Monday April 6 Article On Westell In Investors Business Daily
Zionts Q&A session. Zionts sounds sincerely confident.
Finally Ready? DSL Promises Fast Net Access
Date: 4/6/98
Author: Reinhardt Krause
Waiting for phone companies to invest in new technologies can be like waiting for a bus that never shows up.
But it looks as if the Baby Bells are getting serious about speeding up Internet access over regular phone lines.
Digital subscriber line technology sends data 10 to 30 times faster than conventional modems. Many companies have been waiting for the DSL market to get hot. Among them is Aurora, Ill.-based Westell Technologies Inc.
In '93, Westell was the first company to deploy DSL switching gear in field trials with phone companies. It's now a partner of Bell Atlantic Corp., which plans to start offering DSL service in a few cities by late '98.
Westell CEO Marc Zionts recently spoke with IBD about DSL.
IBD:
Cisco Systems Inc. in March announced plans to buy NetSpeed Inc. , a DSL firm. Texas Instruments Inc. snapped up DSL firm Amati Communications Corp. last year. Will there be a shakeout among DSL players?
Zionts:
There will be plenty more consolidation. Cisco's acquisition of NetSpeed was their third deal related to DSL. That says a lot about this market. If you're just a DSL start-up company, it can be tough to
go it alone. But Westell has other businesses that will carry it through until DSL gets started.
IBD:
Westell almost bought Amati, which held key DSL-related patents. Is it important to own intellectual property in the DSL market?
Zionts:
We were after digital signal processor (chip) competency (to build DSL equipment). The intellectual property came with it. Through our strategic alliance with Texas Instruments, we're still getting
access to that expertise. We needed the right silicon partner.
IBD:
The regional Bells, Compaq Computer Corp., Intel Corp. and Microsoft Corp. recently formed a consortium backing a new DSL variant that's more consumer friendly. Are they on the right track?
Zionts:
Ease of use and ease of installation are important for consumers. (Such ease) also radically improves the business model of the service provider (Baby Bell). If they don't have to send out a truck, they
have a chance to save $250 per installation.
IBD:
Will modems based on the consortium's standard be available for the Christmas shopping season, as the group promises?
Zionts:
As long as you're talking '99. If you're talking Christmas '98, it's overly optimistic.
IBD:
The DSL consortium has embraced a data format from Aware Inc. of Bedford, Mass. Is there any disadvantage to Westell?
Zionts:
The consortium is simply promoting a standard. They're not picking someone's implementation. It's a fallacy if someone thinks the whole tandard) is based on Aware. Even if it were, we're a systems company. We can buy hardware from anywhere.
IBD:
Is the industry still worried that not all DSL gear will be compatible?
Zionts:
We need to take advantage of the consortium's efforts. If we don't achieve interoperability, the market size will only be a fraction of what it could be if we do.
If you look at Cisco's deal with NetSpeed, which also involves Northern Telecom, you still have companies endorsing alternate technologies. All that does is create fear, uncertainty and doubt in the hearts of end users and customers.
IBD:
What's driving the need for DSL equipment?
Zionts:
If you're in the computer industry, the gating item that you now need to solve is bandwidth. Computers have tons of memory, processing speed and video cards, but what's limiting performance is bandwidth. If greater bandwidth doesn't happen from DSL, it will be provided through cable modems or some other method. Phone companies want to exploit their asset, the existing copper wiring.
IBD:
How much do phone companies have to spend to provide DSL service?
Zionts:
The economics of this are based on the homes you serve, not the homes you pass, as in the cable industry. With a cable modem, you have to wire the whole neighborhood. Once you get a take rate (for service), you (providers) can calculate the cost.
With DSL, the phone companies can put equipment in a central office based on each customer served. If there are 3,000 customers that take DSL service, they'll spend 3,000 times the price per line. (DSL providers are) looking at less than $500 per customer served.
IBD:
What issues do the regional Bells face in offering DSL service?
Zionts:
They can deploy DSL as either a regulated or a deregulated service. I think most of the regional Bells will decide to offer DSL as a regulated service, so they have to file tariffs (for pricing rates) in
each state.
They also have to decide on how they're going to distribute DSL. Early on, I think the phone company will provide not just the service, but will also lease or sell the modem. In a few years, the
modem may come built into computers. There are many back-office issues that you can't underestimate. No one wants this to be like ISDN. You want there to be great customer care.
IBD:
What percentage of the U.S. population will have access to DSL technology a few years from now?
Zionts:
By the year 2000, some people say 25% of the U.S. population will want high- speed Internet connections. Given that assumption, the market will be split by technologies such as cable modems, DSL and wireless. My belief is that DSL would get a significant share of the market. I could see a model that by 2000 you could see a 10% penetration rate for DSL services.
This thing will happen a lot later than any of us would have liked. But once it happens for real, it may ramp up a lot faster than many of us expect.
(C) Copyright 1998 Investors Business Daily, Inc.
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