Watch ADTN and TLAB and to a lesser extent AFCI. Also impacts TXCC. (Note TXCC warned after the close today.)
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September 11, 2001
What Bandwidth Boom?
By TERRY SWEENEY
In Depth this week:
What Bandwidth Boom?
More In Depth Stories...
Even with all the improvements in silicon, multiplexing and optical networking, slow and steady T1 remains the workhorse of corporate wide area networks. So what happened to the bandwidth boom?
Although most carrier backbones routinely operate at the 10-Gbps OC-192 level, only a small number of corporate telecom buyers sign up for much more than 45-Mbps T3 service. Throughout most metropolitan areas, 1.5-Mbps T1 lines are cheap and efficient enough.
Independent analyst numbers demonstrate T1's dominance. Probe Research projects there will be 298 million T1/E1 connections worldwide by the end of this year, compared with 2.8 million T3s and about 300,000 OC-3 lines.
And although Probe projects big gains for T3 connectivity in the next four years, companies will be using 150 million T1/E1s in 2005, compared with only 57 million T3s--a ratio of 2.5 to 1.
On the high end, terabit throughput and packet over Sonet may be the norm for carrier backbones, the 50 largest corporations, or even the world's leading research and development labs. And high-speed remote access is great for companies that can afford it. But in this year of cost-cutting and tighter budgets, companies are focusing on ways to shave bandwidth costs.
Take office supplies retailer Staples Inc. in Framingham, Mass. Staples is taking some dial-up voice lines out of service in many of its 1,000 stores and combining voice and data traffic onto a single T1 line. The move eliminates four to five voice lines per store, says Max Ward, vice president of technology. "You multiply that by 1,000, and pretty soon you're talking real money," he says.
Controlling bandwidth costs is also a top priority for Larry Ice, senior vice president and CIO at broadcaster Fisher Communications Inc. in Seattle. Ice thought it would be straightforward enough to buy more bandwidth for connecting a newly relocated data center. But the prices for 10 Mbps were eye-opening, Ice says--$7,000 to $10,000 a month--which the company thought was exorbitant. Ice was also put off by the amount of time carriers told him it would take to get a connection installed, tested and activated. That process can easily take 60 days or more.
"It's very costly to have connectivity in small-town America," Ice says. "All this broadband connectivity is in the big cities."
But Fisher's 12 TV stations and 26 radio stations are scattered across Idaho, Montana, Oregon and Washington. To connect all those sites with even T1s could get expensive--especially with a Seattle-to-Spokane, Wash., connection costing about $900 a month, more than four times what Fisher pays for equivalent bandwidth to connect from one side of Seattle to the other.
As a result, Fisher works with a number of service providers for bandwidth and connectivity. Fisher gets metro area Ethernet connectivity from Terabeam Communications, using two 100-Mbps Fast Ethernet connections into the service provider's network for the Seattle area. And on the outskirts of Yakima, Wash., Fisher has teamed with an ISP that gives the broadcaster wireless WAN connectivity via microwave.
Clearly, few if any providers can deliver on all the requirements of a single enterprise, given the frequent disconnects between pricing and availability, supply and demand.
So T1 networks are proven, cost-effective and a cornerstone of corporate connectivity. But adding new T1 lines or stepping up to T3 and beyond isn't a rubber-stamp exercise. And that's when companies encounter the long-running conflict between the price of connectivity and the strategic importance of a business function.
In many instances, it's straightforward to cost-justify additional bandwidth for adding PC kiosks that lead customers to products that can't be found in stores.
"We know that when we add kiosks to our stores, we make sales that couldn't have been made otherwise," says Staples' Ward. "We'll ship you a printer that may be out of stock right now, but we capture that sale. We tend to look at technology as an investment in the same way we look at opening stores or hiring a new associate."
Even further, the retailer looks at whether the purchase will lower the costs of various business functions, increase revenue or boost productivity. And those criteria factored into the company's decision to selectively use T3 lines for connectivity to its data centers and select international locations.
One company that's also spending money on bandwidth is Ford Motor Co. Ford is using 155-Mbps OC-3 links and higher to run applications between the United States and areas abroad. The infrastructure, which supports global data centers, telecom facilities and LANs for 2,000 Ford locations around the world, includes a full-motion videoconferencing network, an intranet and an extranet.
"We have been putting in some of the big pipes, which not only let us improve capacity but drive costs down," says George Surdu, director of e-infrastructure and network services at Ford. That added capacity lets Ford subsidiaries such as Jaguar, Mazda and Volvo share plans and designs.
Ford also uses the supplemental bandwidth for its joint vehicle development programs, as well as to ensure high levels of reliability for its plant, office and IT infrastructure.
But the fact that Ford is spending money on bandwidth doesn't mean the automaker isn't keeping an eye on costs.
"We remain concerned about escalating bandwidth costs in the southeastern Michigan area," Surdu says, even at the T1 level where prices are ticking upward. The company is looking at alternatives, including installing dark fiber and adding the communications hardware as needed.
Ford is also interested in DSL and even high-speed wireless for telecommuters and itinerant users who require connectivity superior to standard dial-up. But mapping a single-bandwidth solution for more than 27,000 laptop users within Ford probably isn't practical. And as excited as Surdu is about dial-up alternatives, the financial difficulties of DSL and high-speed wireless companies give him pause.
"We're still searching and trying to get to grips with the alternatives out there," Surdu says.
Another barrier companies face is that these newer, faster services are available only in certain geographic regions. That's a huge frustration for Glen Van Voorhis, manager of corporate telecommunications at Diebold Inc., an ATM and self-service terminal maker in Canton, Ohio.
"I haven't seen broadband materialize where I need it," Van Voorhis says. "We're not usually in the inner city--we're located more in industrial parks and along expressways. And that's usually not where these services are."
Van Voorhis supports about 700 dial-up users around the country, following a push to get employees out of offices and closer to customers. But the users each run up $400 to $600 in monthly charges.
"They're running up lots of minutes, so we're trying to do DSL to offset that," Van Voorhis says, adding that the service's availability varies widely across the country.
Diebold is trying to move to a service model with fixed costs, rather than variable ones. Those who can't get DSL may end up using a fixed-rate ISP, assuming their connections are reliable and fast, Van Voorhis says.
And they may be the lucky ones. Broadband service is still a few years away from being a true mass-market product, says TeleChoice analyst Adam Guglielmo.
"It's moving from the propeller heads and gamers to those who understand what broadband does," Guglielmo says "But we're still a ways off from services that will drive users to think that broadband is worth spending an extra $20 or $30 a month."
He also reports that SBC Communications Corp. recently raised monthly DSL prices from $40 to $50; Verizon Communications Inc. and BellSouth Communications Inc. quickly followed suit.
Ford isn't shy about spending money on broadband, at least once the expenditure has been thought through carefully. The automaker has enough forecasting experience under its belt to buy bandwidth in bulk, but without waste or letting spare bandwidth go unused for long, according to Surdu. That's good news when a 155-Mbps OC-3 line between New York and Los Angeles could cost as much as $30,000 a month.
"We map that against costs, not letting the spare capacity sit idle," Surdu says. "I'd rather not find myself installing T1s all over the place--they're expensive but, in some cases, are cost-justified. But with a big pipe [like an OC-3], I can allocate bandwidth on demand. And knowing our growth rates, we can predict pretty accurately."
But that's not the case with all bandwidth consumers. Ice of Fisher says his company doesn't have a magic formula or threshold.
"If the price outweighs the perceived value of the connection, that's when we get creative," Ice says. "But we won't add bandwidth at any price." Prices for bandwidth are increasing, he adds, especially in the areas where Fisher needs it most--Coos Bay, Ore., and Boise, Idaho, for example.
In some instances, the broadcaster uses Citrix server software, a flavor of the Linux operating system, which permits the company to build its own applications and run them in a remote location. That avoids the cost of a T1 or other high-speed circuits to tie users back to the headquarters' app server and databases. But it's not something any IT department wants to rely on across the board.
"We see how numbers look over a two- to three-year window, and if it still looks too pricey, we'll ask if we really need this connection or this application," Ice says. "If some people think they must have connections, we then ask if it's cheaper to move the people to a different location or to provide the connection."
The Coming Boom?
Prices for T3 and greater remain too high for most users, even though costs are expected to drop over time. T1 providers will continue to charge rates based on the amount of competition, user demand and regulatory scrutiny. But it's no surprise that T1 prices are rising in markets where competitive carriers have struggled or gone bankrupt. And analysts cite alternatives on the horizon that might offer relief for dial-up users who need access to corporate networks.
TeleChoice's Guglielmo points to G.HDSL, an emerging flavor of DSL with the potential of offering 2.3-Mbps symmetrical connectivity. And a new cable modem standard, Docsis 1.1, promises to let service providers offer quality of service, a prerequisite to business-class connectivity.
But questions remain as to whether pricing or service bundles will drive wider uptake of broadband connectivity.
"A lot of the services will likely be focused on security, firewalls and antivirus applications, with video applications and others following soon after," Guglielmo says.
The interim obstacles don't phase Ford's Surdu.
"We're still really excited about the pace of new technology and the higher bandwidth opportunities opening up," Surdu says. "We definitely have higher bandwidth demands."
But that's at large companies like Ford. Most of corporate America keeps costs down by running T1s--using high-speed alternatives for remote access when they're available--and anxiously awaits a time when enterprise bandwidth is truly mass-market in scale and as easy to access and afford as dial-up. |
