DSL Prime: The Big Picture

Around the world, most nations are looking forward to a truly broadband future.

by Dave Burstein of DSL Prime and Future of TV and the Web Video Summit [March 9, 2007]

The Big Picture: DSL Still Growing

2005: 72.6 million DSLAM ports, 51 million CPE, 41 million new customers to 141 million total

2006: 85.9 million DSLAM ports, 58 million CPE, about 40 million new customers to about 181 million total.

The price per port of DSLAMs dropped from $54 to $49, yielding $4.1 billion in 2005 and $4.2 billion in 2006. Simple modems went from $29.50 to $27, gateways from $66 to $58. Total CPE sales went from $2.3 billion to $2.5 billion, as simple modems dropped to half the total.

On the DSLAM side, Ericsson sales rose strongly to reach third place after Alcatel and Huawei. Thomson led CPE, with sales rising from $300 million to $500 million, well above traditional leader Siemens.

China is growing faster than Western Europe, which in turn is adding more DSL and broadband homes than the U.S. Japan and Korea are actually losing DSL customers to fiber, as they are further along.

Thanks to Jeff Heynen of Infonetics, Steve Nozik of Dell'Oro, and the ever invaluable Point-Topic database.

Telia, New Zealand Telecom May Split in Half
Retail, wholesale separated. Loop cost crucial.
The government may require TeliaSonera, the Swedish and Finnish incumbent, to split into wholesale and retail divisions. New Zealand is even further ahead, and fired Telecom CEO Theresa Gattung over the issue. Eircom has tabled a similar plan. British DSL and phone charges have gone down dramatically after BT's structural separation, encouraging other nations to consider it. The EU is supportive.

A surprising report from Bear Stearns suggested this would increase, not decrease, the company's stock price. The wholesale side, acknowledged as a monopoly, would have a regulated rate of return. Investors would give added value to the guaranteed profits. British Telecom's earnings and stock price have held up despite the rout of BT Retail in certain products, and BT Retail has become more innovative. Retail is leading convergence of fixed and mobile telephony, using advanced home boxes from Thomson.

BT's success is misleading, however, because it's based on a high line price of eleven pounds, more than the basic phone rate many places. A close look at cost allocation in other countries would almost definitely yield a lower loop charge, and hence lower profits if the measures advance competition.

Day the Music Stopped
Mark Cuban says "Goodbye to Webcasting"
Cuban, who created some of the first internet radio stations, is appalled by the U.S. Copyright Board decision to set high rates and then more than double them. Cuban blogs, "Friday was a sad day , no, make that a shocking day in the webcasting community. … In a nutshell it was the day the internet music died. I remember setting up servers from progressive networks and xing to stream AudioNet's first station, KLIF in 1995. I remember creating Christmas stations, Elvis stations and letting people program their own internet radio station. … Everything that is happening with video now, happened first with audio."

There's nothing inappropriate about royalties, but these are so high they will cripple the medium. Kurt Hanson calculates, "A typical internet radio station plays about 16 songs an hour. That's a royalty obligation in 2006 of about 1.28 cents per listener-hour. … total revenues per listener-hour would only be in the 1.0 to 1.2 cents per listener-hour range. The royalty rate decision for the performance alone, not even including composers' royalties is in the in the ballpark of 100 percent or more of total revenues."

The movie and record companies are getting far more than they deserve in D.C. U.S. Senators Feinstein and Cornyn just demanded Canada's Prime Minister Stephen Harper put more people in jail for not paying Hollywood. Time to resist the superpower.

$1.5 million+ Cost of Ikanos Chip Replacement
Traced to faulty chip packaging
Competitors have been spreading rumors of quality problems with Ikanos' chips for several months, and the company has confirmed they are at least partially true. "Ikanos believes that the high defect rate was isolated to package manufacturing issues on this product, at one of its subcontractors, caused by, but not limited to, contaminated materials contained in package substrates. … The Company has shipped over 1.3 million of these semiconductor ICs without incident." The latter is a convincing argument the problem has been fixed. Ikanos gave the customer a $1.5 million credit and replacement chips.

Vernon Reed of AT&T pointed to another major problem we've previously covered. "We're still a long way from VDSL interoperability. The Ikanos, Broadcom and Infineon chip sets don't talk to each other," (EE Times). Reed added "Installing an external VDSL termination box outside a user's home for video and voice services today takes as much as five hours … the job could be cut to about two hours." Last year, several chip vendors told me interoperability was close, but the carriers told me otherwise.

VDSL DSLAM sales were actually down in Q4, according to Dell'Oro. Dell'Oro expects strong growth in the later part of the year. I hope so—customers want the speed. Taiwan's Chunghwa has recently ordered 300,000 lines with Conexant chips. AT&T is making noise about expanding their deployment, and DT is on track. Japan is over 7 million fiber homes and growing fast, however, reducing the potential of what is today the largest VDSL market.

Stories not yet written:

• The MediaFlo win at Cingular, combined with support from Verizon, means Qualcomm will roll a national network for video to mobile phones. This is big.
• Ken Kretchmer from the Yale Conference on Standards
• Update on DOCSIS 3.0—it works
• The shock of the Boulder Conference: Princeton's Ed Felton points out streaming video doesn't need QoS, just a small buffer. The applications that need QoS are so few the debate on the subject is camouflage.
• There is not, repeat is not, a wide crisis in sight because of bandwidth demand for video. Real growth in bandwidth is more like 15 to 40 percent per year per subscriber, and through 2006 bandwidth costs continue to go down faster than demand goes up.

Copyright 2007 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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