Dial-up is Still Around

aol-dial-up-630x354Since most people in the country can get some form of broadband many people think that dial-up is dead. We all remember those days of trying to get a connection to a modem and then listening for the beeps and boops. But I looked and found there is still a significant dial-up business in this country.

At the end of 2014 AOL still claims to have 2.3 million paying dial-up customers. That is obviously way down from their peak when they had 126 million customers, but it’s still a very impressive number. AOL said those customers account for $155 million in revenue, which still exceeds the company’s next biggest revenue source which is advertising at $144 million.

AOL is not the only one still in the business. Some other big names from the past are still around like EarthLink and NetZero. EarthLink advertises that it has the most dial-in numbers in major markets like 50 in Miami and 45 in San Diego. And then there are dial-up companies that you probably never have heard of including Basic ISP, Toast.net, Turbo USA and Copper.net. Finally, many telephone companies like AT&T still offer dial-up. A surprising number of my smaller telco clients also still operate small pockets of dial-up customers.

It’s hard to get industry figures since most of these companies don’t publish their customer counts, but if AOL still has 2.3 million customer then nationwide there must be more than 4 million households still using dial-up. The FCC says that about 2% of households are still on dial-up, but AOL alone is slightly more than 2%.

Dial-up has gotten better than what most of us remember due to the use of compression techniques where the ISP will compress whatever is being sent to the dial-up customer. But it’s still agonizingly slow compared to other broadband and the realized speed of dial-up is still capped at 56 kbps on good copper. And much of the copper that is left is not very good. With compression techniques dial-up can appear to be twice that base speed.

The low speeds keep dial-up customers relegated to using very basic Internet functions such as email. Browsing the web can be incredibly slow since many website now include advertising and video and take a long time to open. Since shopping on the web is now very image oriented that can also be too slow for dial-up speeds. And obviously dial-up households can’t get streaming video of any kind since it requires anywhere from  steady 1 Mbps at the lowest quality up to 6 – 8 Mbps for the new 4K HD video.

So who is still using dial-up? It appears that there are three distinct communities. First are people everywhere who barely use the Internet and want the cheapest connection possible. Such people don’t do a lot more than check email and do basic tasks. Second is in immigrant communities where one would suppose that the low price is also important.

Finally are rural people who have no other alternative except maybe satellite. For those who have never used it, satellite broadband is not a great product. It’s very expensive with base plans between $60 and $80 per month. It is faster than dial-up, but it still has latency issues which make it hard to use for any real time purposes such as web voice or streaming video. It also comes with low and strict ceilings on monthly data usage. WildBlue has a monthly cap of 17 GB in total downloads, HughesNet is 20 GB, Exede is 25 GB and Dish is 30 GB.

One would think that if AT&T is really able to cut down millions of rural copper lines like they want that a lot of dial-up customers will disappear. All of those rural houses that use dial-up today as their most affordable option will end up with either satellite or cellphone data plans.

Writing this blog made me pause to marvel at how fast our technologies change and grow. The heyday of dial-up was only twenty years ago, and we have come so far since then. We think of dial-up as something ancient and yet twenty years is nothing in terms of mankind’s history. But in that very short time we have grown from having over half of the country on dial-up to seeing some cities connected with gigabit speeds. I remember when I was on dial-up and I envied a few of my friends who were on a shared T1 at their office. I would have called somebody crazy if they said then that within twenty years that people would be able to get a gigabit at their house.

The End of Special Access?

Image representing EarthLink as depicted in Cr...

Image via CrunchBase

For those not familiar with the term, special access refers to selling traditional data pipes on the TDM telecom networks. These are circuits like T1s and DS3s. While one might think the world had transitioned to ethernet circuits there are still huge numbers of these traditional circuits being sold in the world.

In many cases the traditional circuits, especially T1s are being sold because of lack of fiber in the distribution plant. TDS data circuits can still be delivered over copper in many cases and often are the only way for a business stuck on copper to get faster data speeds.

AT&T recently announced that they were going to do away with all of their long-term discounts on these traditional TDM circuits. Customers and other carriers have been used to buying these products with a significant discount for signing up for long periods of time. There have been discounts offered for agreements to buy for up to seven years. And these discounts have teeth since there are significant penalties for breaking the contracts. As of November 9 AT&T will not be signing any contracts with terms longer than three years.

AT&T says the reason they are doing away with the discounts is due to the fact that they are going to be discontinuing TDS special access by 2020. However, that rings untrue since somebody can still sign a 5-year or 7-year contract today and still have that contract finished on or before 2020.

Some of the competitors of AT&T filed a letter of complaint with the FCC this month complaining about the cessation of the term discounts. This included Sprint, tw telecom, CBeyond, EarthLink, Level3 and Megapath. These carriers say that eliminating the discounts is anticompetitive since they are the in direct competition with AT&T and they are the primary purchasers of special access circuits.

Sprint says that eliminating the term discounts will increase the prices they pay and ultimately affect what customers pay. They say that in the worst case examples that their costs will rise 24%.

If you have been following this blog I have reported that AT&T has been positioning itself to get out of the TDM business. They want to convert all data circuits to ethernet as part of their ‘Project VIP’ initiative. But they also want to get homes and small business off of copper and in many cases replace them with cell phones. The FCC has not given AT&T the permission to do this anywhere, yet they keep moving towards that goal.

The biggest problem I see with trying to eliminate TDM data circuits, particularly T1s, is that the customers who use them often are in parts of the network that don’t have fiber alternatives. It’s nice for AT&T to be able to talk about offering only ethernet, but in many cases this is going to result in customers losing what little data they are able to buy today.

There are still huge numbers of T1s that are used to support PBXs and small company WANs for functions like data back-up. It’s hard to picture what a customer will do if the copper goes away and they are expected to somehow perform those functions using cellular data – with data plans that are likely to be capped. We tend to think of a T1 these days as a small data pipe. But if you are using it for data backup, a T1 can transmit a lot of data during a month’s time.

The FCC is in the middle right now of looking at special access issues. They have issued a request for data from the industry that will hopefully help them understand the state of the current TDM data market. I think they are going to find that the market is still a lot larger than AT&T wants them to think.