DSL Prime: China Down

While questions are being raised about China's economy, France's ILEC prepares to deploy 6 Mbps this year, and speeds up to 16 Mbps next year.

by Dave Burstein of DSL Prime and Future of TV [September 23, 2004]

"We can do 24 meg with ADSL2+."—Randall Stephenson, then CFO, now COO, of SBC, and many others

Some great news broke as BT begen trials of their open video service. They have already signed up satellite provider Freeview, but are also looking to carry BSkyB, the BBC, and many others. Think of Verizon offering DirecTV, Echostar, RAI, BSkyB, Canal+, and a slew of independents as well. More in Jennie's next "Future of TV".

DSL Prime was wrong projecting a major switch to ADSL2+ in 2004. Carriers worldwide want to move forward, but the gear isn't ready. France Telecom will offer ADSL2+ in 2005, the first large carrier to promise it across the entire network.

Unfortunately, ADSL2+ looks to deliver 15 Mbps to most users, not the 24 Mbps Randall and others expected. If you want to do HDTV (currently, 10-12 meg in live compression) or compete with cable (25 Mbps in production in Japan, 50 and 100 Mbps coming in 2005, Europe ready to expand), 15 Mbps is not enough, and carriers are scrambling for contingency plans.

Choosing between Fiber, VDSL, and ADSL2+ remains a tough call. Verizon and many in Japan are choosing the expensive path of fiber to the home or basement, while BellSouth's Bill Smith instead tells the NY Times it's "ridiculous." DSL Prime believes Japan, Verizon and Korea are making the right long run decision, 100 Mbps over fiber or (like Korea) 1000 foot VDSL. Many disagree. One of the most distinguished engineers in telecom history looked me in the face last week, saying, "I just can't see the return on a fiber investment." Meanwhile, some extremely smart people tell me fast, cheap wireless is ready to change almost everything. It clearly is part of every discussion about the next few years, but I haven't thought through all the implications. Interesting times.

Last issue, I wrote the "MPEG-4 TV Tax"—up to 2 percent of every video program broadcast—was neither "reasonable" nor "non-discriminatory." With such a strong position, I felt it appropriate to print Larry Horn's comments in full at the end of this DSL Prime, rather than wait for Jennie's next "Future of TV."

Wish I were in Venice for the surely excellent Broadband World Forum this week, but the trip didn't work out. All the European carriers will be there, looking to excite each other with their accomplishments. David Byrne and Gilberto Gil are singing for Creative Commons here in New York Tuesday night, and the very interesting Susan Crawford is bringing together a strong group of tech folks with the better policy wonks 9/28 at Cardozo Law in New York. Neither should be missed if you're in the area.

China Down 30 percent to 40 percent
Inventory overhang kills quarter sales at PMC-Sierra
Bob Bailey of PMC held an emergency press conference, because sales in Q3 will be $15 million less than expected. Most of the fall came from dedicated processors for DSLAMs, which they sell to sell Chinese customers. China Telecom and Netcom, with a surplus of DSLAMs compared to lines sold, virtually stopped buying new ones from PMC's customers, and probably from others as well. Chinese cutbacks also badly hurt UTStarcom. Whether this represents a slowdown in ultimate Chinese consumer demand or just an inventory correction is not yet obvious.

The Chinese economy overall is continuing to grow, but CT and CN could well be cutting capex to prop up a quarter or two. CT has been delaying honoring payables 6 to 9 months for a while, a quiet form of vendor financing. Below, a senior engineer explains that ADSL2+ has many advantages, while others tell me ADSL2+ still painfully early in the development cycle. It's plausible that carriers will postpone all but immediately needed DSLAM purchases for a few quarters, waiting for reliable 2+, but I have no confirmation of that.

Full Speed Throughout France
96 percent Coverage, and ADSL2+ 16 Mbps;
1.7 million added in 2003, over 2 million in 2004
While British Telecom and the Germans are still trying to limit DSL speeds, FT will "make the maximum speeds available on all ADSL lines in France." That will offer 6 meg to many this year, and "As of 2005, the ADSL 2+ service will be deployed on the entire France Telecom network (emphasis added), boosting speeds up to 16 Mbps and even higher under optimal configurations."

Thierry Breton went to Jules Verne industrial park in Picardy to announce 300,000 kilometers of fiber optics in 20 metro rings, not science fiction but instead a logical plan for phase 3 of "Broadband for Everyone." The fiber will offer GigE to tens of thousands of business, and provide backhaul for a nationwide network of ADSL2+ and video. Especially with the EFM standard in place, the role of ATM will continue to shrink worldwide.

FT is offering DSL to 90 percent of France in 2004, rising to 96 percent in 2005. Their TV offering has expanded from Paris to Lyon, Marseille, and Toulouse. With the government selling off shares amid strikes over privatization, the company needs growth to protect the workforce and avoid further turmoil. Strong competition is inspiring FT to move ahead; Free.fr and Neuf took a million lines, and UPC Cable gearing up for VoIP.

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

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