The Shape of the Future
January 8, 1999 - 11:43 PM
By Roderick Beck
In the absence of divine intervention, it is clear that there will be
no broadband revolution. Rather it will be an evolution.
By the end of the year 2000, I estimate there will be 1.5 million
cable subscribers and probably 750,000 DSL customers. In
contrast, the number of households cruising the Net will easily
exceed 40 million.
This should not be surprising.
A well respected AT&T labs researcher pointed out to me that
deploying new technologies on a large scale is far more
challenging than small field tests. A model train is easier to
manage than a national train system. Nonetheless, cable has
a huge lead over DSL and I expect that it stands a good
chance of dominating the residential Internet market given its
strong coverage of the affluent suburbs.
DSL is less competitive in these areas due to its distance
limitations. However, densely populated prosperous urban
areas are another story. In these areas much of the population
lives near a local switching center, well within in the reach of
DSL. Moreover, urban areas have an abundance of fiber,
making VDSL, the steroid of broadband access, a real
possibility.
Indeed, in Manhattan, RCN and other companies are putting
VDSL equipment in the basement of high rise apartment
buildings to supercharge the inside copper wiring in order to
provide cable television and high speed Internet access. The
fiber lying beneath the streets serves as transport. It is also
likely that ISPs will be interested in using DSL as a way of
competing with cable Internet providers.
AOL has proposed that @Home be forced to wholesale its
service to other ISPs. This suggests that DSL might emerge as
a serious rival in a year or two when the infrastructure is in
place and the learning curve has been largely exhausted.
While cable will probably dominate the residential market, it
also seems clear that DSL will be the number one player in the
business sector. Almost all major players launching DSL
offerings are primarily targeting businesses, like financial
institutions, with their insatiable demand for high-speed data
services. Long distance companies want a cheap substitute for
the richly priced high capacity phone lines that they lease.
In addition, DSL makes it economical to offer fancy data
services like videoconferencing to smaller businesses that were
formerly priced out of the market. One reason that DSL is more
suited for business customers than cable is that it offers high
download and upload capabilities.
Symmetrical bandwidth is crucial for distance learning and
interactive services. In contrast, cable has limited speed to
send data. As mentioned earlier, DSL also has greater
potential to jump-start local competition. The greatest obstacle
to local competition is the cost of laying transmission lines to
the customers.
The cost is so substantial to build residential local networks
that virtually all CLECs have focused on business customers.
DSL will radically reduce the cost of leasing phone lines from
the Baby Bells by sharply increasing their capacity. Running IP
voice over DSL will enable CLECs to sharply reduce the cost of
long distance and thereby gain a competitive edge.
The wild card is whether the Internet itself can be improved to
offer the quality of service that customers demand from
broadband services. It will be a shame if broadband access
undermines itself by exacerbating Internet congestion.
There is no magic bullet.
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