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Technology Stocks : KVH Industries, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (843)	6/23/2001 10:56:40 AM
From: Sector Investor	Read Replies (1) \| Respond to of 7249

Indinvestor on Yahoo! asked for help describing a modulator in simple terms. I provided two answers, one short, one long. The long answer uses analogy to outline optical internet technology and issues in also, hopefully easy to understand terms. Here is the short answer. messages.yahoo.com I'll post the text of the long answer here as well. Consider the system of roads in place in the US in the 1920s. Include everything right up to your house. Assuming you had a car (Internet connection), you probably had dirt roads not only for your driveway (access), but also for the road into town (Last Mile). You probably only had a few paved roads in town (Metro), and few and slow highways between cities (Long Haul). If your car could go 30 miles an hour, that was more than adequate, because the road system couldn’t support anything faster. If you saw an Ad for a car that could go 100 miles an hour, you wouldn’t consider it, even if you could afford it, because you couldn’t go that fast on any nearby road. Most roads are single lane, with some being two lanes. Now let’s move forward and add the Interstate highway system (Fiber) of the 1950s and 60s, but only move the local roads up to about the 1940s. Now you can go 65 miles an hour between all cities, but still only 30+ when you got close to home. The interstates also have more lanes (DWDM), and capacity is increased by adding additional lanes (DWDM channels). There is still not much point to paving your driveway (high speed access) if the road to town and the town itself is still unpaved. This is somewhat similar to today’s situation with high capacity long-haul infrastructure, but slower Metro and Access infrastructure. But the analogy to roads now falls apart, so we have to be creative here. Let’s say that, in addition to a fully implemented Interstate Highway system (fiber), we had ALSO built many more Interstate Highways (spares) alongside the first one, but we didn’t build any on-off ramps, bridges (amplifiers and other parts), lane dividers, or anything else needed to use them (dark fiber). These additional highways all use technology that limits them to 65 MPH (10Gbps). Up to now, we have just added additional lanes (DWDM wavelengths) to our first interstate highway system. Now suppose, someone invents a road paver (new fiber) and related technology (modulator and other components) that is SO SMOOTH that cars can go 130 MPH (40Gbps) on them. That is very attractive. People WANT that, so the road builders (equipment providers) start to prepare for that. Then an economic downturn hits and the road builders now have to budget their expenses more carefully than before. The road builders now have FOUR directions for solving the need for increased capacity. They can: 1) Simply add more lanes to their existing 65 MPH highways (higher DWDM channel counts). 2) Build on-off ramps to the “spare” 65 MPH Interstates with the same number of lanes (light new fiber) 3) Build still ANOTHER Interstate system capable of 130 MPH, which is going to cost more. 4) Put their effort into improving the local roads first, so more cars can feed into the Interstate System. Which way do they go? That is the question. If the local road system (Metro) had already been upgraded everywhere, and if the costs of building a 130 MPH system were low enough, they MIGHT choose option three. However, if the costs stay high for 130 MPH, they might choose options 1 or 2. They could also decide to do option 4 ahead of the other three. Gilder argues clearly for option four (and one and two also), saying that the way to go is INDIVIDUALIZED wavelengths to homes and businesses. A paved highway (fiber and one wavelength) to every house or business. NT was highly successful at capturing the 10Gbps (65 MPH) market by moving aggressively, while LU and others stayed at 2.5 Gbps. Now they want to do the same strategy at the next (40Gbps) level, and LU and others don’t want to be burned again, so they ALL try to develop 130MPH highway paver technology. The problem is the faster paver technology is going to be expensive because of the heavy research costs and the new materials the pavers have to be made of. Now suppose there is a new player, with a 130MPH capability, but at 65 MPH costs, due to breakthrough technology, eyeing entry to the market. The question before them is: Should they go after only the 130 MPH market (which may not be there as fast as previously hoped), the 65 MPH market where competition is entrenched but where they may have a price advantage, or BOTH the 65 MPH and 130 MPH markets?