Earthlink’s Telecom Makeover

Earthlink, keeping up with times, and running out of options is transforming itself into a virtual phone company. It has already announced plans to team up with SK Telecom of Korea to start a mobile MVNO focussed on high end of the wireless market. Now it has come up with a plan to offer phone service over DSL broadband lines in conjunction with Covad Communications. This is going to be part of the big four-play strategy that has become conventional wisdom for all service providers. With the dial-up business dying a slow lingering death, Earthlink has no option but to undertake a massive makeover.

Earthlink will advance an undisclosed amount to Covad and the two companies will trial a new phone service based on line-powered voice access, that will allow Earthlink to offer the voice part of the quad-play services. Covad has plans to offer ADSL2+ services in the future, which will also allow any of its retail customers to offer video-over-broadband services. The three-market trial is slated to begin in October in Dallas, TX, San Francisco and San Jose, CA, and Seattle, WA. Covad is going to be using the line-powered DSLAMs from one of the three suppliers it is currently testing. These include Nokia, Zhone and Samsung.

Earthlink, so far has been reselling a Vonage package as part of its VoIP offering and recently showed off an integrated offering which combines instant messaging with a PC2PC and PC2PSTN calling. The Covad-experiment is going to add another dimension to their story. This deal could give Covad the vital dollars to build out its line powered DSL infrastructure that could help the company compete more effectively with larger rivals like the Baby Bells. As I understand it, the line powered DSL increased the voice only footprint of Covad by about 40%. I am sure if this works for Earthlink, other Covad customers like Speakeasy and AOL could roll out similar packages as well.