DSL Prime News: The Inside Source

As Japan goes to 40 Mbps, Masayoshi Son challenges the West to deliver one-tenth the speed.

by Dave Burstein DSL Prime [November 3, 2003]

ITU Geneva: extraordinary times. Masayoshi Son holds up a 26 Mbps modem, and tells Westerners we don't have real broadband if we stick to a meg or two.

He's right. The technology to deliver 10 Mbps now costs no more than 1 Mbps. UTStarcom showed absolutely gorgeous 720p HDTV, at 6 Mbps. Metalink has a 70/30 VDSL chip (300 meters) inexpensive enough to deliver DSLAM + modem for well under $100. Korea's equivalent of Bell Labs, ETRI, shows a 10 gigabit router (Cisco 12000 BFR class) that can be manufactured for $20,000 and may soon hit the market from Dasan. Movidis dropped video server pricing to $89 per stream, using software from bankrupt DIVA.

These great new networks cost so little they are affordable almost everywhere. Son and the Koreans are showing the way. British Telecom now plans 96 percent coverage, and is looking at VDSL. I calculated the President of Telecom Egypt could install all 70 exchanges in Cairo for about $1 million. We began to talk, and perhaps he's been inspired. Turkey has a tender for 200,000 lines, Iran for 100,000. The Canadians, I report below, have switched to 8-12 Mbps equipment. Think how U.S. broadband would change if Masayoshi Son opened New York, as I urged him to do in Geneva. France is about to find out, as Free, LDCom, and now Telecom Italia intend to emulate Yahoo BB in the heart of Europe.

"Stabbing Seidenberg in the Back," last issue's headline, was intended to shock, and some comments that came back were strong. I stand on my story, that the U.S. Bells aren't building networks designed to compete with cable in 2005-2007. There's clearly an extreme disconnect between the strategies at the top and the equipment and operational decisions they've revealed. Next issue of DSL Prime, very soon, will be on solving problems like that, choosing equipment and designing networks for performance.

40 to 50 Mbps in Japan
Tokyo's still the place
Faraj Aalaei of Centillium reports the major ADSL providers in Japan will move to 40 Mbps+ in the next few months, with eAccess officially announcing the upgrade will occur before the end of the year. Centillium's ADSL chips feature a software upgrade that uses frequencies up to 3.75 megahertz, allowing speeds to 40 or 50 Mbps over short distances. Todd DeBonis tells me "Quad benefits tend to go 1200 to 1400 meters, meaning the 40 Mbps type speeds should reach 10 to 15 percent of Japanese loops. Double spectrum ADSL2+ type benefits extend past 2,000 meters." I hear that VDSL gives somewhat better performance up to about 3,000 to 4,000 feet, and ADSL2+ currently has better performance past 4,000 feet. Designers of each are working hard to change those tradeoffs. DeBonis believes that will drive quad spectrum into many providers currently looking at VDSL.

"Why does anyone need the speed?" is about as dumb as question as "Why does anyone buy a sports car when even a Honda Accord can go faster than the speed limit?" By offering speed at reasonable cost, Yahoo BB, Hanaro, and now KT have proven demand is strong. Of course we need more speed, if only to keep up with the size and frequency of Microsoft security patches. I just downloaded 25 megabytes of software updates from Microsoft, and would have welcomed all the speed I could get.

Centillium torpedoed by many problems
Japanese slowdown, yield, price problems, bad research
Japan has been slowing for several months, as I've reported three times since July. Yahoo BB has apparently delayed some orders from Ambit, and there's some slowdown as people anticipate the faster service. Early this year, Japan was adding 400,000 and 500,000 per month; September net adds were 347,000, to 9.2 million.

That's still enough for Japan to pass Korea for the highest number of DSL subscribers and leave the US in the dust. The monthly numbers are posted by MPHPT in English. Most Centillium sales are in Japan, so no one should have been surprised their quarter was weak and the announcement should not have driven the stock down 30 percent. Beyond that, I've reported competition has hurt margins in the DSL chip business for years, leaving even good companies highly vulnerable to the pricing pressure Aalei mentioned. I believe no small investor should be in DSL stocks, unless prepared to lose badly. That applies even to good companies with smart management, such as Centillium.

Centillium's Japanese customers are demanding the newest chips immediately, so competition can't leap ahead. While most companies are still testing ADSL2 and ADSL2+ into 2004, Japan deployed already. Yields at the beginning were predictably low, so Centillium had to pay for additional wafers to get enough good chips.

Copyright 2003 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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