Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : WCOM -- Ignore unavailable to you. Want to Upgrade?

To: el paradisio who wrote (6669)	5/18/2000 2:31:00 AM
From: el paradisio	Read Replies (2) \| Respond to of 11568

WCOM is a stockholder of RTHM. worldlyinvestor.com Sector of the Day Phone-Line Sharing to End Lion's Shares By Casey Freymuth, Telecom Columnist An FCC ruling set to take force by June will be a boon for competitive providers of DSL technology. The dream of inexpensive broadband access may finally come true. Last week, at the Association of Communications Enterprises (ASCENT) annual meeting and exhibition, much of the buzz around the conference revolved around a telecom issue known as line sharing, which holds significant implications for competitive telecoms players. In November 1999, the Federal Communications Commission (FCC) passed a ruling directing local telephone companies to share their telephone lines with providers of high-speed Internet access and other data services in order to facilitate line sharing. As part of this ruling, the FCC asked incumbent telecom players to upgrade their networks for line sharing by June of this year. As a matter of practicality, most analysts believe that line sharing will be deployed countrywide by the end of this year. The ruling helps to level the competitive ground for digital subscriber line (DSL) providers trying to enter the residential broadband market. Cable providers have the advantage right now; DSL providers have struggled with the ``last mile'' of access to users. They've been forced to pay leasing fees to incumbent telecom players to gain entrance. The ruling will substantially free companies like Covad Communications (Nasdaq:COVD - news), NorthPoint Communications (Nasdaq:NPNT - news) and Rhythms NetConnections (Nasdaq:RTHM - news) from the control of the incumbents. Incumbents Have Had Upper Hand Line sharing is a process that allows a consumer to use his or her existing phone line for voice communications -- provided by the incumbent local phone company, such as SBC Communications (NYSE:SBC - news), Bell Atlantic (NYSE:BEL - news) or BellSouth (NYSE:BLS - news) -- and high-speed DSL Internet Access through the phone company or a competitor. Right now, incumbent phone companies dominate the local-phone service market and predominantly provide voice communications. In addition, they possess the advantage of providing high-speed DSL access via their networks. Competitive providers of high-speed Internet access via DSL technologies, however, often have to depend on the local phone companies to provide customers with these services. Competitive DSL providers like Covad, NorthPoint and Rhythms NetConnections, for example, lease lines from the phone company at an average of $20 a month. Beyond the cost of leasing, competitive DSL companies have to typically wait 20 to 30 days for the incumbent company to provide a second line; meanwhile, the incumbent can provide DSL services much faster as they can do so on the customer's existing line. The customer is not given the capability of using competitive DSL services and voice communication over the same copper line, and is forced to order a second line from the local phone company. Line Sharing Will Push Competition While the competitive community has welcomed this ruling, the incumbents have viewed it otherwise. If the competitive local-exchange carriers (CLECs) have access to the incumbents' networks at affordable rates, incumbents may not sustain the incentive and urgency with which many of them have been building networks, argue the opponents. This ruling, they say, goes against the Telecommunications Act of 1996, which sought to encourage facilities-based competition in the telecom market. But the FCC ruling -- once implemented -- will be a boon for CLECs and ISPs, the providers of high speed DSL Internet access. And it will put the competition on level ground with the ILECs (incumbent local-exchange carriers) who have enjoyed a price advantage as they can provide high-speed data and voice to their customers at no extra line-costs. Line sharing will help reduce the cost of providing DSL services, as the fees will be almost 75% cheaper than the fees for leasing a line. Take Covad Communications, which pays an average of $20 per month to lease a line from the ILEC now. It expects to pay only $5 a month once the ruling is fully implemented. The time to deploy DSL services will be shortened drastically while providers will have increased capability to offer DSL services more widely to meet the growing broadband demand of customers. And the customer benefits from the change as well. Line sharing makes efficient use of the existing telephony network and alleviates the copper scarcity issue so users won't need a second line. The bottom line is that the customers will be benefit the most as they will have a wider choice of services at a lower cost. Line Dancing With Rhythm Line sharing has already boosted activity between the incumbents and the competitive players. The first movers in this sector are Covad, Rhythm NetConnections and NorthPoint Communications. In January, Covad Communications deployed the first shared line. Two months later, NorthPoint followed up by announcing its line sharing pilot program in Dallas, Chicago San Jose, Calif., and New York. In April, Rhythm NetConnections penned an agreement with US West (NYSE:USW - news) under which the CLEC will pay no monthly charge to use customers' existing voice lines for digital subscriber line services throughout U S West's 14-state region. In return, the CLEC has agreed to withdraw its opposition to the merger between Qwest (NYSE:Q - news) and US West. This is a very good deal for Rhythm, which has extensive coverage on the East and West coast but less in between. The deal with US West -- in which they don't even have to pay the minimum line sharing cost -- will give Rhythm immediate coverage to 14 states in which it doesn't have presence. Casey Freymuth is president of Group IV Inc., a Phoenix-based consulting,research and publishing firm specializing in strategic and operational matters for global telecommunications, utility and Internet companies.His weekly column uncovers investing opportunities in telecom stocks. Freymouth doesn't hold a position in any of the stocks mentioned in this column.