DSL

DSL Prime News Briefs

Why Japan is better and faster than us, unbundling in France, free info from the USTA, and much more news in this week's DSL Prime News Briefs.

by Dave Burstein DSL Prime [December 18, 2001]

"Make broadband access available at a price consumers and businesses can afford." —Bill Gates

Covad climbing out of bankruptcy is great news for the entire industry. Everyone there deserves congratulations—and some generous options at the new pricing. Condolences in turn to the 7,000 being dropped at Qwest and the thousands more at suppliers who will be affected by Nacchio's $1 billion further spending cut.

Japan: more subs in 2 months than U.S. in three
Competition has 55 percent of market
280,000 Japanese signed on to DSL in November, up from 270,000 in October, reaching 1,200,000 in total. The deployment is driven by pricing between $22 & $30, led by Yahoo/Softbank. The queue of orders is strong, with installation problems slowing things down, temporarily. Son of Softbank reports 70,000 orders in the queue waiting for NTT hookups. (Probably a good thing, because Softbank still has some operational problems to solve.)

7 meg for less than the price of 640K in the U.S.
Besides the low prices, Japan is doing something the world should follow, not throttling DSL speeds. Those lucky enough to be close to the CO are getting up to 7 meg for that $22-30. NTT has just cancelled some equipment orders, and now will be shipping 7 meg to all. Backbone connectivity costs have gone down dramatically with the fiber glut. You can give your customers higher speeds for a cost small enough to fit in a marketing budget. It cannot be right to deliberately give inadequate speed/inferior service.

Sony Playstation 2 hooking up
Computers games are bigger than Hollywood, and millions in Korea have bought DSL for gaming performance. Sony understands this well, and will be adding a hard drive and Ethernet connection in the spring, first in Japan working with NTT. Of course, Microsoft's XBox comes equipped that way. Microsoft has cable and DSL deals around the world—watch for that to be a battleground between Microsoft and Sony by next summer.

U.S. Q3 + 487K
Telechoice's third quarter numbers showed the continued slowness of the U.S. telcos, adding only 480K to 3,800,000. Canada's 928K is twice the take rate of the U.S., despite a later start in most regions. BellSouth was ramping faster than the other U.S. telcos, including a significant deployment through existing DLCs. Verizon's $19.95 three month promotion should help their numbers Q4 (they planned to double) but SBC's new orders have been very few.

Briefs

• Arrival's Scott Garrison writes they have test customers for Zhone VoDSL in smaller California cities, with paying customers soon on the way.

International

• Colt, backed by Fidelity, raised half a billion dollars to build their European network. They've already installed 50 DSLAMs in Paris, and are launching VoDSL.
  
  
• Phillipe Goold of the very helpful French site DSLValley.com pointed to his report on Free Telecom, which he believes will be among the first French CLECs to take advantage of unbundling, using CIRPACK equipment and Zhone IADs. Separately, Kaptech, a business oriented CLEC with a direct sales and agent model, has ordered up to $70M of Pairgain Avidia.
  
  
• Taiwan looks to have 1.4M DSL subs the end of the year, Mike Newland of Total Telecom reports. That's four times the market penetration of SBC or Verizon, but less than forecast. Chunghwa's install rate is down from 5,000 a day to 3,000, and the three key competitors.
  
  
• Need international telecom info in a hurry? The U.S. trade agency has helpful detailed country studies here.

Competition

• @Home's furniture and fixtures are going up for auction at Dovebid. Meanwhile, the performance of AT&T's new network has been spotty. Some comments from DSL Reports: "Speed 58(down)/234(up) kbps . About modem speed!", "I just downloaded a 876k file, it took 10 min". Sounds like the complaints we get on poorly engineered DSL networks.

Chips

• TI and Infineon both released new high-density, low power DSL CO chips, that will continue to drive down the cost of DSLAMs and DLCs. Both made clear the products are strategic to them, meaning they will back the products strongly and presumably price aggressively. TI, in particular, believes their financial resources will make them survivors in what everyone expects to be a tough market for chip vendors.
  
  
• Anton Wahlman of UBS on 12/7 reported that Chunghwa relative slowdown was causing an inventory buildup at Ambit, and perhaps reduced orders at their supplier Virata. He also looked at the Japanese market, growing rapidly but behind schedule, and noted not all of the growth was going to Centillium parts. The stock price moved rapidly, especially when SSB piled on. Anton's doing exceptional research work, and has become the most respected analyst covering broadband manufacturers.
  
  
• Metalink won an order from Siemens.

People

• Susan Biagi, editor-in-chief, Vincent Ryan, and Karen Murphy, three of the best in the business, are no longer at Telephony. Jason Meyers will now be responsible for a joint staff producing Telephony, Wireless Review, and Global Telephony. He's been able to retain Rhonda Wickham of Wireless, John Williamson of Global and Sheila Tawney, Global Telephony's art director, but many others are gone. Meyers writes "We have a talented and dedicated team that will continue to deliver comprehensive, timely and compelling coverage of all sectors of telecom." I believe reporters being dropped are more than just a tragedy for the people involved; it means there is less and less coverage of the industry. Falling ad pages are hurting every publication in the business. I wince when I see how thin some of the magazines have become, and worry about the next casualties.

Wall Street

• McLeod's threatened bankruptcy filing is partially an attempt by Forstmann to force bondholders to accept less than 20 percent on the dollar to wipe out the debt. I had an interesting foreshadow of McLeod problems a while back with a report McLeod's deal with Qwest was (expensively) designed to defer costs for a couple of years, but I didn't go deeper into the financials. Folks on the street who just a few months ago identified McLeod as the exception to CLEC struggles don't look very good.
  
  
• Polycom is not stuffing the channel to offset declining sales, according to careful Morgan Stanley research reported by In Play. Their voice IAD continues to be a contender for several prospective very large contracts, although margins in that business look to drop rapidly. Two voice port units have recently been quoted at $150 by second-tier but respected suppliers. There are a lot of designs chasing very few substantial customers in the voice business.
  
  
• Globespan and Virata have shareholder approval to complete their merger.
  
  
• Nikos Theodosopoulos of USB forecast Alcatel DSL sales will decrease 18.8 percent in 2002 and that DLC sales will decline 25 percent. We expect 2002 operating margins to be .5 percent and .7 percent, respectively. U.S. losses were heavy in 2001, and Mike Quigley reported 6,000 of 12,600 employees are no longer with the company.

We are journalists, not investment advisers; invest at your own risk and do further research.

Copyright 2001 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

"The power of the printing press belongs solely to those who own the presses"
—A.J. Leibling

The Internet is the cheapest printing press ever invented.

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	[Dec. 4, 2001]	DSL Prime News Briefs
	[Aug. 2, 2001]	First Ethernet Backbone for Japan