Bell Atlantic announced an alliance yesterday with America Online to offer AOL's customers speedy links using Bell Atlantic's local phone network. Maryland will be included.
The deal is AOL's first for high-speed Internet service but is expected to be followed by many more. That's good news for the majority of U.S. households that still have no access to high-speed Internet service.
AOL has more than 15 million subscribers worldwide, with roughly 13 million in the United States.
The online powerhouse's interest should speed deployment of high-speed services by Bell Atlantic and other phone and cable companies.
AOL brokered this deal because "people are clamoring for it," said Patti Reali, a technology analyst with Dataquest, a division of the Gartner Group. That's particularly true with people who telecommute or have small businesses in their homes, she said.
In the alliance, AOL will offer Bell Atlantic's Infospeed DSL access as a premium upgrade in Bell Atlantic's East Coast region, which runs from Maine to Virginia.
Regular phone line used
DSL -- which stands for Digital Subscriber Line -- allows customers to use a regular copper phone line to surf the Web and simultaneously talk on the phone or send a fax.
With DSL, customers do not have to dial into an Internet service provider. The service is always "on."
AOL said it will start offering the service as a premium package co-branded with Bell Atlantic in some markets this summer. It expects to price it at $20 per month in addition to its regular monthly charge. AOL customers will also have to pay for installation and equipment.
Bell Atlantic will also be allowed to cross-promote other products and services to AOL members.
With the AOL arrangement, customers will only have the high-speed features when they use AOL and not when they use other Internet service providers.
The AOL-Bell Atlantic DSL service will be at 640 kilobits per second, more than 20 times faster than 28.8 kps modems.
But it is slower than many high-speed cable modems, which offer speeds of up to 10 megabits per second -- a megabit is 1 million bits and a kilobit is 1,000 bits -- and generally cost $40 per month.
Bell Atlantic will offer higher-speed access at a higher price separate from its arrangement with AOL.
Some upgrades needed
To offer DSL, Bell Atlantic must upgrade its central office switching and the customer's home phone line with technology that splits phone lines to handle voice on one part and data on another.
Bell Atlantic said it expects to make its DSL technology available in areas covering 7.5 million homes by the end of this year and 14 million homes by the end of 2000.
"With this major purchase agreement between us and AOL, we will be accelerating deployment and serving even more homes," said Amy McIntosh, president of Bell Atlantic's consumer data services.
Bell Atlantic's alliance with AOL puts it in competition with cable companies such as Comcast Corp. of Philadelphia that are rapidly upgrading their cable networks to offer their own high-speed service.
Until now cable companies have seen almost no competition. According to the Yankee Group, a telecommunications research company in Boston, at the end of 1998 about 425,000 U.S. homes had cable modems, while only 25,000 had DSL service.
By the end of 1999, Yankee expects 1 million homes to have cable modem service and 250,000 to have DSL.
Phone companies such as Bell Atlantic have been slow to roll out DSL because "they don't want to cannibalize their existing products," said Yankee analyst Bruce Leichtman.
DSL service could hurt the phone company's sales to businesses of T1 lines, which are more expensive high-speed data lines. In the residential market, DSL would mean fewer sales of additional phone lines, which have proven a lucrative business for the local telephone companies.
"It makes sense for the phone companies to a large degree to wait for cable" to offer high-speed service first and then offer it in the same areas, Leichtman said.
Limited DSL service
At the moment, Bell Atlantic is offering DSL service in parts of the Philadelphia, Pittsburgh, Washington and northern New Jersey metro areas.
"We certainly have been expecting to have competition for high-speed data and were prepared for this," said Richard Rasmus, Comcast vice president for online services. "It will be very difficult for the second guy on the block to take any of those customers away because the customer satisfaction we track is very, very high."
Pub Date: 1/14/99