Foundation

World2000 133of disputes and the FCC's required intervention to loosen up on a number of clauses, as well as to broadenthe directives to line sharing, which involves the co-existence of the network owner's analogue phone line andthe DSL operator's high-speed access service, which enables lower leasing costs for the DSL operator (from$15/20 to $5). The relative surprise derives from the fact that over two-thirds of DSL lines are marketed byregional telephone operators (SBC, Verizon, Bell South, Qwest/US West).Growth in the number of DSL lines in the US, in 2000Although encountering no difficulties in obtaining financing until mid-year, and enjoying the support of longdistance operators, new entrants specialising in DSL find themselves not only miles behind the ex Baby Bells,but now in dire straits. After the April crash, investors discovered the frailty of these operators' business model,who, while few in number, spend considerable sums to be present in thousands of COs, and whose rapidlygrowing revenues are not enough to counterbalance increasing operating losses. Created in 1997, Covad, theleading DSL pure player with 270,000 lines at the end of the year, posted some $189 million in losses in thethird quarter of 2000, for $66 million in earnings. Worse still, the battle over costs came to aggravate thesituation during the last quarter, under the effect of their ISP clients' bankruptcies. The three leading DSLfirms–Covad, NorthPoint and Rythm- collapsed under the pressure. The irony is that they do not appear to beable to find a saviour among local phone companies. SBC acquired a 6% share of Covad and committed toa long term agreement, while NorthPoint was banking on a merger to help stave off the effects of heady cashconsumption; a deal which has now been cancelled. Given these plights, many now consider that thewholesaler model upon which these companies were based is in need of serious revision.Growth of DSL lines in the USANumber of DSL lines700000560000420000280000140000March - 2000June - 2000September - 2000December - 20000SBCVerizonUS West (Qwest)ndBellSouthCovadNorthPointRhythmsSource : IDATE (end 2000 estimates)More generally, while the stability of regional phone companies should enable DSL lines to continue to developin the US, doubts persist about the current profitability of high-speed access, particularly on the residentialmarket (around 2/3 of all lines). The results of leading cable provider Excite@Home, held by AT&T, whichboasts over 2 million subscribers (+157% in one year), but which posted a deficit of $5.4 billion during the lastquarter, serve to indicate that the frailty is not technological in nature.It is doubtless by keeping the North American experience in mind that Europeans will attempt to proceed thisyear with the veritable launch of high-speed. Europe was clearly lagging behind at the end of last year, withunder 700,000 DSL lines marketed (with an equivalent number of high-speed cable accesses). In fact, themajority of DSL lines are operated by Deutsche Telekom, which has announced 500,000 lines marketed in© IDATE www.idate.fr