All, I found this Last Mile viewpoint in the current (12/1998) Business Communications Review magazine quite interesting. I don't always agree with their editorial slant, but I almost always find the manner in which they present contemporary issues stimulating, and for the most part, informative.
Here, Eric Krapf discusses the last mile race, predicting some unclear outcomes, for some unclear reasons. I think that they could benefit from reading this thread, as they have missed some crucial points, IMO.
In any event, I've subscribed to their hard copy stock editions for the past fifteen years, and have read them through previous employer subscription services for a period before that. While the article below may be a bit self serving (NGN is a BCR event), it raises legitimate issues, nonetheless.
Let me know what you think... hopefully it will make for some interesting discussion.
Regards, Frank Coluccio
p s - I guess it's really important to be represented at these Annual NGN Conferences. Note the conspicuous absence of any mention of @Home.
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from: bcr.com
BRIEFING - Why Cable Modems Are Winning
December 1998, p. 16
By Eric Krapf (ekrapf@bcr.com), managing editor of Business Communications Review.
The following is the full text of the printed article.
Remember when the Jim Carrey movie "The Cable Guy" came out? It gave everyone in the telecom business a good laugh, because, it seemed clear, an industry that could be so convincingly parodied couldn't possibly do anything as complicated as delivering reliable Internet access.
And, just in case the cable guys were serious, the telcos proclaimed themselves armed with services based on digital subscriber line (DSL) technology. Even if the DSL systems weren't as fast as cable modems, they'd be more reliable because, after all, the phone companies are known for their service, whereas the cable companies, well, aren't.
The telcos may yet have the last laugh, but as 1998 draws to a close, cable modem services are starting to take off, while DSL languishes. At last month's Next Generation Networks conference, sponsored by BCR and McQuillan Consulting, attendees learned there were at least three times as many installed cable modem units--300,000-350,000--as there were active DSL lines.
Market researchers expect that big lead in market share to last into the next decade. For example, in the year 2002, Forrester Research sees cable modems being in 80 percent of the projected 16 million "broadband-connected" homes; Yankee Group believes that the overall market will be smaller--7 million broadband homes by 2003--but agrees that cable modems will have a strong lead in market share: 61 percent compared with DSL's 39 percent.
Confronting DSL's Problems
The obstacles DSL has to overcome have been well documented: The incumbent local exchange carriers (ILECs) fear that DSL will cannibalize higher-margin services like private leased lines, and they've also been unwilling to let competitive LECs (CLECs) into their central offices (COs) to offer competing services.
But the real problem for DSL, according to Rick Tinsley, president and CEO of Turnstone Systems, is outside plant. And we're not talking bridge taps, load coils and the other architectural problems that have been much discussed. It's more fundamental: According to Tinsley, DSL is "a royal pain in the ass to get installed." Of course, his perspective isn't purely academic, as Turnstone's main product push is "copper cross-connects" to improve DSL provisioning.
Still, his experience trying to get DSL installed is indicative of the problem the new technology faces. Tinsley told the NGN audience that it took seven weeks to get DSL operating, and that some existing services were disrupted during the install. And while DSL has indeed produced savings for his business, Tinsley questioned whether any consumer DSL service would become profitable as long as multiple truck rolls are required to make a given installation work. "If you think you can get out of the truck roll business by getting into DSL, you're wrong," Tinsley said.
His claims were echoed by Larry D. Blair, vice president of marketing for RedBack Networks, another DSL equipment startup. Blair said that, while his chosen CLEC was able to install a DSL modem at his house in one day, it took seven days to get the proper cross-connection done at the CO so the service could be turned up.
The bottom line, according to Tinsley, is that while new data CLECs such as Northpoint and Covad have plenty of venture money to pour into infrastructure, delivering actual service will remain a problem. "You'll see the equipment build-out much faster than the subscriber uptake," he concluded.
Cable modems, of course, also have deployment-related and operational problems--including spottycoverage and inability to select your own ISP. But the fundamental business model lacks the dilemmas faced by the ILECs with DSL, according to NGN presenter Stephen Van Beaver, senior VP of operations at Road Runner, a cable modem joint venture of MediaOne, Time Warner, Microsoft and Compaq. Van Beaver points out that he doesn't need to worry about cannibalization--cable modems represent incremental revenue; the Internet's essentially just another premium channel.
In Defense of DSL
DSL still has many champions. CLECs, in particular. But launching DSL services isn't easy. For example, Chuck Haas, VP of marketing and sales at Covad, identified the steps a CLEC needed take to offer a service:
1. Get state certification everywhere it wants to operate.
2. Then negotiate interconnection agreements with ILECs.
3. Then request CO colocation space.
4. Then arrange the colocation.
Haas told NGN attendees that, given the regulatory hoops CLECs had to go through, it was never realistic to expect DSL services much before the second half of 1998.
Then there's the matter of ILEC-CLEC cooperation, or lack thereof. Jeff Blumenfield, VP and general counsel for the data CLEC Rhythms, grumbled that while the telcos complain about lack of space for colocation inside their central offices, he sees lots of square footage being devoted to administrative offices and "the Bell Pioneer tchotchke shop."
Conclusion
Cable modems have jumped out to a substantial lead over DSL, but the cable companies face a couple of serious problems: First, cable modems don't seem suited to the business market; second, it's going to be very expensive to upgrade existing cable plant to two-way capability. The telcos and CLECs are flush with cash for their infrastructure buildouts, while most cable operators are not.
So, long-term, the high-bandwidth access game remains the telcos' to lose. They may be moving slowly on deployment, but Bell Atlantic sent an important signal when it recently announced that it would offer DSL for under $60 per month: Some telcos may forego much initial profit in order to preempt cable.
And Yankee Group's research contains an particularly ominous prediction for the cable industry: Survey respondents were 4.5 times more likely to want high-bandwidth service from their phone company than the cable guys. It seems some images are hard to shake.
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