DSL Prime: Explosive Growth

DSL is growing very rapidly, especially in nations like France, Japan, and Canada, whose governments are encouraging competition.

by Dave Burstein DSL Prime [May 19, 2004]

"We have to transform the company within five years, completely integrating video, or we're in desperate shape," a Bell insider tells me.

Extraordinary results from Oslo to Paris to Denver to Sydney suggest the turning point is here, when broadband will dominate the net. DSL beat cable this quarter in the U.S. for the first time.

I'm flying today to Toronto, where I'll ask Eugene Roman of Bell a tough question: is ADSL2+ enough, or should Bell jump to 30 Mbps upstream VDSL? I'm pretty sure in three years the VDSL will prove the right choice, about the time it takes to implement today's decisions. But SBC, even for it's basement deployments, still doesn't see that, and I'm in a small minority outside Asia.

At VON Canada, I'll be doing a video session with Glen Campbell of Merrill, Keith Teare, and Martin Cullum of Bell, and have a meeting with Telus. I'm bringing on my laptop the video from Fast Net, showing VDSL working at 100 mbps over 1,000 foot spool, just in case I meet any doubters. I'll also be asking the other key question: recreate a walled garden, or open the edge of your network like BT is promising, creating a great service with near infinite consumer choice. I believe in open networks, end to end.

Thanks to the DSL Forum for allowing this reporter to attend Roman's speech; I hadn't realized the Forum had changed policies and the presentations are no longer open to the press.

615,000 are Free
Fast DSL, VoIP + Video pulls
In little more than a year, Free is the largest independent DSL provider in the West, adding more users than Covad found in four. This is the second validation of the Yahoo BB strategy voice, more speed, minimal tiering and marketing obstructions, and a great price. Result: FT, trying to keep up with the competition, is putting out requests for a million DSL gateways, with voice, video, 802.11, and bluetooth. A hard drive and full DVR is an option.

A friend in Paris writes they are growing incredibly fast with now over 630,000 DSL subscribers. This makes them the largest VoIP network in Europe by far, and maybe the second largest after YahooBB. They report they will reach their 1 million subs target mid-2005 (6 months ahead of schedule), but I personally think they'll get there by year end as they get 150,000 new sub per quarter. FT must be having nightmares. They will offer number portability, so you can keep your legacy FT phone number to be reached on your VoIP service. This means they now promote VoIP as a pure POTS replacement.

France, like Japan, is succeeding while the U.S. is failing because of a stronger regulator. Theyve maintained line sharing. VoIP is approaching a million lines because the access charge for terminating the call is 0.3 euro cents. That more than covers FTs cost of switching, but is half what the U.S. Bells charge. The incredible U.S. rural oversubsidy (as much as 7 cents a minute) raises that to about 1.2 U.S. cents on average across the U.S., almost doubling the real cost of VoIP service.

Next up in France: no telco line required. Neuf/LDCOM is already offering their complete DSL/voice/video bundle at essentially the same price whether or not you have an FT phone line. Essentially, they pay a cost-based rate to FT for the line, which comes to about 6 euros per month. That compares to $10 to $12 per month in the U.S. for a comparable UNE-L, which the bells are trying to raise. Neuf, soon to be followed by Free, is willing to gamble the 6 euros that the customer will buy enough phone service to cover the cost. In effect, buy their DSL, and theyll give you a phone connection for free, charging only a modest amount for usage. Thats an even better deal than the nekkid DSL Qwest is starting to offer.

Important to note the overpriced UNE-Ls however, remain a viable strategy in 40 to 65 percent of the United States, where inexpensive volume and reasonably priced fiber is available. Thats Dave Dorman's plan at AT&T if he doesn't decide to exit the voice business, dropping 5,000 DLC/DSLAMs across the country. It's also the strategy implicit in an article I'm writing, Masayoshi Son Should Come to America. In Japan, customers still have to pay $15 to $20 for a basic NTT line, which in more than the UNE-L cost Son would face. I think theres room for one successful company, jumping in soon with the full 20 Mbps ADSL2+ (or VDSL), voice over IP, and video. That bundle costs $30 to $60 in Paris or Tokyo, or about half what the telcos and cablecos want for similar.

Copyright 2004 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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