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Business Week: April 7, 1997
Special Report
THE RACE TO REWIRE CORPORATE AMERICA
In the corporate world, you can never have too much bandwidth--the lines and switches that transport all your voice and data communications. The more bits you push down the network, the more PCs you tie in, the slower the traffic moves. Add in full-motion video, and most office networks choke.
None of this is news to networking companies. Bay Networks Inc., 3Com Corp., and their ilk began rejiggering the dominant office network standard, Ethernet, three years ago to gain speed. Almost overnight, they delivered a minor miracle called Fast Ethernet that lets office workers zip data around at 100 megabits per second (mbps)--a tenfold increase over the old standard.
DEAD DUCK? Now, the same network giants, plus Cisco Systems, Compaq, Sun Microsystems, and a host of startups, are ratcheting up again. Their goal: gigabit Ethernets that can move data around the workplace at speeds of up to 1 billion bits per second. The first switches will be available toward yearend and could cost as little as $1,600 per dedicated line, says Dataquest Inc. chief analyst Don Miller. He predicts that the global market for such switches could swell to $2.9 billion by 2000. In the network world, ``there's never a boring minute,'' Miller says with a chuckle.
Not all manufacturers find it so amusing. For the past decade, network vendors large and small have sweated to create a standard called asynchronous transfer mode (ATM). It's an elegant but expensive combination of switching and transmission equipment that mixes voice, video, and data packets and speeds them over optical fiber. ATM peaks out at about 622 mbps--six times the speed of fast Ethernets. But gigabit Ethernet will beat ATM into most offices, argues Brendan Hannigan, an analyst with Forrester Research Inc. in Cambridge, Mass., in a new report. ``ATM to the desktop is dead as a duck,'' he says.
Fortunately for the ATM camp, the networked universe is vast--and desperate for bandwidth. Step outside the local area network, and you find sprawling intercity and transnational phone and data links hungry for more speed. Companies such as AT&T, Federal Express, and Texas Instruments have already spent millions on ATM to beef up their wide-area networks. By 2000, predicts Dataquest, such demand will soar to well over $1.5 billion.
By then, wide-area customers will have several appealing choices. No fewer than 15 companies and individuals have asked the Federal Communications Commission for licenses to circle the planet with satellites--half of them hoping to offer broadband services. The flashiest plan comes from Teledesic Corp., backed by cell-phone billionaire Craig McCaw and Microsoft Corp.'s William H. Gates III. They want to put 840 satellites in orbit 435 miles up, at a cost of about $9 billion, and start service around 2002.
If it flies, Teledesic will offer a big payoff. Linked by a receiver dish to Teledesic's satellite ring, top-paying customers will get up to 1.2 gigabits per second. But Teledesic must fight it out with such giants as Hughes Communications and Space Systems/Loral, which expect to be spacebound first.
How will all this bandwidth change the nature of work? For one thing, it spells an end to aggravating network delays. What's more, high bandwidth makes work more portable. By the time offices start installing gigabit Ethernets, telecommuters will get a quantum boost in Internet access speeds at home. Fast modems will finally take advantage of the thick coaxial TV cable that already snakes into 65 million homes. These modems, installed by the likes of Time Warner Inc. and Tele-Communications Inc., promise Internet download speeds of 40 mbps--many times what most office workers can get today.
Not to be outdone, MCI Communications, Bell Atlantic, BellSouth, and other phone companies are testing a high-speed transmission technology for public networks known as digital subscriber line. DSL uses powerful chips to compress voice, video, and data and then speed it over ordinary copper phone wire. In field tests, DSL has hit 9 mbps--slower than cable modems but nothing to snicker at.
BellSouth says DSL modems, like cable modems, will cost about $350. MCI is testing one version of DSL at a rural Iowa school. It plans to begin service to homes and small businesses in August. Home Web surfers will be pleased by the fast access speeds. More important to Corporate America, cable and DSL modems will let home workers log on to their corporate networks and zoom through work as quickly as they could at the office.
Not that there won't be speed bumps. Winn Stephenson, vice-president for network computing at Federal Express Corp., points out that companies installing gigabit Ethernets will need more powerful servers and fiber-optic lines to take advantage of the speed. ``You'd better have a lot of fiber on the wide-area network,'' he cautions--and a lot of money to pay for all the upgrades. Given Corporate America's appetite for bandwidth, that shouldn't be a problem.
By Neil Gross in New York
Copyright 1997 The McGraw Hill Companies, Inc. All rights reserved. Any use is subject to (1) terms and conditions of this service and (2) rules stated under ``Read This First'' in the ``About Business Week'' area.
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