Insight: IP broadband could cut private line prices

Demand for broadband services based on IP could force down the prices of high-speed private leased lines, creating an unpredictable competitive landscape, according to a new study from Insight Research.

Telecommunications carriers offering private lines such as T-1, T-3 and DS-O, are still likely to see revenue growth of 8.8% annually through 2002 in that market, since the lower prices will probably spur demand, the report said. Insight analysts predict marketing and technology battles between fast packet or IP-based services and circuit-based private lines in the coming years, the company said in a statement outlining the study, "Private Line Services 1998-2003."

For corporate users, that could mean lower prices as new IP-based broadband carriers such as Level 3 Communications and Qwest Communications International put competitive pressure on traditional carriers such as AT&T and MCI, the study says.

IP-based networks for long distance and xDSL and cable modems for local services are threatening the private line market, which could force price cuts to keep private lines alive.

"Private line was put on the critical list in the mid-1980s when virtual private networking gave corporations an alternative to nailed-up circuits to tie their locations together," said Robert Rosenberg, Insight president, in the statement.

"Commercialization of the Internet in the mid-1990s breathed new life into the private line market as companies rushed to create intranets, but the emerging technology alternatives to private line means we've got to put the patient on the touch-and-go list again," said Rosenberg, who was not available for additional comment.

Packet-switched services such as ATM and frame relay make T-carrier private lines less advantageous. T-carrier lines use traditional circuit switching -- a more cumbersome telecom method than packet switching, which sends packets of digital data for a number of customers at different times over the same circuit.

But the emergence of companies such as Level 3 and Qwest, with their plans to offer private-line services at far lower prices than traditional telcos, shows "promise to significantly alter the markets for private line services," according to an executive summary of the report.