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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: LTK007 who wrote (5271)	5/28/1998 9:39:00 AM
From: Phil Jacobson	Read Replies (2) \| Respond to of 29382

Maxx, Sorry for not getting back to you yesterday on PAIR and DSL tech. Work is hell! Had to pull an all nighter last night. Now I 'm writing from the carpet of a Northworst Airlines gate area as we have just had to turn the plane around about 80 miles out of Detroit and head back as there were fumes on the plane making people sick. I ate some chile before the flight, hope I didn't contribute to the problem! Update: got home at 3:00 AM. Spent 45 minutes waiting for the parking shuttle bus. I'd love to be brief on this DSL stuff but since I currently have an hour before they let us try to go home again and I have a fresh battery I'm afraid you're in for a brain dump. Not unlike another kind of "dump"... The best way to understand the problems PAIR is having is to look at a five year chart. The 30,000 foot level view is required. You'll see that the stock rose dramatically a couple years ago. This was about when everyone started realizing the importance of the data communications, and the internet in particular. DSL modems looked great because guess what, they're not only able to let people download dirty pictures very fast, they can replace a lot of the DS1 1.5mb/sec) local private line customer base that the RBOCs have nurtured for years...what a target market! Better get invested right? Wrong. There's one major problem and several others, and with monopolies it only takes one. The RBOCs charge about $500 minimum per month for a data DS1. DSL service usually costs under $75. The RBOC's own the copper wire that DSL uses to gain entry into your home. In retrospect it's obvious what would happen. So, the stock went up, then it went down, and continues to sink. Follow the money and it's easy to see why. You've probably seen my posts ranting against the cable industry and their incredible ability to hype broadband without ever having to do anything. DSL is the dinosaur RBOC monopoly equivalent. The RBOCs have been using DSL in their own networks for at least 10 years. Imagine that! It's a great technology and actually works. But the RBOCs would be nuts to rapidly roll out a product that could result in the conversion of a large portion of their small and medium size business customer base from a $500 product to a $75 product. So, you hear a lot about "trials" and "tests" but little in the way of actual large rollouts. This way they look like they support the rollout of new technology but in reality they do squat. Oh, and by the way, a CLEC, ISP, or other carrier can't just put a modem in someone's house, and stick another in their closest point of presence. Because of the way these companies are interconnected (via digital, not analog connections), I believe it is impossible for a DSL service to operate unless the equipment on the LEC side resides directly in the LEC central office where it can be connected to the other end of the analog copper wire connection (anyone know differently please tell me!). So, an alternative provider must get the explicit cooperation of the RBOC to run a DSL service. Good Luck!! This alone is enough to make any intelligent telephony Marketing VP tell a fledgling product manager to take his/her DSL business case and sell it to Mother Goose. Oh, and don't forget the issues with distance (doesn't work beyond 18,000 feet) and problems in how parts of the network are built. If they actually rolled the service out they would quickly come under a lot of pressure to rebuild a lot of the network on which DSL would experience quality problems. There are other technical issues that have been written about, some more problematic than others. One is very ironic. Because DSL is analog, a lot of implementations won't work if something called a Digital Cross Connect exists between the RBOC and the customer. DCCs were installed as a result of attempts to improve the network as required - they bring a call digitally to within a half mile of the customer, then use copper the rest of the way. It's estimated that 30% of homes are connected today using a DCC. DCCs won't work with analog DSL signals. Some proponents say they can get around this, but I've yet to see a surefire way to do it. One last crappy thing the RBOCs like to do. Let's say you're a CLEC and decide to put DSL modems in the customer site and somehow get around the central office issue and put the equipment on the other end in your own network (especially if you're already co-located and "own" your little piece of the central office). WHOA says Mr. RBOC. What are you putting on MY NETWORK! You are not authorized to put anything on the network that could pose a danger to the overall network. It takes a long time and lots of bribery to get DSL gear cleared for the public network, usually longer that you have left to live. Boy have I painted a bleak picture!! And bleak it is... But there is hope (always is!). Like all else in life the RBOCs are doomed, but especially so. At the moment they don't quite know whether the cable guys are serious about cable modems. Some stuff I read this week after I posted my cable rant actually show there may be something going on there. Some of the plans are actually taking on shades of reality. In addition the RBOCs are very concerned about the CLECs, mainly because they're being acquired by carriers like WorldCom (who own MFS, Brooks Fiber, UUNet, and ANS). So they're starting to wonder if they need to act. US West has announced a major rollout to a market of 5 million homes. Ameritech is conducting region wide trials, particularly in Detroit and Ann Arbor (Univ of MI). One last thing is consumer price acceptance. While many businesses would snap up DSL to minimize existing expenses, it would be an additional cost to most consumers and they typically refuse to pay more than $35/month for new services of ANY kind. DSL services are targeted at about $50/month (Ann Arbor) but about $60 to $75 most other places. The need for speed is a chicken/egg thing - most internet content is geared to work OK at 28.8K speed. High speed is nice but the consumer market is not well understood when it comes to what they will pay for 1 mb/sec or higher. There probably needs to be some innovative bundling of services to make it work, but then you bring up the possibility of sticker shock and quality of service issues for the components. An interesting thing to watch (and I need to learn more about the actual execution) is the deal between DSTR and Teleport in multi dwelling units in NYC. Teleport's being bought by AT&T so it brings up the possibility of AT&T offering bundled long distance, local via teleport, and DSL speed internet. So, to sum up, there's a lot of sideways inertia, some interesting sparks,. but lots and lots of issues revolving around the RBOCs before DSL services can take off. Phil