DSL discounts come at a price

US West is offering a new kind of discounted broadband Net service today, a high-speed connection whose relatively cheap price will be offset by some of the same busy-signal dangers as a dial-up service.

Priced at just $19.95 per month for the DSL access, or $37.90 per month when combined with Internet service, it will be the cheapest DSL package on the market. US West said it would begin the service in Seattle, Tacoma, Washington, and Portland, Oregon, then expand the service across its 14-state area later this year.

The announcement is a departure for the high-speed Internet industry, which has consistently touted both the blazing speed of the service and the convenience of computers perpetually connected to the Net, with no danger of busy signals or waiting periods while the computer dials.

Despite its potential pitfalls, US West's new service will be the first that any of the big telephone companies has offered for a high-speed Net service that is cheaper than cable Internet services like Excite@Home or Road Runner. As such, the announcement could eventually be a significant landmark in the broadband pricing.

However, it remains unclear whether other broadband providers will immediately rush to drop their own prices, because most have been unable to keep up with consumer demand even at existing levels.

"Demand has been so strong that we see no reason to discount significantly," said Bob Cunha, BellSouth's vice president of broadband services.

The still-slow progress of DSL and cable Internet access offerings means that there are still few places in the country where true competition for the consumer market exists, analysts added. As a result, the real price wars may not occur until true competition heats up.

"It's premature of them to try to compete on price when they can compete in terms of service at the existing price," said Joe Lazlo, an industry analyst with Jupiter Communications. "I'm not sure how much consumer response there will be, particularly if it's in the same market where two-way cable service is already available."

New twist on old technology
The new service will be offered though US West's DSL, or digital subscriber line, which allows high-speed Internet and traditional voice telephone traffic to share a single telephone connection. As with cable modems, the selling point of DSL has been that it is both fast and always plugged in, eliminating most of the hassles of dial-up connections.

But under US West's "Megabit Select" service, the DSL lines will essentially be shared by a pool of users, much the same way that a conventional ISP often has 20 or 30 more subscribers than it has available modems in a given area.

A subscriber will be able to activate his or her connection simply by starting up a browser software like Netscape Navigator or Internet Explorer. But, because there will be more users than lines in the system, it will be possible that no line will be available.

Once on, a subscriber will have just two hours to use the service before being bumped off, though he or she can immediately reestablish a connection. The service would be offered at speeds up to 256 kbps, several times faster than standard dial-up home connections that typically range today from 28.8 to about 45 kbps.

"Basically it's dial-up at DSL speeds," said Claudia Bacco, senior DSL analyst at TeleChoice, a telecommunications consulting firm. "There are less modems than there are users--you potentially may not get in. It's probably not a problem in the near term because not that many people use DSL, but in the long term it could be an issue."

For those who want to ensure that they don't get busy signals or get cut off from their connections, the company still offers a more expensive DSL service.

"The goal is to have a service available for people who aren't always online, who are just casual or recreational Web users," US West spokesman Jeremy Story said. "People who need more can always sign up for the full service for $10 more."

But it is just that $10 that has so far separated the telephone companies' high-speed offerings from their cable counterparts.

US West's ordinary high-speed service starts at about $48, just a few dollars cheaper than the comparable offerings from SBC Communications, BellSouth, and Bell Atlantic. Cable services like Excite@Home, however, cost about $40, a cost advantage that has helped drive predictions that consumers will adopt cable far faster than they will DSL.

At $37.90 a month, US West's new service rings in at the cheapest high-speed alternative available from one of the major providers.

"If there is resistance at the [earlier] price points, and they feel they need to bring it down, this would fit the bill," said Jeannette Noyes, a broadband analyst with International Data Corporation.