NorthPoint CEO Surveys DSL Landscape

BOSTON (05/15/2000) - Elizabeth Fetter, named NorthPoint Communications Group Inc.'s CEO earlier this year, knows what she's up against in battling the established phone companies in the broadband access market. After all, she has worked at US West Inc., Pacific Bell Corp. and SBC Communications Inc. She recently spoke with News Editor Bob Brown about the competitive environment and NorthPoint's game plan.

NorthPoint always gets lumped in with Covad Communications Co. and Rhythms NetConnections Inc. How would you distinguish them from NorthPoint?

It gets tiresome being the triplets. Fundamentally, the business we are in is similar, but we have very different strategies. For example, Rhythms early on declared that it was going to focus on the enterprise market, going direct and focusing on value-added services and average revenue per customer. Recently it has done some very consumer-oriented deals. Covad started out retail in the telecommuter market, then it went into wholesale. Now with the acquisition, it appears Covad is going direct. But it is a very clear try to reinforce that "We are the biggest in terms of installed lines."

So how is NorthPoint different?

The first two years really focused on having a broad-based network. We very much wanted to take advantage of the emerging opportunity in Europe, and we were first to market there. We've had a first-to-market strategy in each of the areas in the U.S. We are focused on small and midsize businesses with a business-quality digital subscriber line (DSL) service. Only now, after the standards have emerged, technologies have evolved and line sharing has been passed, are we going in a big way into the consumer market. With our content strategy that we announced in February and are deploying now, we are very quickly going into next-generation broadband services.

What are the chances of a fourth national DSL provider emerging?

The window for becoming a national provider really has closed.

But what about the established carriers, such as AT&T Corp. and the Bell companies?

I don't believe AT&T will try to do it themselves. It may try to get a national DSL presence to augment its cable footprint, but I would say it would be by acquisition or strategic alliance. The Bells have enormous scale, and that has always been the competition. Our strategy is to be very focused; 80% of our lines have been in the small and midsize business market, which the incumbent local exchange carriers historically have not done a good job with. The emotional battlefield with them is the consumer market, and our strategy there is to go through alternate channels like Radio Shack and the Microsoft Network.

What's NorthPoint's game plan for the rest of the year?

We'll continue our network build-out. The second thing is expanding our scale.

We just turned up our new operational support system, which we spent a ton of time and money on to handle our order flow from end to end. We are also augmenting our internal provisioning system so we can offer millions, rather than just thousands, of lines.

We're not really focused on the enterprise right now. We don't have the core competency set or the bandwidth to handle the bigger companies' needs. We'll continue to be a wholesale provider for the foreseeable future; there's plenty of business there.

What can we expect from NorthPoint in the way of new business services?

We'll have virtual private network service. We do offer service-level agreements now, although we'll expand that and get pretty specific about guarantees. That's going to become important as we add voice into the mix, which will be coming by year-end. There are more stringent expectations for voice than data. Then there are value-added services. We're doing work with ASPs to bundle their services with equipment from customer premises equipment vendors like videoconferencing firms.

I was under the impression that NorthPoint was playing down voice over DSL. No?

I want to make sure not to overhang the market with things a year before they are out. There has been a lot of conversation about voice over DSL and voice over IP, and there are certainly cost benefits. At a recent trade show, we had some voice over DSL running and the quality was fabulous. This is the kind of thing that should start to catch on in the small and midsize business market that is much more cost conscious and not as emotionally wedded to a brand as consumers are.

Does NorthPoint have plans to expand beyond DSL?

We are in the early days of thinking about wireless to fill in our network footprint. Cable, probably not, though we do have early investment from At Home Corp. and Vulcan Ventures, which owns [cable company] Charter. We'd much rather focus on the emerging technologies.

DSL is here now. The challenge we have is keeping up with demand.

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