DSL faces critical year
By Darrell Dunn, EBN
Feb 12, 2001 (12:01 AM)
URL: siliconstrategies.com
HONOLULU -- This is the make or break year for DSL. Hailed as the next breakthrough for broadband communications, digital subscriber line (DSL) technology has so far lagged behind competitive products and failed to produce the myriad market opportunities that have been promised for semiconductor suppliers, OEMs, and service providers. This year, however, DSL is expected to make significant technology and competitive gains, proponents said last week at the DSLcon Global Summit here. In 2001, DSL subscribers could for the first time surpass cable modem subscribers. In addition, voice over DSL (VoDSL) deployment will begin, bringing to market an added service that could help reverse the disappointing performance to date of some DSL service providers.
After an extended incubation period, DSL does appear to be gaining momentum. Subscribers totaled nearly 10 million worldwide in 2000, and that number is expected to double in 2001, said Jim Southworth, chief technical officer at start-up communication service specialist AdEvia Ltd., London, and a board member of the DSL Forum.
In the United States last year, subscribers totaled 2.3 million, and the domestic market is expected to increase to more than 17 million in the next four years, according to Telechoice Inc., Tulsa, Okla.
Similar to many technology markets, DSL experienced a slowdown in growth in the fourth quarter of last year, although for the year the DSL subscriber market in the United States grew by 366%, according to Telechoice.
"No matter how bad anyone says the market is, it's vital and it's growing," Southworth said. "Nominal market consolidation has started, which of course is another word for trauma. DSL is growing, but I'm absolutely convinced that this is a multitransport world. You use what works where you are: DSL, cable, wireless, two-way satellite, free-space laser, whatever."
In the home consumer market, cable operators got the jump on DSL due to a variety of issues, the most significant of which was the inability of telcos, particularly in the United States, to provide service at distances of 10,000 feet and greater from the central office.
In Europe and parts of Asia, the distance problem is much less pronounced because most end users are located within much shorter loop lengths. There were almost as many DSL subscribers in Korea last year as in the United States, and Hong Kong had 2 million subscribers, followed by Taiwan with 1.3 million, Southworth said.
By 2004, DSL will likely outpace cable in the home, said Kathie Hackler, an analyst at Dataquest Inc., San Jose.
"Part of the reality of the market is they have loop length limitations on DSL," Hackler said. "There's not much preference in the market between one or the other. The consumer market just wants a faster line."
In the small and medium business market, DSL has gained the advantage over cable modems in deployment where cable companies have no incumbent status.
Compounding the market's dip at the end of the year was Wall Street's impatience with the performance of the competitive local exchange carriers (CLECs), many of which bet heavily on DSL for future growth. Numerous CLECs reported quarterly losses, from $100 million to $300 million, in 2000, with only slightly better performance expected in 2001.
Banks and venture funds that already began to move investment heavily to third-generation wireless companies have been reluctant to provide the additional cash needed to roll out DSL by CLECs, Southworth said.
The emergence of VoDSL is expected to stimulate the DSL market, particularly for struggling CLECs, analysts believe, although growth currently appears limited. Telechoice estimates that voice-enabled DSL lines will grow from only 40,000 last year to 2 million by 2004.
Silicon and system suppliers have completed two years of testing on VoDSL solutions and will begin to hit the market this year, Dataquest's Hackler said.
Incumbent LECs, however, continue to be hesitant to deploy VoDSL due to cost considerations and fear of cannibalizing the companies' traditional voice services. The CLECs, however, who already are dealing with small businesses, could find VoDSL an easy sale, Hackler said.
"I think what we've seen is a technology curve where it's gone from all the inflated expectations that people have in the early stage, to where the market is now sorting itself out," she said.
Peter Benisti, vice president of worldwide sales at Montreal-based NHC Communications Inc., points out that there are more than a billion phone lines in the world, and to date DSL has addressed only two-thousandth of one percent of the market.
Several events are coming together in 2001 that should enable DSL to gain new traction. Probably most significant is the emergence of self-installed DSL that will enable mass deployment, Southworth said.
The market is also seeing improved silicon and systems, said Nick Burd, director of DSL products at Conexant Systems Inc., Newport Beach, Calif.
Semiconductor suppliers are rolling out adaptive hybrid transceivers that will reduce signal distortion at longer distances by allowing them to tweak performance dependent on specific loop characteristics.
DSPs are providing improved noise prediction and cancellation, and standardization of turbo codes will ease integration. In addition, overall integration improvements will reduce cost and provide OEMs and service providers with solutions that better meet customer demands, he said.
"Loop reach is almost certainly going to get better," Burd said. "Improvements are happening on both the chip and system level. I hesitate to say it comes for free, but the chip-level improvements will be much cheaper
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