More Pacific Coast News...Pac Bell shelves cable. Copper alive.
Posted at 10:10 p.m. PDT Sunday, June 14, 1998
New technology uses old copper phone lines
Previous plans to install new infrastructure abandoned
Frequency shift gives old lines new life
BY JON HEALEY
Mercury News Staff Writer
To usher in a new communications era, Pacific Bell declared in 1993 that its copper phone lines would have to be ripped out from under area streets and replaced with high-capacity cables fit for both telephone and video service.
Major phone and cable companies across the country announced similar plans, yet only a few such networks ever were built. Most were abandoned in the face of unexpectedly high costs.
Now, Pac Bell and other phone companies across the country are sounding the trumpets again, pledging to bring high-capacity communications pipelines to millions of consumers this year. But this time, no one is talking about digging up the streets. The network of the future, they say, already is built.
This turnaround breathes new life into plain old copper lines, a development driven by new technology that multiplies the capacity of ordinary lines. Once seen as a choke point on the flow of information into homes and businesses, copper lines now hold the key to the rapid spread of advanced communications.
The benefits include fast, constant connections to the Internet, more opportunities to buy and sell goods electronically, easier telecommuting, and a variety of entertainment services on demand. Although the phone companies can deliver many of these things today at budget-busting prices, the new copper-based technologies promise to slash costs to a level consumers and small businesses can afford.
The new approach also eliminates much of the expense and risk that might keep a new service out of low-income neighborhoods such as East Palo Alto or downtown Oakland.
''It's a much more egalitarian service,'' said Charles J. McMinn of Covad Communications Co., which provides high-capacity phone lines in competition with Pac Bell.
That's the promise, at least. On the other hand, limits to the technology could prevent it from becoming widespread. More than a third of all homes may not be able to use it, and the prices remain too high to attract casual Internet users.
Outside of tests and trials, the new technology has few paying customers so far. One analyst, David Cooperstein of Forrester Research, estimates that fewer than 1,000 of these lines are in use, although the number is growing quickly.
Some industry officials continue to argue that existing copper lines aren't fit for the long run. The information flowing into people's homes and offices -- phone calls, faxes, Internet text and graphics, TV channels and, soon, digital TV -- is increasing too quickly for copper to keep up with, they say.
The law of big numbers
Fred Briggs, the chief technologist at MCI Communications, countered that the industry must find a way to adapt the world's 800 million copper lines to advanced services. ''It's the law of big numbers,'' he said. ''If you've got big numbers, you're going to use them.''
In recent months, five of the six largest local-phone companies and two of the three largest long-distance companies have announced major initiatives involving high-speed service over copper lines. Pac Bell's parent company, SBC Communications Inc., said last month that it would bring such service to more than 200 California communities by the end of the summer, potentially reaching more than 5 million homes and businesses.
USWest plans to offer its version in 40 cities in the Midwest and West by the end of July. BellSouth Corp. plans to bring it to 1.7 million customers in seven major Southeastern cities by fall, adding two dozen more next year. Bell Atlantic and GTE Corp. have announced widespread deployments too, while Sprint and MCI say they plan to provide competing services in major cities across the United States.
Significantly, none of the phone companies making major announcements talked about building anything -- instead, their plans all use the wires already in the ground.
Plans on the shelf
By contrast, the ''California First'' plan that Pac Bell announced in 1993 was a five-year, $16 billion project to build new networks with fiber-optic strands and cable-TV wires. Much of that cost was not the equipment, but the expense of digging trenches for the cables. SBC isn't disclosing the cost of its new initiative, but it is well under the $2 billion the company spends annually on all network improvements.
''California First'' and similar plans were shelved not only because of their cost, but also because the people didn't welcome the disruptive construction. Many Pac Bell customers would have received a new lawn ornament: a refrigerator-sized cabinet filled with the equipment needed to interpret the advanced phone signals.
''Digging up rose bushes was a big deal,'' said Joe Glynn, director of ''internetworking'' products for long-distance upstart Qwest Communications. ''People do not want that.''
The new services use a technology known as digital subscriber line. The prices vary from region to region, starting as low as $40 per month for speeds five times faster than the speediest conventional modem. SBC's prices range from $99 to $339 per month, depending on speed.
Many of the first customers have been small and medium-size businesses, which are using their high-speed lines to do things that only large businesses could afford to do in the past. One is the Employers' Medical Network Inc., which collects records for employers when injured workers are examined by doctors. The company is saving almost $1,000 a month by using the high-speed service from NorthPoint Communications of San Francisco to make the records available over the Internet, rather than having to fax them to employers, said Keith Waldorf, the company's chief information officer in Santa Clara.
The technology doesn't work on particularly long lines or those with multiple branches. It also may interfere with other high-speed technologies in neighboring copper lines.
SBC's goal is to be able to reach 60 percent of the homes and businesses in targeted areas -- meaning that almost half of the people who might want the service won't be able to get it. These limits aside, the technology can be deployed quickly and with relatively little expense.
The copper revival also is good news for neighborhoods likely to be bypassed by the expensive construction projects. SBC has announced plans to bring high-speed services not just to well-off communities like Laguna Niguel and Palo Alto, but also to Compton, East Palo Alto and Oakland.
''We have purposely chosen to serve under-served and less-affluent'' areas, Pac Bell spokesman Eddie Reeves said. The company was motivated in part by pressure from community activists, regulators and state legislators, he said, but also by faith in those markets.
McMinn, the president and chief executive of Covad, said his company's focus on telecommuting workers means that it aims for blanket coverage of a city -- rich and poor areas alike.
''Every neighborhood is relatively inexpensive from a cost standpoint to make this service available,'' McMinn said. ''Then it's just a question of, does that neighborhood have enough people who want to buy the service at any price?''
Another important difference between the high-capacity networks of yesterday and today is their mission. In the early 1990s, phone and cable companies talked about competing head-to-head with packages of telephone and video services. Most of that talk subsided as soon as they discovered how expensive it was to build these unified networks.
Since then, the Internet has skyrocketed in popularity, giving rise to a replacement demand: speedier World Wide Web surfing. Businesses, too, are shuttling far more data in and out of their offices than before. Meeting either need requires more capacity than a conventional phone line, but not as much as it takes to deliver multiple TV channels. So a copper-based approach makes more sense now than before.
Wait-and-see approach
The phone companies have one other, significant motive for getting a high-speed service on the market quickly: competition. Aggressive companies like Covad, NorthPoint and Rhythms NetConnections are using this same technology to undercut Pac Bell's prices for other, more established forms of high-capacity phone line. Meanwhile, the cable industry is gradually equipping its networks for two-way communications, offering a high-speed alternative in more and more communities.
Cooperstein of Forrester Research suggested that the phone companies are playing defense, not offense. ''I think that's why they're making announcements way ahead of deployments,'' he said. ''Pac Bell can't not be in this game. Otherwise, they'll cede the market to Covad and NorthPoint.''
Despite the gung-ho announcements, some analysts expect the technology to spread slowly. One reason, they say, is the phone companies' reluctance to bet much money on it.
''They're very worried,'' said Andrew Cole, an analyst at Renaissance Worldwide Inc. ''What will be the situation in two years' time? Will they be burdened with an investment that's not going to pay off? I think that's delaying some announcements.''
One problem has been the lack of a single standard. The industry may soon embrace one for a high-speed service aimed at consumers, though, which could spur demand by prompting computer manufacturers to build compatible modems into their products.
Another factor slowing deployment is that the dominant local phone companies set the terms for connecting to the lines that deliver even competitors' service. ''The issue is not technology, but getting access to the unbundled copper,'' said Briggs, the MCI chief technologist. ''If we could solve that problem . . . I think you would see the information highway start to deliver on all of its promises.''
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