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DSL Is Dead! Long Live DSL!

Walking through midtown Manhattan yesterday, I came across a Verizon truck bearing this rather insipid call-to-action: “Why Wait? Get Verizon Online DSL.”

It neatly illustrates the bind Verizon’s legacy landline division is in, and its love/hate relationship with DSL. Outside of FiOS — which was available to about 13 million of the 16.3 million premises passed at the end of Q3 — DSL is all it has to offer. (Well, along with traditional phone service and DirecTV.) The “why wait?” message is aimed at people who still have dial-up, for whom DSL would actually be a step up.

DSL is dying a slow death. In Q3 2011, Verizon lost a net 118,000 DSL connections, to stand at 3.96 million connections (down 11.2% from 4.46 million a year earlier). By comparison, it had 4.62 million FiOS Internet subscribers at the end of September 2011 (up 18.8% year over year).

But in much of its territory, Verizon is forced to offer DSL, which maxes out at 15 Mbps downstream… if you’re lucky: The 15 Mbps DSL tier is available to 4 million homes across 12 states and D.C.

In some areas, the top DSL speed available to you is a meager 3 Mbps. Verizon’s “high speed Internet enhanced” tier is listed at $39.99 per month whether you’re able to get 1.1 to 3 Mbps, 3.1 to 7 Mbps, or 7 to 15 Mbps downloads.

DSL, an inferior technology to cable’s DOCSIS, just can’t compete — and it’s going to keep shrinking.

According to Sanford Bernstein’s Craig Moffett, cable’s share of broadband connections will rise from about 60% today to 69.6% by 2020. DSL will drop from 28.2% share today to 8.8% by 2020 (see Cable’s Gonna Keep Winning the Broadband Wars: Moffett).

So what’s Verizon to do? Partner with cable, to sell cable’s broadband, TV and phone alongside its wireless services (see Mobile Mashup and Comcast, TWC And BHN Sell Spectrum To Verizon Wireless For $3.6 Billion).

Moffett’s take is that Verizon CEO Lowell McAdam “threw wireline under the bus” with the Verizon Wireless deal.

“Obviously, Verizon would never characterize it that way,” Moffett wrote in a Dec. 16 research note. “They remain committed to the Wireline business — Wireline is, after all, half of their proportionately consolidated revenue — and have no intention of suggesting otherwise. Still, it’s hard to draw any other conclusion but that Wireline has been marginalized.”

Just look at the map below (from the telco’s site) showing Verizon’s wireline presence: It covers just 14% of the U.S. population. To reach the rest of the country, Verizon Wireless is going with cable (if regulators give the OK).

Do you really want DSL? Verizon Wireless may suggest something speedier for you.


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