DSL Prime: Huawei, Alcatel Both Claim Top Spot

Is somebody fibbing, or are both massaging the numbers? Cisco claims P2P is declining, but surely they're wrong?

by Dave Burstein of DSL Prime and Future of TV [June 23, 2008]

Did Alcatel Have a DSL Disaster? Is Huawei the New #1?
Something is wrong here

• Alcatel claims, "Alcatel-Lucent today announced that, following the publication of the Dell'Oro 1Q'08 access report, the company remains the worldwide leader in DSL with 6.6 million DSL lines shipped in 1Q'08."
• Huawei claims, "A recent report by industry consulting firm Broadbandtrends ranked Huawei first in the global DSL market with a market share of over 31 percent [in Q1]."

Theresa Mastrangelo and a second analyst I respect have Huawei ahead. Dell'Oro, also one of the most respected analyst firms, believes Alcatel continues well ahead. I've had the opportunity to look closely at most of the numbers, and the differences are startling. I know the three analysts well; they are all responsible and very rarely make careless errors.

Since I started DSL Prime in 1999, Alcatel has been the dominant DSLAM vendor. Recently, they consistently have had 35 percent to 55 percent of the market. Rarely has any other vendor had even half of Alcatel's sales. Alcatel five years ago recognized Huawei as their most important competitor, and Huawei has been #2 recently but far behind. If Huawei has in fact caught Alcatel, that's important news for the industry.

It's impossible for any outsider to get precise data without the help of the companies. I therefore call upon the companies involved to make clear and open reports of their sales. This is not competitively sensitive information; all competitors have enough information for practical purposes. It's simply hiding information from the industry and public. Alcatel reports Q1 shipments of 6.6 million DSL lines; I've sent them a note to get more details. I haven't yet heard back from Huawei's press division and would welcome an introduction to the right people there.

The difference may be something innocuous, with one company counting remote terminals and the other excluding them. One company may be counting "orders" while another is only counting "goods shipped and invoiced." Neither I nor any of the analysts have enough data to be sure. Huawei, Alcatel, come on. Right now, any objective observer needs to have doubts and that is not a good thing.

Checking this story, I see Ray Le Maistre wrote on this topic June 13. Ray probably originates more solid stories than any other telecom reporter in Europe. (And he publishes faster than I do.)

Cisco Claims P2P Flat in North America
But some are experiencing major growth
North American P2P went from 370 petabytes in 2006 to only 416 petabytes in 2007 according to Cisco's figures. Since U.S. users increased 16 percent in the same period, that's a drop in P2P per user and a significant drop in P2P as a percentage of all traffic. There's a major margin of error in these figures, so I'm calling it "flat." That's very different from our pre-2007 experience, when P2P grew rapidly. It severely contradicts what many in D.C. are saying, but who would believe a lobbyist? Last issue I reported from two sources that P2P had dropped to about a quarter of traffic. P2P isn't down everywhere—see below for a contrary datapoint and opinion. Cisco projects that P2P in the next five years will grow at less than half the rate of internet traffic. P2P outside of North America has and will grow faster, but also more slowly than overall traffic growth. I can confirm from European sources that they have not seen the P2P traffic slowdown seen in at least some North American carriers.

Cisco's 2007 estimate for U.S. P2P is a little less than half their estimate for total consumer traffic, dropping to about 40 percent in 2008. Europe they also believe was a little less than half in 2007, but the P2P percentage they expect to increase in 2008. Asia they place at 57 percent in 2007, dropping to about half in a few years. Denny Strigl of Verizon just said "about 60 percent of internet traffic is conducted on a peer-to-peer basis," but Denny's a wireless guy and not yet a trusted source on wired connections.

A reader at a world class carrier is having a very different experience on his network, with rapidly growing P2P. Some of the difference is that encrypted traffic is up significantly, and he believes the vast bulk is P2P and counts them that way. I'm touching base with Cisco to look deeper into their numbers, which overall are the most carefully produced publicly available figures. There are some gems in the tables in the white paper.

Overall, traffic growth seems flat to down. Nikos Theodosopoulos says, "we are seeing some signs of moderation in growth rates." Cisco's projection for internet traffic growth is 43 percent overall, which is 33 to 36 percent growth per user, the figure you need for costs and policy. (The 46 percent total IP bandwidth in the headline is the right number to use if you are, for instance, forecasting total demand for IP service provider routers. It includes the IPTV video buildout at AT&T, cable VOD, etc. My 43 percent figure is a quick adjustment of Cisco's data to look at the internet growth rate.)

43 percent overall would be 33 to 36 percent growth if it were all on the wireline side, but both Cisco and I expect wireless data demand to grow much faster. The per user traffic growth on DSL and cable networks, working from Cisco's figures, should be 25 to 32 percent

25 percent to 32 percent growth sounds enormous, but actually is right on target and possibly below the trend of the last seven years. Cisco sees growth "continuing to decline in subsequent years" after a spike in 2008. (Except for small pockets such as Africa, cable upstream until DOCSIS 3.0 comes along, subscale providers), internet speeds are increasing and congestion decreasing unless the carrier in question is severely cutting capex. Something like 98 out of 100 engineers who follow the net are confident traffic growth in the future will be handled as efficiently as it has been for the last 6 years.

The widely publicized fear of internet slowdowns is a result of some of the most skilled lobbying in the world. Larry Irving, key to that effort, is proving to be the most effective lobbyist in D.C. As a Democrat and Obama supporter, he will be able to name his price if Obama wins. He should easily pull the $2 million plus people like Tauke and Cicconi report publicly, although probably not the $7 million Bill Barr, Verizon's Mr. D.C. behind the scenes guy, makes. They (and most of the other telco advocates) are Republicans, so the companies are offering top dollar for available Democrats. Larry is proving to be very, very good at spreading the message.

I'll welcome ideas, on or off the record, about the trend in traffic.

Copyright 2008 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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