From MONEY TALKS, Seems like some are behind the curve, This is not all of his article, will post the beginning in next post, more fluff
but interesting.....
Cable has the early lead, having entered the cable modem
Internet access business more than a year ago. There are
now about 100,000 Net surfers out there who go through
their TV wire instead of their phone wire, and they can get
information about 30 times faster than you or I. The
significance of the technology cannot be understated -- if all
users eventually move up to that speed, then the Web can
be completely made over to include such delights as video
e-mail, TV quality video, and any other bell/whistle that a
Web programmer might dream up.
Last week, the phone companies finally struck back. The
telco's best comeback to the cable modem threat is a
technology called DSL, which stands for "digital subscriber
line." And until last week, it was little more than a
theoretical comeback. By last fall, I was among many who
worried that the phone companies had essentially ceded the
home market to cable modems and were working on DSL
only as an expensive equivalent for businesses. But then,
egged on by PC industry, the telecom people announced
that they were forming a committee to come up with a
technical standard for DSL.
Now, announcing the formation of a committee to study
technical standards doesn't sound the same as announcing
the availability of an end product, but believe me, this is a
huge, necessary step. Every company involved knows how
important DSL is, and like any hot new technology, there
are several competing proprietary versions. So industry
fathers finally cried "enough!" and decided to hammer out a
single platform upon which everyone can move forward.
I've written several columns about cable modems before,
so let me take the time now to explain a little bit about how
DSL works. In general, DSL works with modems and
regular copper phone lines, except the data gets
compressed into minuscule packages and blasted through
the wire with greater force than a voice conversation. A line
set-up for DSL still leaves room for the voice, so it's
possible to be online and to talk at the same time.
A generic DSL set-up would look like this: Your computer
would be hooked into a DSL modem. The modem would
plug into a regular phone line, but the phone company
would have to install a "splitter," which would siphon your
voice calls and faxes onto the regular phone network. All
your Internet traffic would flow through a special DSL
modem rack at the phone company's central office, and on
to your Internet Service Provider, which would also have to
have a DSL modem rack.
This isn't cheap, but one of the most recent DSL
breakthroughs has been modems that work without the
"splitter," which removes a great deal of the cost. Some
actually call this "DSL lite," since the original architecture
promised speeds of up to 8 megabits per second, while
splitterless DSL gets ratcheted down to around 1 megabit
per second. Phone companies will be able to sell both
versions, and presumably DSL lite will be priced to sell to
consumers.
The industry goal is to be able to have DSL available by
Christmas. Now here's where we have to throw up our
caution flags. While the industry stood together and
announced its desire for developing a DSL standard, I don't
see anyone ready to concede that their proprietary
technology doesn't belong in the final specification, either.
"Between technology providers, there will be some very big
battles," said Lisa Pelgrim, an analyst at DataQuest who
was quoted recently by the Wired news service. "We've
seen many different announcements from many different
players."
An ironic problem the phone companies constantly face is
the rapid pace of innovation. Phone companies are big,
bulky Goliaths, and they're now in a highly competitive
environment. New twists to make DSL faster and less
expensive are always coming around the corner, and it's not
easy for a phone company to make a massive, phone
company-sized commitment to a single technology that will
likely be obsolete in a short time. "If you're a phone
company, you're really having a hard time putting a stake in
the ground," said Danielle Briere, president of Telechoice
Inc., in an online interview with CMP's Internet Week
magazine. "You're constantly in technical evaluation mode."
Of course, at some point, the phone companies are going to
have to stop talking about getting into the game and make
the plunge. How much pressure is on them to do so? Well,
the cable modem penetration of 100,000 is still small, but it
is going to double this year, and could snowball thereafter.
Being first is a big advantage.
But the hurdle for cable companies is that they have to
essentially rebuild their entire plant to make way for cable
modems and other advanced services, a physical dilemma
that essentially dictates the speed at which cable modems
can be rolled out. DSL, on the other hand, builds off of
existing infrastructure. Once the phone companies settle on
a standard, they should be able to roll DSL out rather
quickly. Hence, some forecasters are quite optimistic about
DSL's rapid-fire future in the marketplace. International
Data Corp. projects 2.5 million customers by 2001, a
figure that not even the most optimistic cable modem
advocates foresee for their own technology.
My own handicap goes like this: cable modems will build a
huge early lead, and by the time DSL is ready, cable will be
an entrenched competitor. There won't be a clear-cut
winner once the fight goes head-to-head; while there are
critics of each technology, I don't foresee one
outperforming the other, and brand preference and
marketing will hold sway over consumers. The battle for
market share will be waged city by city, with the telcos
winning in some spots, but coming in second in others.
As an investor, you could plunk your money down on one
of several DSL specialist companies, such as Paradyne or
Aware (Nasdaq: AWRE) or Pairgain (Nasdaq: PAIR) or
Westell (Nasdaq: WSTL). But picking which one will
benefit the most, and when the big DSL explosion will
come, is a gambler's game for sure. Invest in the Internet
itself, and in the long run, you can't go wrong.
As an end-user, I'm not rooting for any side in particular.
Whether it's my cable company or my phone company, I
just want the bandwidth of my dreams.
###
Rob Gebeloff bases his comments on sources deemed
reliable
but he does not guarantee their accuracy. |
