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And Who’s Paying for This?

And Who’s Paying for This? The other big news this week was the confirmed, but not yet announced plan from Compaq, Intel, and Microsoft, along with GTE and four of the five regional telephone companies (all except Bell Atlantic, which may yet join) to develop technology that would provide Internet access for consumers at throughputs up to 1.5 Mbps, much greater than today’s 56 Kbps modems. The new modems, which the group hopes to have in PCs by next Christmas, would rely on DSL (digital subscriber line) technology, would use a single, normal pair of copper wires – just like a regular phone line – and would provide dedicated Internet connections, thus eliminating the annoying wait that today’s modems suffer when dialing and connecting. Some reports indicate that the service would be asymmetric (which is the A in the ADSL variant of DSL), running 1.5 Mbps towards your computer, and considerably less from you to the Internet (the exact numbers haven’t been reported and may vary depending on local conditions). This would prevent you from running much, if anything, in the way of Internet servers.

The wee problem with this proposal is that bandwidth is not free, despite what many people think. Your ISP must purchase enough upstream bandwidth from another source to serve all their customers, who mostly connect at around 28.8 Kbps. If, suddenly, everyone could connect at T1 throughputs of 1.5 Mbps, your ISP would need to purchase a vast amount more bandwidth to provide everyone with decent throughput. Of course, the costs would be passed on to customers; currently, you can buy T1 access from your ISP for between $500 and $2,000 per month. Given that the average cost of a dialup account in the U.S. is about $20 (with a 128 Kbps ISDN account costing between $50 and $300, depending on how long it’s connected each day), are you interested in paying 25 to 100 times more for T1 throughput?

All that comes before you pay the phone company for the line to carry your data between your computer and the ISP. Here in Seattle, a residential telephone line costs about $20 per month, with an ISDN line coming in at a flat rate of about $80 and a 56K frame relay line at about $90. It’s hard to believe that the phone companies would price 1.5 Mbps DSL connections lower than ISDN or frame relay, so assume a minimum of another $100 per month.

One of the concerns we’ve had is that the phone companies will bypass some of the above issues by offering themselves up not only as a conduit for data between you and your ISP, but also as the only ISP option for DSL Internet connections. Larger ISPs and network providers like PSI, MCI, and UUNET can probably still compete by dumping Internet traffic directly into their own incredibly high-throughput fiber-optic networks, but smaller ISPs may simply be priced out of the market.

In short, without more details on how much the service will cost, we currently doubt many people will be seeing a DSL modem in their stocking next Christmas. [ACE]

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