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Computers & Technology Eyeing A Big DSL Payoff, Networkers Get Prepared
Investors Business Daily, Tuesday, May 05, 1998 at 12:22
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 standalone 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. |
