(FORTUNE Magazine) – In today's troubled telecommunications sector, there are laggards, there are losers, and then there are DSL companies. These stocks, which include Covad, Rhythms NetConnections, and NorthPoint, have plunged 85% or more in the past 12 months. In contrast, a Dow Jones telecommunications index is down about 32%.

As recently as a few months ago investors thought carriers deploying high-speed digital subscriber line service over regular phone wires would thrive. DSL companies seemed well positioned in the ultrahot data segment of the local phone business and well suited to meet the broadband demands of small businesses and even consumers. Wall Street applauded the companies' narrow focus.

That scenario didn't pan out. A couple of DSL companies are struggling because some distribution partners aren't paying their bills. And Wall Street's new thinking: DSL is a calling feature, much like, say, three-way calling or voice mail--not the basis of a stand-alone business. Some telecommunications executives have derisively equated a DSL carrier to the idea of a company that sells only caller ID. (Read: a total dog.)

If this thinking prevails, DSL companies will have to figure out how to hawk other services--or merge with a company that can. Unfortunately, new services don't really exist yet. For example, cable television over DSL lines is costly and available in just a few test markets. "A year ago we would have expected to be providing services already," says Liz Fetter, CEO of NorthPoint, which has agreed to merge with the DSL assets of giant Verizon.

Not everyone agrees that DSL carriers need to broaden their Verizons, um, horizons. Catherine Hapka, CEO of Rhythms NetConnections, says the notion that DSL companies need to deliver a bunch of other services "lacks an understanding of how you build scale and expertise by focusing." Hapka, who says her company is funded through the end of next year, cites AT&T's decision to break itself up as evidence that telecom companies are focusing on, well, focus. Wall Street hasn't rewarded AT&T for its newfound focus, however--and it is unlikely to treat DSL carriers much differently.