B r o a d b a n d C o n n e c t i v i t y C h o i c e s
for Day Traders [updated from original posting, June 1999]
1. Cable Modem - provides a continuous, broadband (200Kbps-3Mbps) connection. The high-speed data signal is delivered on the same cable coax which delivers your cable TV signal, modulated as a high-frequency signal which carries the data stream. Since the same cable is connected to every house, this is a "shared media" technology, therein lies the potential problem. When too many users are deployed on the same cable coax loop, the system can bog down, resulting in poor performance. You do not have a choice of ISP with cable modem - the ISP comes "bundled" with the high-speed connection, as a package deal. Therein lies another potential problem. For example, I recently tested Cable CoOp's [now AT&T Broadband; AT&T upgraded the ISP resulting in better performance] 2Mbps cable modem service in Palo Alto, CA. Although it was great for snappy web access, it was unusable for real-time, Level II quotes and trading. The reason? Trace Route's revealed a 60% packet loss in the backbone ISP (Cable & Wireless) routers in San Francisco. This problem recurred repeatedly over a three week period, so I dropped the service and went back to Frame Relay (the ISP behind the cable modem service was providing sub-standard service). But many traders report excellent results with Cable Modem hookups. It all depends on your provider, and how many other people are using the service in your area (the less, the better). [update May 2001: Cable Modem is often the best choice, when it is available. Hard to beat re:'bang for the buck' bandwidth, hassles to deploy, etc. when it is available].
2. DSL/ADSL/HDSL "Digital Subscriber Loop". This is the phone companies' latest and greatest solution for providing low-cost broadband services to residential and cost-sensitive commercial customers. There are more technology variants than you can count. ADSL is a little more affordable than HDSL, providing "Asymetric" bandwidth (more downlink bandwidth than uplink), and can be very good for traders. Generally, DSL connections are dedicated in nature and not shared-media. An ATM aggregator in the Telco's (ILEC; or a CLEC) Central Office POP called a "DSLAM" (DSL ATM Multiplexer) aggregates your traffic across a high-capacity digital backbone, carrying it across the service provider's network to the ISP. Again, you are usually locked into an ISP. But because DSL is run across a switched network by the service provider (usually the local phone company, or a "CLEC" - competitive local exchange carrier), there are often more choices of ISP's, when you go with DSL. Many times, ISP's will partner with DSL providers (Rhythm, Northpoint, etc) and offer special package deals. AOL is also big on DSL and is cutting a few deals. DSL is more reliable, and the prices are reasonable (generally, $89-$300/mo depending upon the bandwidth). [Note: due to the pricing, I have now switched over from Frame Relay to DSL... $79/month from Pac Bell with six static IP addresses. I run a RAMP Networks Hardware firewall behind the Alcatel DSL router, configured for NAT (Network Address Translation), and local DHCP so I have a virtually unlimited local IP address space. I also run remote control software behind the software so I can access my trading machines from anywhere... e.g. I can access my scanning feeds from anywhere while trading on the road. With DSL it is ESSENTIAL to run a firewall... there is much hacking going on... the hackers get to know the contiguous IP address spaces that the Telco's use, and are constantly "scanning" through them. I've had a many as 700 'hack attack' attempts in a single day. [DSL and Cable modem are the two leading contenders now for daytraders... Cable has the lead in raw # lines deployed, but DSL is coming on strong with 2.2M lines now deployed worldwide to date, and 65M lines forecast (by Forrester Research) to be in use within 3 years... if the Telco's can get it together on all those "truck rolls"].
3. Frame Relay. Frame Relay is a dedicated data connection, provided with bandwidth and "Service Level" guarantees. 56Kbps sounds slow, but because of the dedicated nature of Frame Relay, actually performs much better than most dial-in 56K modems. The advantage is cost - a 56K Frame line is available for $100-$125 in most parts of the country. I [used to] run a 128Kbps ("fractional T1") line, which is a bit pricey compared to DSL. However, Frame Relay service is industrial-strength; there generally are a team of technicians assigned full-time, dedicated to maintaining your connection/service, 24 hrs x 7 days. Frame Relay is usually fixed-price, regardless of useage. Another big advantage of Frame Relay is, you can buy a "PVC" (Permanant Virtual Circuit - a dedicated virtual data "pipe" through the FR network) connection to just about anywhere; so you can use any ISP you choose. Here in Silicon Valley, we have some excellent high-end, boutique ISP's like Walltech [long-gone/out of business], where great service is always less than two rings away when you have to call them. A friendly, competent, high-performance ISP is a wonderful thing, in my experience! [Frame Relay can still be a great option in remote areas... often you can have FR installed in locations where you're too far from the Central Office to get DSL; it doesn't have the same tough loop-length requirements and is a business-grade service. And Frame Relay can be provisioned at T1 and higher speeds. The support tends to be great 24x7, since it's considered an industrial-grade, mission critical service by the Telco's].
4. ISDN. Integrated Digital Subscriber Line, comes in both "nailed-up" (permanent) connection variety (preferable, usually called "Centrex or PBX ISDN), or dial-up (transient) connection services. I tried it for about six months (three times), and each time went back to Frame Relay. ISDN hasn't been a real big success, and configuring it can be a headache. The biggest thing to watch out for is useage-based billing - to be avoided unless you're sure about their billing rates, and your useage levels. You want to look for flat billing, regardless of useage. But many traders report good results using ISDN - in certain areas it's the best solution. Generally, it is being surpassed by DSL as the phone company's preferred offering though. [ISDN is quickly fading into "history" as DSL and Cable take over the local loop high-speed access market].
5. Satellite. Some traders have experimented with high-speed internet connectivity provided by Satellite dish, like Hughes "Direct PC". Generally, the problem is not bandwidth (which is very good); it's the latency which is a problem for traders. A Geo-synchronous satellite orbits at 22,000 miles, so you're talking big delays to get the signal up there and back, nearly a half a second depending upon your location relative to the satellite. And the ISP behind these networks was not designed to optimize service for trading quotes. Generally, to be avoided unless you're trying to trade out of an RV up in the Rockies... [most traders that try satellite broadband service end up finding it to be a headache due to latency problems, etc... but it is the only option in some remote areas. Proceed with caution!]
6. Wireless. Here in the Bay Area, I frequently use a battery-powered, thin 8-oz. "Ricochet Wireless Modem" to trade from my laptop, in remote locations (like StarBucks <G>). The service is only $30/month including the ISP, and data rates are ~40Kbps (shared media like cable modems, so mileage may vary depending on network useage conditions). Ricochet (www.metricom.com; no affiliation) works surprisingly well for delivering quotes, and I run RealTick III on top of it, along with Windows on Wall Street, both receiving real-time quotes, no problem. The service is widely deployed in the SF Bay Area, Seattle, large parts of Los Angeles, Wash DC, and there are nodes in many major airports. They are about to deploy a much higher-speed service which will quadruple data rates. It's a trip! [Metricom screwed up their high-speed migration strategy and they are now struggling on the edge of bankruptcy. As of May, 2001 their service is still available. Now, though the hot ticket is 802.11b Wireless LAN access into various high-speed connections... there are now "pods" of 802.11 access all over the Bay Area, and other major cities/areas. And, many other high-speed wireless accesss services/technologies are emerging. This will be a big deal and a real alternative within 2-3 years. For the most part, now, "not quite ready for prime-time"].
Good trading, -Steve |
