Eyeing A Big DSL Payoff,
Networkers Get Prepared
Date: 5/5/98
Author: Michele Hostetler
Data networking giants are squaring off over an
Internet connection market that could be the next
wave - or a washout.
They're fighting for a hunk of digital subscriber
line, or DSL, equipment sales. DSLs are digital
phone lines that are 10 to 30 times faster than
traditional modems.
''It's opening up an entirely new area for data
networking,'' said Rick Edson, senior vice
president of new business initiatives at
networking titan 3Com Corp. ''This high-speed
connection is going to be like power was in the
(early) 1900s. People are going to wonder how
they did without it.''
3Com is among a who's who of networking
companies in the DSL market. Others include
Cisco Systems Inc., Bay Networks Inc., Ascend
Communications Inc. and Cabletron Systems
Inc.
In an industry dominated by complex technology,
DSL's simplicity is an asset, says Ashok
Dhawan, Ascend's general manager of
high-speed access products.
''It's the most easily understood technology
today,'' he said. ''I can tell a high school kid what
it is, and he wants it. Maybe he can't afford it, but
he understands it. I've never heard anyone tell me
that the Internet is too fast for them.''
Slowing networking sales are spurring companies
to seek new profitable markets. DSL seems
promising.
But standards that will make products from
different companies work together aren't
expected until next year and could stall the
market. Regardless, no one wants to be the last
one to the party.
''The plan is to be in DSL in case it works,'' said
David Cooperstein, an analyst with Forrester
Research Inc. in Cambridge, Mass. ''It's not clear
if it's going to take off. There's a lot of
meandering and there's a lot of tension around
the industry.''
Companies that offer DSL gear will win -whether
they connect the consumer to the network or
simply provide heavy-duty equipment - says Tim
McElgunn, analyst with Dataquest Inc. in San
Jose, Calif. Volume is another essential
ingredient, he adds.
''It will be over the next couple of years when
we'll be able to see who will dominate,''
McElgunn said.
For some, the question is getting in on the game.
No. 4 networking firm Cabletron admits it has
been slow about unveiling its DSL strategy, says
Michael Leland, the company's director of
telecom marketing.
But the company plans to roll out a host of DSL
equipment in the next six to nine months, he says.
''The media hype definitely came long before the
market was ready,'' Leland said. ''We've
intentionally stayed a little bit in the shadows.
That way when we announce, it doesn't fall on
deaf ears.''
Networking companies also must take on such
telecommunications companies as Lucent
Technologies Inc. and Northern Telecom Ltd.
These companies are interested in moving
aggressively into this embryonic market and in
building the equipment usually reserved for
networking companies.
''I think the winners are going to be the ones who
have the products now,'' said John Kasha,
Ascend's DSL product manager. ''The race is on
to see which companies can get there first.''
And if a company can't create DSL products
soon enough, then they may try to buy those that
can. Consolidation has begun even before the
market has made serious money.
True to its acquiring nature, Cisco has led the
way with a buying spree of three firms to spruce
up its DSL product line. Its most recent purchase
was Austin, Texas-based NetSpeed in April.
''The vultures are starting to circle,'' Forrester's
Cooperstein said. ''Cisco picking up NetSpeed is
a good indication that DSL isn't a stand- alone
business.''
But the uncertain situation over DSL standards
doesn't make telephone companies or Internet
service providers want to buy large amounts of
equipment, Dataquest's McElgunn says. A
standard is expected by late this year or early
next.
''If the endgame is to get (DSL modems) into
CompUSA, they need a standard,'' McElgunn
said.
Enzo Signore, Cisco's manager for DSL product
marketing, says the lack of a standard won't hold
back DSL.
That's because a DSL supplier, such as a
telephone carrier, supplies everything to the
customer, including a modem, Signore says. It
doesn't matter if the carrier's DSL technology is
incompatible with another company's DSL
brand; it's all coming from one source, he says.
''It won't be a reason for slowing down or
speeding up the market,'' Signore said.
Ascend plans to expand its already commanding
presence in the Internet service provider market
with its DSL offerings this year. Ascend has had
DSL products out for two years and plans
another major push in the fall.
Networking companies will benefit in more ways
than in sales of equipment to DSL providers,
says 3Com's Edson. Faster networks need
speedier equipment in all segments, not just DSL.
This year is expected to mark the biggest DSL
product push by the networking companies. It
follows a lackluster '97, Edson says.
''(Last year) was a year of a fair amount of
players . . . hype and very little reality,'' Edson
said. ''This starts to enable, from our point of
view, a great amount of market growth.''
Kieran Taylor, Bay's DSL product marketing
manager, says the new technology is simply a
way to get information to its destination.
Therefore, it will become a commodity product,
he says.
Networking companies will make their money by
selling services that can run on DSL such as
voice over IP (Internet Protocol), Taylor says.
DSL could be giving major networks a kick-start
by '99 and '00.
''That's why we're treating it so aggressively right
now,'' Taylor said.
(C) Copyright 1998 Investors Business Daily,
Inc.
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