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December 16, 2002
As the telecom winter drags on, more and more carriers are trying to distinguish themselves with cheaper, more convenient bundled services.
The latest carrier to join the bundled party is recently bankruptcy-absolved Covad Communications Inc. (OTC: COVD). The company announced today that it is offering bundled voice and data, a service titled TeleXchange, in the San Francisco Bay area (see Covad Bundles Services).
The company says that TeleXchange will provide up to 24 full-featured phone lines and a high-speed connection to the Internet over a single digital subscriber line (DSL) connection. Both services will be billed on the same statement, and the company will offer customer support for both voice and data over one 24/7-serviced phone number.
"This sounds very promising," says i2 Partners LLCanalyst Andrei Jezierski. "We believe that the whole bundled thing is a done deal."
This is certainly big news for Covad. Unlike many of the larger service providers announcing bundled services these days, the company, which reemerged from bankruptcy last December, has never offered voice services before (see Covad Reorg OK'd). It plans to take advantage of its expertise as a DSL provider and offer voice services over a DSL connection.
Covad claims that the ATM technology in its backbone network will ensure that the sound quality in its voice services is equal to that of standard telephone services. Voice services will be carried over Covad's data network before being connected to the public telephone network.
The voice service includes unlimited local calling with bundles of long-distance minutes, access to directory and operator services, and such features as caller ID, call waiting, and three-way calling at no extra charge, the company says.
As for data services, Covad will offer customers high-speed Internet access with business ISP options like business email, flexible IP address options, web hosting, and custom domain services. At the moment, TeleXchange is DSL-based, but Covad says it expects a T1 option to be added sometime next year. The company also expects to expand the customizability of its bundled offering and to launch its TeleSOHO service for small businesses and home offices next year.
"What’s great about VoDSL is that it allows Covad to leverage its own DSL network to provide voice service,” says Todd Kiehn, group manager at Covad. “The only additional upgrades are installing VoDSL hardware in the central offices.” Covad has 90 central offices throughout the Bay area.
The company has signed an agreement with Focal Communications to provide the voice service network for TeleXchange. Focal owns its own national network, services 23 metro markets, and, according to Covad, is not dependent on purchasing wholesale services from the regional Bells. Focal had not returned requests for comment by press time.
This means minimal risk and capital outlay for Covad, according to Infonetics Research Inc. analyst Kevin Mitchell. "They’re relying on another carrier, so this is not important in terms of big capex spends," he says. "It will really be up to Focal to invest if Covad is successful."
However, Mitchell cautions that success may not be imminent, pointing out that many companies may be wary of moving to a new and less-reliable technology. "Business customers have to be aware of the reliability issue," he says. "If there’s a power cut, there will be a service cut."
"Nothing can match the quality and reliability of a traditional PSTN line," i2's Jezierski agrees. "Psychologically, at least, I think there will be some concerns." However, he continues, "If [the technology] does work, it certainly improves the economics of the offer."
Covad's Kiehn says he's not worried that the voice services won’t be up to par. "Covad is confident that the service will be reliable and is providing the service-level agreements to back it," he says.
Since reorganizing, Covad has focused on getting the basic services right and offering them cheap. The carrier says that customers switching to its new service bundle can expect to save as much as 40 percent on their monthly phone and Internet service bills.
The bundled service package will initially be available only in the San Francisco Bay area, but the carrier says it expects to expand geographically into 10 to 15 additional markets next year.
— Eugénie Larson, Reporter, Light Reading
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