Mark --
I read SBC's pricing for residential customers and was shocked.
Setting that aside, here's an informed article by the ADSL Forum's director, William Rodey, and published in Telephony Magazine:
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May 4, 1998
Partner for profit
ADSL alliances forge new ways to reach key market segments
WILLIAM RODEY
An asymmetrical digital subscriber line demonstration at the Networld+Interop show this week in Las Vegas lets visitors surf the Web and videoconference with other booths to see firsthand the technology's strategic importance. The demonstration, organized by the ADSL Forum, involves 20 vendors. It showcases applications that range from streaming video to distance learning and real estate marketing, with an emphasis on equipment interoperability.Many industry observers believe such value-added, productivity-enhancing services will appeal first to the business market. The market's technical knowledge is valuable in evolving products and services for future consumer mass markets.
For service providers, the business market translates into fewer customers to support during the first several months of service availability. Better yet, carriers can charge higher prices than in the consumer market, earning more money with fewer customers.
Demand for remote access is generated by 9 million U.S. telecommuters, 1.4 million U.S. branch offices and 114,000 businesses with Internet access, according to The Yankee Group in Boston. ADSL provides fast access to critical information stored on company networks and the Internet, with bandwidth similar to corporate local area networks.
For example, GTE Network Services recently announced plans for a regionwide rollout of ADSL services aimed at the corporate and academic communities. SBC Communications, through its telco subsidiaries Pacific Bell and Southwestern Bell, is pitching ADSL service to telecommuters and branch offices as well as small and medium-sized businesses (Table 1).
Bell Canada and several U.S. competitive local exchange carriers are taking a wholesale approach to the market by offering ADSL service initially to Internet service providers (Table 2). The latter then can package ADSL with value-added services such as Web hosting, e-mail and virtual private networking, and sell it to end users such as telecommuters and small businesses.
CLECs typically collocate ADSL equipment in several central offices and then outsource the modems to their ISP partners (Table 3).
Crossing the chasm to the consumer market
Other service providers will target the consumer mass market, going for the higher volume business. With computers that cost less than $1000, the skyrocketing growth of the Internet and evolving multimedia applications such as streaming video/audio and multicast gaming, the potential of this market is staggering.
By the end of 1997, 43% of U.S. homes owned a PC, according to International Data Corp./Link. Forrester Research projects that PCs will find their way into 60% of U.S. homes by 2002. More than 20% of U.S. households are now on-line--up by nearly 50% from 18 months ago, according to IDC's 1997 World Wide Web survey of home and business users. Frequency of use and the amount of time spent on-line also increased, with nearly 60% of home users accessing the Internet at least once a day.
Ameritech intends to deploy ADSL to the mass consumer market because of the market's size and the fact that it can satisfy the market's needs quickly on a CO-by-CO basis. This will be followed by a rollout to business customers clustered around key COs.
U S West is going after both the business and consumer segments with a 43-city rollout in 14 states by June 1998. Bell Atlantic will introduce DSL services for residential subscribers in mid-1998.
Channeling into retail
Reaching the consumer market is prompting many providers to enter the retail marketing arena through strategic partnerships in the distribution channel. For example, Canadian carrier Manitoba Telecom Services just rolled out ADSL service in a venture with four ISPs and 12 computer stores, which have ADSL demo lines on-site and act as one-stop shops.
The ISPs and computer stores sell Internet access, computer software and network interface cards for Ethernet connections to end users. MTS then sends technicians to install modems and POTS splitters at the customer premises.
Splitterless ADSL--sometimes called ADSL Lite, G.Lite and universal ADSL--is gaining increasing attention as a retail, plug-and-play solution for the consumer mass market. This lower cost, easier-to-deploy variation squarely targets the much coveted, larger consumer market.
Although splitterless ADSL, with downstream speeds of 1.5 Mb/s, will be considerably slower than existing full-rate ADSL solutions providing speeds up to 8 Mb/s, it may be easier for computer manufacturers to bundle ADSL modems into computers and distribute them through retail channels. This could provide a useful first step for consumers seeking faster access to the enormous range of digital information and entertainment available on-line.
The entry of the PC powerhouses into the ADSL arena, highlighted by the recent emergence of the Universal ADSL Working Group led by Microsoft, Intel and Compaq, is a crucial development for reaching the consumer market. The group's goal is to propose a simplified version of splitterless ADSL, which will give consumers high-speed modem communications over existing phone lines based on an open, interoperable International Telecommunication Union standard.
The ADSL Forum is working closely with the UAWG and standards groups to ensure that proven innovations reach the market effectively. The Forum also wants to ensure that any splitterless ADSL standard provides a smooth upward migration path to full-speed ADSL for consumers who want more speed.
The thoughtful bundle
Packaging is paramount to a sound marketing strategy. ADSL can be bundled with other services based on the needs of specific customer segments. Many providers are packaging ADSL with Internet access and other value-added services such as long-distance, Web hosting and virtual private networking. Value-added packaging can include everything from equipment and implementation support to project management, network consulting and on-line network management tools.
One service provider, for example, is using ADSL to deliver embedded application services for end users, the first of which will be remote backup for teleworkers, branch offices and small businesses. This is a smart move because central archiving, recovery and desktop data restoration is critical for distributed network users.
Some providers have developed tiered service offerings that target specific customer segments, charging progressively higher prices for higher speed services. U S West and GTE Network Services, for example, offer five ADSL service options. U S West customers can get a one-bill option that puts their ADSL, Internet and local phone charges on a single monthly statement. One-stop shopping for the retail consumer market takes this approach a giant step further.
Some service providers offer other variations of DSL with lower speeds or symmetrical transmission, which can be priced accordingly. However, ADSL has the corner on the market given the asymmetrical nature of most applications and its capability to be set for symmetrical transmissions at lower speeds. In the future as fiber starts to get closer to the neighborhood, another technology, very high-speed DSL, will enable providers to offer premium, bandwidth-intensive services up to 52 Mb/s.
Niche marketing can be a valuable tool for seeding the ADSL market. Providers can package ADSL with other services aimed at the needs of specific vertical markets such as health care, education, real estate and prepress, or sell ADSL services based on applications such as collaborative whiteboarding, videoconferencing, remote backup and video streaming.
An intriguing market development involves campus-type ADSL deployments for hotels, business complexes, educational institutions and multitenant dwellings. This enables competitive service providers to bypass the sometimes complicated collocation deployment issues.
Low-density rural markets also are being addressed. Leaco Rural Telephone Cooperative, Lovington, N.M., provides ADSL services to schools in southeastern New Mexico. Valley Telephone Cooperative, in Raymondville, Texas, intends to provide rate-adaptive ADSL to its 5400 customers in the remote 7300-square-mile ranching region between San Antonio and the Rio Grande Valley.
MCI, in a venture with Northwest Iowa Telephone and Northwest Iowa Power Cooperative, offers ADSL service in a few rural areas in Iowa. MCI reportedly is negotiating similar arrangements in 300 rural communities in 10 Midwestern states.
A bridge across marketing cultures
Strategic alliances are crucial to ADSL deployment and marketing. For example, at the equipment level, most major telecom equipment manufacturers are establishing partnerships with one or more of the many smaller companies that pioneered ADSL technology and systems. These partnerships enable vendors to accelerate product development while providing carriers with an end-to-end solution.
For mass deployment to occur, interoperability is critical if future ADSL customers are to receive information from any source using any equipment. As ADSL services are deployed, equipment interoperability is taking on added urgency for vendors, which are entering interoperability agreements in increasing numbers. The ADSL Forum has made interoperability a top priority in its technical work, which is focusing on developing end-to-end network architectures and end-to-end service architectures.
Many providers are partnering with systems integrators to better serve their customers.
Although U S West's network technicians will install the network interface cards and DSL lines, the incumbent is partnering with computer companies to handle the inside wiring, software installation and other customer needs.
Large providers are working with software and hardware manufacturers to make PCs ADSL-compatible. Ameritech, for instance, has inked partnership agreements with Microsoft and Compaq to make the technology easier to install and simpler to get. Ameritech will package Ameritech.net services with Microsoft Internet Explorer.
In addition, the incumbent LECs' ADSL service will be offered with software that greatly simplifies the installation of ADSL, ensuring that a user's Microsoft Windows operating system is ready to connect to the Internet using ADSL.
Ameritech customers will be able to buy select Compaq Presario computers with the equipment needed for ADSL-enabled Internet access already installed. They can have those PCs configured by retailers to run the Ameritech.net service.
Despite differences in deployment and marketing strategies among service providers, one thing is clear--rolling out ADSL services has become a strategic imperative in an increasingly competitive marketplace.
William Rodey is Vice President of the ADSL Forum and Vice President of Channel Sales and Marketing for Westell Technologies, Aurora, Ill.
For a complete list of ADSL trials and deployments worldwide, visit the ADSL Forum Web site at www.adsl.com.
Any Comments?
Send them to Karen Murphy at msblues@earthlink.net.
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