John,
Did you see this article?
SuperComm '99: Trouble Brewing in ADSL Territory
By Jim Seymour
Special to TheStreet.com
6/10/99 4:21 PM ET
Speed, speed and more speed have been the bywords at SuperComm '99, the
telecom industry's mega-trade show, running this week in Atlanta. Everywhere, of
course, except in the taxi lines, where the early-summer weather that long ago led
computer folk attending the annual run of spring Comdex in the same venue to
rename it "Sweatdex." Atlanta has escaped the worst of this strange heat wave -- it's
been cooler in Atlanta than in, say, Washington -- but what one analyst called
"SuperSweat '99" has been plenty hot.
Some of that heat has been felt on the show floor, too. SuperComm '99 was
supposed to be the big coming-out party for asymmetric digital subscriber line
technology, the moment the telecom industry stood as one and affirmed that G.Lite
ADSL is the broadband horse the industry will ride into America's homes.
Supporting that goal, the industry's Universal ADSL Working Group and ADSL
Forum are running an impressive circus at SuperComm called the G.Lite
Interoperability Showcase. The groups pulled together 30 companies in an
impressive agglomeration of ADSL consumer-side and network-side G.Lite gear. The
showcase drew lots of tire-kickers and a fair amount of press, but unfortunately --
perhaps -- other announcements at the show tended to undermine the "all for one and
one for all" momentum the trade groups intended.
The biggest bombshell came from French telco supplier Alcatel (ALA:NYSE ADR),
which was actively demonstrating full-rate DSL -- the Real Thing, with downloads
running a 8 Mbps and uploads at 1 Mbps -- over ordinary copper drops and typical
household wiring. In itself that wasn't so impressive. After all, DSL was supposed to
deliver speeds like that, and has been, both in the labs and in its very limited
installation in the field. But Alcatel showed that its new system really can easily be
set up by consumers.
In a field full of newbies and technology pretenders, Alcatel stands out, with real
credibility, as the leader in DSL equipment sales.
To understand the importance of Alcatel's demonstrations, you have to remember that
the highly compromised G.Lite flavor of ADSL, which at its best delivers only 1.5
Mbps in its faster upstream mode, arose because of installation issues and costs.
Telcos didn't want to bring to market a product that involved "truck rolls" -- trips to
your home or office by a phone company installer to set things up. That was seen as
too costly for widespread use, though in fact the set-up time for an installer at a
customer site can be as little as 10 minutes, as he or she installs a simple splitter
that allows G.Lite ADSL to give the consumer simultaneous use of both voice and
data over one line.
But in field trials so far, G.Lite users have been having problems with crosstalk
between the two psuedolines, as voice conversations have corrupted data
transmissions, and data streams have caused noise and brief interruptions in voice
streams. So telcos trying to roll out G.Lite ADSL have, despite their wish to keep
things simple and cheap, been experimenting with so-called "microfilters" they hope
consumers can themselves attach to their ADSL lines.
And in their fondest wish, the UAWG wants the industry to start selling G.Lite
modems at retail, with the necessary microfilters bundled with the modem.
If this sounds like we're getting pretty far from the original "anyone can do it; no fuss,
no muss" goal for G.Lite installations ... well, you've got the picture.
Now comes Alcatel -- again, a respected vendor, with lots of street cred in the biz,
not some crackpot with a vague idea -- with a full-rate solution (including fancier but
simple microfilters) that is demonstrably user-installable.
Alcatel gave telcos looking at multibillion-dollar campaigns to put G.Lite ADSL in
place some pause, as you can imagine.
Lots of the telcos' fear about widespread proliferation of G.Lite ADSL service grows
out of forward-looking planning of the sort not usually associated with the RBOCs.
Key here is the now nearly universal assumption that a primary driver of fast-access
growth and revenue will be shipping digitized movies-on-demand down these lines to
consumers. That's great news for consumers, if terrible news for the likes of
Blockbuster.
The telcos and other fast-access providers love the notion of putting
broadband-access networks out there that can support real-time downloadable
movies. Except ... it takes something over 6 Mbps to support a viewable movie
stream. That's well within the 8 Mpbs rate of full-rate ADSL, but laughably beyond the
reach of the kind of G.Lite ADSL the phone companies want to bet on today.
Having to replace everything in a year or two, when downloadable movies come to
market, gives RBOCs the willies -- as it should. Especially when it's pretty easy to
move existing cable-modem-flavor fast-access systems -- the telcos' sworn enemies
in this contest for ownership of the fat pipe into your house -- to 8 Mbps or so when
needed.
Sadly, most observers in Atlanta thought that while driving full steam ahead on G.Lite
was increasingly the wrong decision, the RBOCs would probably nonetheless push
for it, preferring a slightly earlier proliferation of G.Lite over the unknowns in testing,
gearing-up for and putting in place the much faster Alcatel system.
I fear yet another VHS-Beta situation here, where the demonstrably poorer system
becomes the prevailing standard, for the wrong reasons. (Rented any good Betamax
movies lately?)
For investors, the tease of this superior Alcatel system could be seen as a worry for
Aware (AWRE:Nasdaq), which I have often mentioned here and which I am long.
Perhaps we can ascribe some of the sudden dip in Aware's share prices two weeks
ago to advance knowledge among savvy investors of the Alcatel announcement. (But
that said, I still think the Aware droop was a classic case of Message Board
Madness: overstatements about the impact of reduced sales to Cisco
(CSCO:Nasdaq), and the unlikely replacement of Aware as a supplier to Cisco, drove
the stock down in a way unrelated to its real prospects.)
But if you think, as I do, that the RBOCs are going to bull ahead with G.Lite, you've
got to like Aware's near-to-midterm prospects, since it nearly owns that business on
the chip-and-technology level today.
As for Alcatel, there hasn't been any discernable response in the market this week to
the Atlanta announcements; the stock, trading around 25 1/2, has been stuck in the
mid-20s all year, down by half from its peak in the high 40s last summer.
Alcatel is a real play if you think quality and speed are going to win in this contest.
But the market's utter lack of acknowledgement of the Alcatel wow at SuperComm is
an important warning: The market, I fear, may be as cynical about the outcome of this
contest as I am. Then again, maybe the market didn%anies want to bet on today.
Having to replace everything in a year or two, when downloadable movies come to
market, gives RBOCs the willies -- as it should. Especially when it's pretty easy to
move existing cable-modem-flavor fast-access systems -- the telcos' sworn enemies
in this contest for ownership of the fat pipe into your house -- to 8 Mbps or so when
needed.
Sadly, most observers in Atlanta thought that while driving full steam ahead on G.Lite
was increasingly the wrong decision, the RBOCs would probably nonetheless push
for it, preferring a slightly earlier proliferation of G.Lite over the unknowns in testing,
gearing-up for and putting in place the much faster Alcatel system.
I fear yet another VHS-Beta situation here, where the demonstrably poorer system
becomes the prevailing standard, for the wrong reasons. (Rented any good Betamax
movies lately?)
For investors, the tease of this superior Alcatel system could be seen as a worry for
Aware (AWRE:Nasdaq), which I have often mentioned here and which I am long.
Perhaps we can ascribe some of the sudden dip in Aware's share prices two weeks
ago to advance knowledge among savvy investors of the Alcatel announcement.a World Trade Center this week!
Jim Seymour is president of Seymour Group, an information-strategies consulting
firm working with corporate clients in the U.S., Europe and Asia, and a longtime
columnist for PC Magazine. Under no circumstances does the information in this
column represent a recommendation to buy or sell stocks. At time of publication,
Seymour was long Aware, although positions can change at any time. Seymour does
not write about companies that are consulting clients of Seymour Group, or have
been in recent years. While Seymour cannot provide investment advice or
recommendations, he invites your feedback at jseymour@thestreet.com. |
