DSL won't make telcos rich claims Ovum

DSL is not going to be the cash cow that hard-up telcos might have hoped for, according to sobering new research from Ovum.

An Ovum study which looks into the financial prospects for operators providing basic DSL highlights competition within the market and the investment necessary to succeed as factors which will limit the impact of DSL roll-out and keep margins low.

Mike Cansfield, research director at Ovum, said: "Business revenues are one thing - margins are another."

Cash-strapped telcos have pinned a lot of hopes on DSL being the service which turns around flagging average revenue per user (ARPU).

But Cansfield said in a statement: "Operators should not expect pots of gold from DSL. Our research with operators and vendors led us to develop a DSL business case model for a typical operator covering revenues and costs. From this, we found that revenues peak in year four and costs in year three, and over the five year period a typical operator can expect to make a reasonable return on its investment."

To make DSL profitable Ovum advises operators to concentrate on "the three Cs" - customers, costs, and competitors.

Cansfield said: "It is important to win as many customers as possible, as quickly and efficiently as possible, to make the business case positive. It is just as important to drive out costs from the business to make it cash positive as soon as possible so that an operator can start to recover the substantial start-up costs. To do both, an operator needs to compete like crazy to maximise market share."