Why did the Coop switch from SDSL to ADSL? What is "the $24 problem"?

DSL can be provided in either of two ways -- "dedicated loops" and "shared loops". Nearly all DSL in the United States is provided on "shared" loops, meaning that the data signal is provided to the subscriber over the same pair of wires used for a voice dial tone. The data signal is carried on frequencies which are much higher than the voice frequencies and they do not interfere with each other. The DSL provider uses a "splitter" at the DSLAM which combines the voice and data signals to be passed to the subscriber, and a second splitter is used at the home to separate the data and voice signals again. The other way of providing DSL is by means of a dedicated loop. A separate copper pair is used between the DSLAM and the DSL modem in the home. This is shown below in Fig. 3.

Back when the DSL plans for Ruby Ranch were being made, the Coop faced a decision, namely whether to use dedicated loops or shared loops. The Coop chose dedicated loops for several reasons. First, at the time negotiations began in June of 2001, the sole shared-loop product in Qwest's product catalog was a shared loop with the DSLAM in the central office, a product that was of no help for would-be end users (like ours) who are isolated from the central office by a loop carrier (pair gain) box. It was only half a year later that Qwest added to its product catalog a shared distribution subloop product.

Even if Qwest had made shared distribution subloops available at the outset, there are reasons why the Coop might not have chosen it. For one thing, the multiline splitter that would be needed by the DSLAM was very expensive and very large. For another, the Coop hoped to avoid finger-pointing that might result if Qwest tried to blame the Coop for somebody's voice line going out of service, and the dedicated line provides less of a finger-pointing opportunity for Qwest as compared with line-sharing. Finally, the dedicated distribution subloop was priced only a few dollars more than the sole "shared" product, the shared loop ($8.73 per month as compared with $5 per month). The Coop figured it was worth paying a few extra dollars a month per line to save having to purchase an expensive splitter and to save the risk of finger-pointing if there were a problem. At the time the Coop signed its interconnection agreement with Qwest in March 2002 the agreed monthly price for a dedicated pair was $8.73. The Coop rolled out its service based on this price. The dedicated-line approach is shown below in Fig. 2.

Shortly after Qwest signed our contract, Qwest asked the PUC to allow it to triple the price for the sole product being rented by the Coop. On June 6, 2002, the Colorado PUC approved the price increase to $24.13 per month. We later learned that under PUC rules, such a decision may be questioned only if a dissatisfied party complains to the PUC within thirty days. Perhaps unsurprisingly, Qwest did not mention the PUC decision to the Coop until August of 2002, well after the thirty-day period had come and gone. At first Qwest said the price increase applied only prospectively -- to subloops installed after June 6, 2002. The Coop concluded this was a problem it could survive with, since most of the subloops it needed had been installed prior to that date.

You can see a map showing how much of the state of Colorado was harmed by this PUC decision and a letter the Coop sent to the PUC about this. The PUC pointed out that its thirty-day reconsideration period had already passed and thus it declined to do anything in response to the Coop's letter.

Two months later in September 2002, Qwest dropped the bombshell that it had changed its mind and was now of the view that the price increase applied retroactively -- to all subloops regardless of when they had been installed. This was a big shock to the Coop and completely threw off the Coop's timetable for repaying its lenders, as well as the Coop's timetable for dropping monthly rates after the lenders were repaid.

The Coop had to decide what to do about this "$24 problem". The Coop's investigations revealed several things. While the sole "shared-line" product in Qwest's product catalog was initially line sharing requiring the DSLAM to be in the central office, Qwest had quietly added a shared distribution subloop to its catalog in January of 2002. While the dedicated-line price had tripled to $24.13, the Qwest price for a shared subloop turned out to be $3.50 per month. The type of DSLAM line card needed for line-sharing had become available cheaply on eBay. The Coop found a source for a multiline splitter that was much less bulky and less expensive than expected. The Coop also found a surplus dealer selling outdoor home splitters at a good price. It also turns out that used modems for this type of service are available on eBay.

Most of the money that Coop subscribers pay per month for the DSL service goes to debt service (repaying the launch costs). Once the launch costs are repaid, the long-term monthly service will drop to some lower level that is based on the fixed costs of the Coop. As one can appreciate, the long-term monthly cost is greatly affected by whether Qwest demands to be paid $24.13 per month or only $3.50 per month. Although it's too soon to predict long-term monthly costs exactly, the Coop imagines that with line sharing the long-term monthly cost might be $20 or even lower. Without line sharing the long-term monthly cost would presumably be much higher (by the difference between $3.50 and $24.13). Converting over our subscribers from dedicated lines to shared lines thus offered the prospect of a long-term price that is some $240 cheaper per year than it would otherwise be. It also permitted the Coop to repay the launch costs at about the same timetable as was originally contemplated. But of course it has the drawbacks of being more complicated to install and risking finger-pointing problems in the event of trouble with the associated voice line.

What did it cost to add ADSL capability to the Coop's system, and to convert subscribers to ADSL?

You can see the central-office splitter, home outdoor splitter, and Alcatel Speed Touch Home ADSL modem which the Coop uses for its ADSL service.

The following figures are intended to help to show how the dedicated-line and shared-line approaches work.

	Figure 1. Here is how a regular telephone line reaches a Coop subscriber. It comes up from Highway 9 on a pair called an "F1". It is connected in the Ruby Ranch crossbox to an F2 which comes to the subscriber's house and connects to the subscriber's telephone. (You can see a photograph of the crossbox.)
	Figure 2. When the Coop launched service it obtained a separate F2 from Qwest for each subscriber home. The F2 provides a connection between the DSL modem in the home and a port of the DSLAM in the barn. There is no electrical connection between the telephone line and the DSL line.
	Figure 3. With line-sharing, the dial tone comes up from Highway 9 to the crossbox. From there it connects to a splitter in the barn, which combines the voice and data signals. The combined signal comes back from the barn to the crossbox. There it connects to an F2 which reaches the house. At the house, a second splitter is used. It separates the data and voice signals, passing the data signal to the ADSL modem and passing the dial tone to the telephones in the house. This is the way most DSL connections in the United States are made.