End of the CLEC war for residential? Retreat has started.
End of the CLEC war for residential?
From DSL Prime
Covad and NorthPoint had been backing away
Not discussed by Covad was that part of the financial problem of the ISPs was the elimination of the large hidden subsidy the DLECs had been providing the ISPs. As part of their goal of making numbers to satisfy Wall Street, DLECs had been spending almost $1,000 for each customer, partly in the form of market development funds to the ISP. When Rhythms moved from a direct to a wholesale model, they cut some deals that were very attractive to lure ISPs. NorthPoint chose to be competitive, while Covad moved more to a direct sales strategy, exemplified by the Bluestar buy (which also, of course, bailed out their controlling venture capitalists.) That spending meant the residential customer could not possibly be profitable for years, but made sense because before April Wall Street was valuing DLECs at over $5,000 per customer, a distortion unsustainable after April.
So Rhythms and NorthPoint signaled each other in the press to back off, and ISP payments were reduced by all. Covad and NorthPoint have been de-emphasizing residential (they officially deny it), at least until 2001. On the other hand, Rhythms' Catherine Hapka wrote us "We continue to see strong demand in the consumer market, especially with the advent of line sharing, which we have led the charge for."
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