Nice DSL article:
stocksite.com
(Go to bottom on click on 'The Strategist')
November 5, 1998
Finally, bandwidth for the masses
As more and more users pile onto the Internet, many are discovering that driving on the "Infobahn" is not providing the pleasure they had anticipated. This is because the Infobahn, unlike its cousin the Autobahn, currently has strict speed limits. Those speed limits are imposed by the info traffic cop called a modem.To fulfill user desires, one needs at least 384 kbs at an affordable price.
Touted as "twice as fast as a 28.8 kbs modem!" the 56 kbs modem premiered last year and has fallen flat on its retail shelf. Users want immediate access, video conferencing, quick downloads of 2-8 megabyte video clips, wave files or high-resolution pictures. Bandwidth limited to 56 kbs is not enough. To fulfill user desires, one needs at least 384 kbs at an affordable price.
Well, finally, a solution is forthcoming. It's called DSL technology, it's here now, and the service provider is the telephone company.
ADSL, HDSL, SDSL, VDSL, and HDSL-2 This babble of acronyms represents the new set of names for the high-speed digital service consumers will soon be getting. More commonly called xDSL service, the letters stand for different kinds of digital subscriber lines:
ADSL: asynchronous (or asymmetric) DSL
HDSL: high bit rate (bi-synchronous) DSL
SDSL: synchronous (or symmetric) DSL
VDSL: very high bit rate DSL
HDSL-2: a new version of HDSL that uses one copper pair (vs. the two pairs used currently) to achieve its high bit rate (up to 2.0 Mbps).
See Table One for a comparison of the services.
Why xDSL?
There is a lot of excitement among Internet users and the telephone equipment suppliers about xDSL. Why? Because xDSL:
1) Provides a straightforward, affordable mechanism to satisfy the bandwidth cravings of end-users, both in the near term and far term, and
2) enables carriers to offer value-added, high-speed networking services without massive capital outlays by optimizing transmission over the existing copper local loop. One can't emphasize enough the benefit of using the existing copper loop.
It is estimated that the public carriers have spent more than $500,000 per central office (there are 30,000 COs in the U.S.) over the last 10 years on ISDN (Integrated Services Digital Network) without getting a reasonable return. As a result of their disappointing experience with ISDN, they have been reluctant to spend for the latest technology under the premise of "build it, and they will come."
Instead, they now need up-front orders, a cost structure that can support the consumer's price points ($20-$50 per month), and a technology that is easily scalable. Fortunately, this is what xDSL provides. As one can see from Table One, xDSL provides a range of speeds, which will be priced accordingly. It also is "rate adaptive." This means that the subscriber easily can switch from a low bit rate service to a faster service without much cost either to himself or the carrier. Since xDSL uses the local loop copper, switching service speeds can be as simple as changing the software in the customer premises modem and at the CO.
The competition and a forecast
The xDSL service satisfies the bandwidth cravings of end-users. The primary competition for xDSL services will come from your local cable company. Cable modems are touted as the answer to our Infobahn speed needs. The stated goal of 10 Mbps per user for $40 per month certainly is formidable. But there are problems with the cable modem concept, including the following:
1) Speed - DSL service enables full use of the phone line's bandwidth, whereas cable modem users will enjoy only a fraction of the cable modem's potential speed. As more cable modem users go on-line, everyone's throughput will be lower.
2) Availability - Copper phone lines are installed in almost every home and business worldwide. Coaxial cable is not.
3) Interactivity - DSL offers interactive capability in all of its applications. Cable modems do not. For the most part, cable modems can only be used for "broadcast" to the customer.
4) Security - Since cable modems operate on a shared line, security becomes an issue not present with DSL.
5) Cost - Cost to the subscriber may be low, but cost to the operator is high. To achieve two-way cable operations, cable operators have to spend upward of $1,500-2,000 per passed home. This expenditure has already been made in the case of copper.
We forecast that xDSL technologies of all sorts and "colors" will provide the bulk of Internet access for businesses and residences over the next 10 years. As you can see from Table One, one version of xDSL VDSL can provide speeds that are beyond what most homes or businesses will likely use, even as video phones and narrow casting of television signals over the Internet take hold.
As the cost to provide the service comes down, prices will too. Users then will be able to move up the power curve. In addition, the stated goal of the industry is to make the sale as easy as plugging a modem into a universal serial bus (on the PC or TV) on the customer side, and typing in a software switch on the provider side. This feature should be possible in 1999.
Today more than 100 million homes in the U.S. and 550 million worldwide have copper telephone lines coming into them. (We don't have an estimate of the number of copper business lines in the U.S. and around the world, but these lines, too, should be added to the residential number.) Each of these lines eventually will have an upgraded speed.
For investors, the question is how fast will consumers and businesses react to the new service offerings? Dataquest and Forrester Research estimate that 3 million-4.5 million phone lines will be connected via some version of xDSL by the end of the year 2000. This would constitute a 10-fold increase in four years. My experience with DSL service in the U.S. West operating district is that U.S. West is selling xDSL lines as fast as it can get equipment in place. In several of its CO areas (Seattle Main, for example), it is backlogged until the first of the year. Demand has far outstripped the company's expectations.
In terms of equipment, there are many aspects of the xDSLThere are many aspects of the xDSL story for investors to analyze. story for investors to analyze, including modem suppliers, digital loop carrier manufacturers (DLCs) and digital subscriber access multiplexers (DSLAMs). Each equipment supplier has to take into account legacy equipment at the carrier, the range of services the carrier expects to provide, open standards and scalability. Some of these equipment suppliers are Cisco (CSCO), US Robotics/3Com (COMS), PairGain (PAIR), Advanced Fibre Communications, Inc. (AFCI), ADC Telecommunications (ADCT), and Lucent (LU). We leave it to the reader to analyze and predict which of these companies are good values.
In the next few weeks we will comment on how increasing demand from xDSL subscribers will increase the load on the network infrastructure or "backbone." At that time, we will identify some of the equipment suppliers who will be most affected. We will also discuss the interaction between the increasing fiber being built, dense wave division multiplexing, access concentrators, ATM, IP, Sonet, switches and routers. |
