, and the new entity became operational on May 1 this year. SBC-ASI is responsible for supplying wholesale data circuits, including asynchronous transfer mode (ATM), DSL and frame relay; it is also a competitive local exchange carrier (CLEC) providing retail data services.

Some analysts say the U.S. region's problems are a foretaste of what's to come in Europe, where incumbents operators are taking similar strategic decisions to separate out wholesale businesses.

SBC-ASI's growing pains have already prevented some ISPs-from delivering their services.

"This is the worst it's ever been, and we've been doing business with SBC since 1997," said Dewey Coffman, vice president of sales and marketing at Jump.Net Inc., an Austin, Texasbased provider of colocation, webhosting and Internet access for small businesses. "Six months ago, I could get customers installed in three weeks."

In August, Coffman stopped all orders to SBC-ASI for DSL circuits, and he says the situation has not changed. Instead, Jump.Net gets circuits from alternative access providers Northpoint and IP.Net.

"This is the worst nightmare that I've seen in my life of delivering a product," said David Robertson, president of the Texas ISP Association (TISPA), on ASI's inability to provide circuits. "They don't need to have all the dirty delay tricks because they are so incompetent."

In mid-September, TISPA and SBC-ASI went before the Texas public utilities commission to discuss these problems. Robertson said SBC-ASI demonstrated improvements in several areas, while the PUC seemed to be losing patience with SBC's excuses.

Coffman blames the recent spin off of ASI as the primary cause for the delays, as well as a huge increase in demand for DSL because SBC ran a special promotion in which users would get free connectivity and a new Compaq Presario PC with no payments until 2001.

"It's the inter-company databases that seem to be breaking down," said Coffman. "Staff shortages are another big part of the problem. There aren't enough technicians."

The Washington DC-based FCC has defended the arrangements.

"The reason for this condition in the merger approval was to make it easier for competitors to get DSL circuits," said an FCC spokesman. "The whole idea was to minimize if not eliminate the difficulties in getting circuits."

However, the ISPs that have to work with SBC-ASI label the new structure as "remonopolization," because it seems to them to be a huge step backwards for the market.

The SBC-ASI situation could have serious implications for European CLECs and ISPs, as national telcos undergo major reorganizations. For example, BT's restructuring, announced earlier this year, created a wholesale division, an ISP called BTOpenworld and a wholesale and corporate carrier division called Ignite, among other units. It is as yet unclear which division will provision circuits or colocation space to CLECs.

One employee from BT Advanced Communications Centre, formerly BT Laboratories, observed the operator is grappling with questions like, "who owns the DSLAM?" while managing directors are entrenching and protecting their respective turfs in their new business divisions. The chief executive of a U.K. operator has admitted that when it comes to colocating in BT's exchanges, he doesn't know who or even which division to approach.

"Incumbents need a mindset change, not just a pure reorganization," said Bawani Shankar, principal analyst at Gartner, based in Egham, England. "They can reorganize all they like, but they have to view unbundling as an opportunity [for new wholesale revenues], rather than a threat."

European CLECs

In Europe, incumbent corporate restructuring seems to be the least of new entrants' worries. Most European CLECs are still embroiled with national regulators over basic unbundling rules-let alone rolling out commercial DSL services. But analysts agree that ISPs should be wary of incumbent reorganizations.

"If you're buying a third-party service from a company and it's breaking up, it does pose some questions," said Chris Lewis, research director at the Yankee Group Europe, based in Watford, England.

Jump.Net's Coffman believes these problems can be prevented by regulatory intervention. "Regulation and oversight are the only ways to keep this from getting ugly," said Coffman.

"SBC is like an alcoholic spouse-they may want to get better, but it doesn't happen overnight," said TISPA's Robertson.

But he said that SBC-ASI's on-time installations have increased; DSL circuit provisioning is getting much better; and slamming has practically stopped. "If slamming does occur, they can fix it in one day, which is phenomenal," he said.