Voice-over-DSL: The market is molten
By Kathleen Cholewka
NEW YORK. 4:10 PM EST-Data services are hot. Voice service is lucrative. Together, they're unstoppable.
The venture capital community is especially keen on voice-over-digital subscriber line (DSL), the technology that can shunt 16 channels of voice and a high-speed data stream over one phone line. And as competitive carriers and service providers hungry for revenue look to sell consolidated voice and data services, the market continues to sizzle.
Jetstream, a vendor of voice-over-DSL equipment for service providers, said today that it received $40.75 million in venture capital funding from major investment firms, including Amerindo Investment Advisors, Bowman Capital Management, Canaan Partners, Davidow Ventures, Mayfield Fund, Mohr and Pivotal Partners.
The company also drew funds from telecom-type companies MCI WorldCom Fund and Nortel Networks (nyse: NT).
"These are big votes of confidence," says Jetstream founder and Chief Technology Officer David Frankel. "It shows that they're willing to place some bets."
And when it comes to the carrier market, even bigger bets are on the board. According to a source close to MCI Worldcom (nasdaq: WCOM), the carrier has decided to base its local access strategy on voice-over-DSL technology and plans to use products from Pairgain Technologies and Jetstream. Covad Commmunications (nasdaq: COVD) is also testing voice-over-DSL services in California.
While the still new voice-over-DSL market has not been measured, analysts say that widespread deployment is likely. "Every DSL line is potentially a voice-over-DSL line," says Paul Johnson, an analyst at BancAmerica Robertson Stephens.
While it may seem strange to boast about technology that sends voice traffic over phone lines (after all, that's what phone lines were intended for), voice-over-DSL technology consolidates voice and high-speed data service onto one line.
The fact that the technology works over phone lines, infrastructure already in place in most homes, only proves the potential ubiquity of the service. "I'm having a hard time figuring out a place where it wouldn't fit," Johnson says.
Voice-over-DSL also potentially saves on networking costs for customers and carriers. That's why service providers are planning on selling it to small- and medium-sized businesses.
In addition, despite the growth in revenues from data services, it is still more crucial to some carriers to be able to sell voice services. While the market for voice services is worth $60 billion per year, data services are still only around $6 billion per year, according to Johnson.
"There are a finite number of people that want broadband," he says. "But I would speculate that in a few months there'll be people calling up for voice-over-DSL for its enhanced-voice services and just get the Internet service thrown in as a bonus."
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