DSL Prime News: The Inside Source

While the U.S. Bells continue to complain to regulators, outfits large and small are proving that DSL can be depolyed profitably from suburban California to villages in France to the urban centers of South Korea.

by Dave Burstein DSL Prime [December 6, 2002]

"We will wire every town of 5,000, and we don't need a subsidy to do it." —Jean-Yves Gouiffes, France Telecom

"ADSL is the Internet, and it's exploding," France Telecom reports, passing a million subscribers and expecting 400,000 more in Q4 alone. CEO Thierry Breton adds "ADSL has become a ubiquitous consumer product, alongside color TVs, DVDs or cellphones." Coverage is now over 70 percent, moving quickly past 85 percent. "It's a sound business," Gouiffes added. "We have some of the lowest prices in Europe, and don't need any subsidies from the government for a very wide buildout. Only a handful of places are uneconomic, probably less than 5 percent of the Internet users in France."

The drafts circulating of the FCC's broadband decision are shallow and loaded with errors of fact and especially analysis. The justifications of several items close to approval are based on assumptions that telco are spending $1,000 per port for DSLAMs that cost about $100 per port, that the likely take rates in new builds will be a quarter or less than current demand, and that Ed Whitacre and Ivan Seidenberg are incompetent louts whose 2002 projections were uneconomic twaddle. The FCC staff is actually extraordinarily able—folks like Pepper and Rosenworcel are sharp as a whip. They can do better work. Verizon's Tauke plan (connect at the CO, price TELRIC with common sense) is giving the telcos plenty; deregulating beyond that will slow, not speed deployment.

AOL Broadband non-strategy
No one has enough unique content to own the Internet
AOL's analyst meeting introduced the unlikely strategy of making money on broadband by getting people to pay $15 per month for infomercials and limited exclusive content. David Kirkpatrick in The New York Times calls it "a subscription version of the free website Yahoo". He projects their budget for this content is perhaps $1 per subscriber, meaning most of it will be movie trailers, magazine reprints, and sales promotions—infomercials.

"Content will make everyone a fortune on the Internet," folks believed not long ago. They were also wrong. Several million people pay AOL to keep their e-mail address and buddy list active, but those customers will drift away over time. No carrier in the world has persuaded large numbers to sign up because of their "exclusive" content. No matter whether you're Yahoo, MSN, AOL, BT OpenWorld, Telfonica/Lycos, or make dozens of content deals, 90 percent of what a user wants from the net will come from outside your walled garden.

No site too small for DSL
10 user DSLAM the size of a large cell phone
Peter Lindner intends to bring Ericsson to a leading position in DSL, starting with a remarkably small new unit designed to attach right to the main distribution frame in the local exchange. It is designed for easy installation in increments of 10 subscribers and connects to the network over an Ethernet interface. The list price is less than $2,000 for ten users (ask for a volume discount), meaning any exchange can start offering DSL for an investment, installed, of far less than $5,000. A cheap, standard Ethernet switch can support 24 units/240 users without requiring a DSLAM chassis. China is already buying units, for a quick, inexpensive deployment.

Ericsson worked hard in the past to sell either their own DSLAM or OEM'd Zhone product, and came close to a big win at France Telecom. Their new strategy is products that go beyond "me-too," leveraging the economics of Ethernet as well as niches in the ATM world. They play a major role in the Ethernet in the First Mile Alliance, a group to watch for the definition of future networks.

Growth moving to remotes, small offices
In North America, 30 percent or more of new DSL lines next year will come from smaller facilities, both upgraded DLCs and smaller offices. (The initial buildout of the larger offices was completed two years ago, as the telcos grabbed the low hanging fruit.) That will also be a factor in Europe, with fewer remotes but many small exchanges set to upgrade in the nest two years.

Adtran introduced a hardened 24 port unit, including splitters, that fits in a single rack unit or virtually any cabinet. Alcatel's new offering puts 48-216 ports in a space that's 2' x 2' x 1'. Nearly everyone else has a unit in the works, with many from Asia extremely inexpensive. The prices aren't down to the $70 per port some DSLAMs go for in massive contracts, but telcos can install these boxes for about 4 months' DSL subscriber revenues.

Alcatel Litespan DLCs are easily upgraded with a line card, especially because Alcatel is currently pricing cards very aggressively. Other DLCs are upgraded with one of these small DSLAMs, either inside or attached to the current case. A new option—soon to be available from every DLC vendor—is a combined voice and data card using Infineon chips. Where uptake rates are high, the operational saving of the new cards should be very attractive.

Some telcos are still lying about the economic impracticality of providing DSL to smaller communities. Where you have fiber capacity (almost everywhere) the fact is simply that DSL is profitable.

Surewest/Roseville—100 percent coverage, 15 percent uptake
Why can't Pac Bell match that?
Bill Demuth, CTO, confirmed to me that 100 percent means everyone in their territory can get DSL. "For the few long loops we can use DSL repeaters to extend the reach." Roseville serves 80,000 homes north of Sacramento, and has DSL-enabled the COs and 29 remote terminals. Next, a move to Sacramento using $200 million of fiber and cable facilities purchased from overbuilder WINFirst. How about a 10 Mbps fiber connection for $49.95 per month? Sounds good to me, and these folks are considering it.

Verizon Introduces High-Speed Internet In Western Virginia
Verizon, BT, FT, Telstra have many headlines like that coming
Press releases are rarely news for DSL Prime, but I took this headline directly from Verizon's press release. It's the fifth similar Verizon announcement in two months, and great news for the company, the industry, and Verizon's communities.

Copyright 2002 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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