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My ISP offers 1.5 Mbps, 3 Mbps and 7 Mbps connection speeds. I currently have 3 Mbps and would like to get something faster but my ISP says that 7 Mbps is not available in my area. I assume this is due to distance from the CO (or does 7 Mbps require fiber?). My question is, even if I can't get a reliable 7 Mbps would my ISP hook me up at something in between, say 5 Mbps?

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Fiber isn't usually billed as DSL. DSL speeds are dependent on a) the distance between you and the CO, b) the condition of the wiring between you and the CO, and c) the equipment at the CO. (It's also dependent on d, the equipment in your home, but often the ISP provides what you need to use for the service.) Your ISP's 7Mbps service could be Fiber, but if it's truly DSL it may not be available to you because you're too far away OR because your CO isn't equipped to provide that level of service.

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I'd assume 7 must be over something that you don't have to your house.

I'm in the UK, and most connections are sold as up to 8Mbps, then you just get whatever your line supports, so it may well be possible that you'd get somewhere in between.

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Disclaimer- I Live in the UK

Speed is limited by two things, the service your ISP sells you and your distance from the CO. If you currently connect at exactly 3 Mbps on your 3 Mbps service then your line could be be capable of a higher speed (somewhere between 3 and 7).

DSL modems will auto negotiate the highest possible stable speed on a line, so your next port of call should be to find out what speed your line is capable of (unfortunately I live in the UK so any websites I could give you wouldn't be applicable) at which point you can decide whether paying for a 7mbps service is worth it.

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