Covad Offers Small Business Bundles

By Colin C. Haley

Covad Communications is augmenting its digital subscriber line (DSL) offerings with long distance and local calling plans as part of a new bundled service for small businesses.

Initially, the package — featuring high-speed Internet access, e-mail, Web hosting, and service for up to eight phone lines — will be available in the San Francisco area. If successful there, Covad is eyeing an additional 15 markets for 2003.

“This is the next step in our campaign to popularize broadband,” Covad’s Todd Kiehn said in an interview with

Covad’s goal is two-fold: sign up new customers interested in simplifying their business services; and upgrading existing DSL customers to include phone services, thereby boosting its Average Revenue Per User (ARPU) — an important telecom industry metric.

By winning regulatory approval to offer voice service in California, Covad, which scratched and clawed its way out of Chapter 11 bankruptcy this year, gains new ammunition in its ongoing fight for new customers against Baby Bell rivals, such as SBC and Verizon.

How it Works
A box, which Covad calls an Integrated Access Device, is installed at a customer’s office. It comes with four or eight phone ports as well as an Ethernet connection to fuel Internet access for a local area network.

The box combines both compressed and uncompressed voice traffic with data traffic, and then sends it out over the SDSL connection to the network. Short for symmetric digital subscriber line, SDSL allows more data to be sent over plain old telephone lines (POTS) than asymmetric DSL access — SDSL supports data rates up to 3 Mbps. It works by sending digital pulses in the high-frequency area of telephone wires. Since these high frequencies are not used by normal voice communications, SDSL can operate simultaneously feed voice and data connections over the same wires.

In addition to local and long distance calling plans, Covad is offering no-frills value-added services most commonly used by small business owners: call waiting, directory assistance, operator services and international calling. Packages will be sold as allocation of minutes, much like wireless calling plans.

What it Costs
As for pricing, Covad said the voice portion of the service will be 20 percent less than competing offerings. The four-line package is expected to cost $379 a month — $200 for phone services and $179 for DSL access. The eight-line option will run $579 a month — $400 for phone services and $179 for DSL access.

Because Covad’s network is already equipped to carry voice traffic, the capital investment needed to launch the program is relatively low, Kiehn said. Training of call center and field service representatives in the Bay Area is nearly complete.

Business customers benefit from gettng one-bill and a single point of contact for all questions regarding both voice and data service. There is a five-day testing period after the service is first installed before it goes live.

Competitors are also offering bundled packages, however, Covad believes it can provide a better price for similar services — up to 40 percent less than rival offers. The Santa Clara, Calif., company says its research shows there is little customer loyalty to phone service providers. As an additional motivation to switch providers, Covad is offering free installation, equipment, and activation — after credit is approved for new customers.

“Small businesses have always gotten the short end of the stick when it comes to the best the next generation network has to offer, particularly when it comes to bundled voice and data services,” said Pat Hurley, DSL analyst with TeleChoice, Inc. “Services like Covad’s TeleXchange are going to find a pent up market demand for the one-stop shopping that other larger companies have been getting for years.”

Adapted from

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