Dsl Retailers Claim To Have Right Model
Sydney Morning Herald
Tuesday May 8, 2001
As the giant North American telecoms pick over the carcasses of bankrupt Digital Subscriber Line retailers, Australia's recently cashed-up DSL pioneers say the shake-up is not likely to be repeated here.
Last year RequestDSL, FlowCom and Netcomm raised millions to fund the roll-out of DSL networks: a means of upgrading the existing copper phone network to deliver high-speed data, voice and video services.
DSL is expected to become the main broadband technology for at least the next three to five years, with research firm IDC predicting 2.1 million subscribers in Australia by 2004. According to the latest Australian Bureau of Statistics report, that's up from just 7,000 in December 2000.
But just as the first networks start to come online in Australia, a stack of US counterparts have bitten the dust. Last month the assets of NorthPoint Communications, which covered 40 per cent of the US market, were bought for a song by AT&T. Four other DSL retailers have filed for bankruptcy and the share price of one Nasdaq-listed company has sunk so low it faces delisting.
According to Mr Phil Sykes, chief executive of RequestDSL, which was seed funded by Pilbara Mines last January and topped up with $40 million from Hong Kong's Telecom Venture Group in October, the difference comes down to ``the luxury of hindsight"and more conservative cash spending here.
``The [US] independents spent a fortune on building broadband awareness and just as it got going they ran out of cash and weren't able to reap the benefits," said Mr Sykes. ``We have an aggressive roll-out schedule but we only pay for enough network capacity to satisfy existing demand, then scale up in line with demand and cash flow."
RequestDSL said it would reach all capital cities by the end of 2001. So far Sydney and Melbourne are up and running.
Meanwhile, Netcomm and FlowCom claim their protection comes from owning the whole network, not just providing access to customers.
FlowCom raised $60 million last year to fund its nationwide network, using DSL to cover the ``last mile" to small businesses.
In the US, said Mr Tom Amos, FlowCom's chief executive, you cannot own the backbone, provide access to the customer and own content.
He claims it was that market structure that put the failed North American DSL retailers in a vulnerable position.
Similarly Netcomm, which is building its own national broadband network, is partially funded through a five-year $380 million partnership deal with equipment provider Cisco.
Netcomm chief executive Mr Rob Gillan said the company was one of the few to be deploying a network outside of central business districts. The first pilot trial of the network has just begun on the North Shore, with a commercial roll-out expected in the second half.
© 2001 Sydney Morning Herald