DSL info for consumers & the industry.
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| DSL Prime, the trade paper of an internet community
DSL Prime is always looking for news. Email Dave Burstei June 28, 2006
13% of TV customers will sign up for Project Lightspeed because they hate their cable company so much, a Microsoft survey predicts. AT&T has some pleasant surprises coming in deployment and early sales. Expectations are so low they will be easily exceeded, despite lack of Internet and HD TV throughput. The DOCSIS 3.0 delays should cause an AT&T sigh of relief audible from San Antonio to Chicago. 50 and 100 meg download cable modems will be few in North America until 2008, as Cable Digital News reports CableLabs and Comcast are rejecting DOCSIS 2.0b. Scientific Atlanta, Bigband, and others are demonstrating the wideband modems, based on Broadcom chips, and are ready to ship this year after testing around the world. Cisco also has a 300 meg (shared) 8 channel wideband modem based on a BroadLogic chip. Dave Fellows of Comcast said he rather wait for the full DOCSIS 3.0, unlikely to meet Brian Roberts’ 2007 goal. 100 meg VDSL will be part of the news, and Verizon is close to announcing 100 meg GPON contracts as well. Tellabs will get part of the GPON contract, Nikos Theodosopoulos expects, after bidding GPON gear cheaper than the BPON Verizon is installing by the millions of lines. Running fiber throughout some apartment buildings is impractical. 14,000 VDSL remote terminals (2M homes at 50/10 speeds) are ready to go in Germany, waiting for modems and IPTV gear to finish debugging. DT is using the delay to put pressure on Merkel’s government to give them a monopoly. EU Commissioner Viviane Redding knows they are bluffing, four competitors are building ADSL2+ nets across Germany and will take millions more customers if DT doesn’t upgrade. 1,088,935 Indians have DSL (Q1), as deployments are starting to accelerate. India is adding 4M mobile phones every month, close to the 5M in China, suggesting enormous potential. 10,000,000 ADSL DSLAM ports shipped from Conexant in Q1, Cyrus Namazi tells me. That’s an important corrective to my “ADSL is so 20th century” comment. ADSL, not VDSL, is still the vast majority of shipments. The crossover could come in 2007, as Centillium, TI, Broadcom, and PMC-Sierra deliver chips and bring down the prices. Alternately, power and space demands could keep ADSL sales robust for several years. With DSL selling for $8-10/month in India, even $6 VDSL chips may be too expensive. There’s an extraordinary video of AT&T’s Ed Whitacre at the U.S. Senate. Republican Senator Arlen Specter threatens him with contempt for not answering questions, and Big Ed just goes on smiling. rtsp://video.c-span.org/15days/e062206_merger.rm Verizon’s ready for 100 meg VDSL Fiber to the basement, VDSL up the risers Mark Wegleitner, Verizon CTO, told DSL Prime in 2004 that some of his “fiber to the premises” deployment would be VDSL from the basement, and they are ready to move from trials to deployments. Wegleitner clearly prefers fiber all the way, for lower maintenance costs and ultimately more bandwidth. However, many buildings literally don’t have room for the new cable, while others are difficult and expensive to unwire. Wall Street sources tell me Verizon is ready to move forward to serve the millions of customers living in apartment buildings in New York, Boston, D.C. and suburbs. The rumored vendor is Tellabs using Ikanos chips. Ikanos is hoping for more good news at KPN and Telefonica. Rajesh Vashist of Ikanos demonstrated VDSL at 100 megs down, 100 megs up in April of 2005 at my Fast Net Futures conference. He showed working boards at 100 meg symmetrical over 600 feet of phone wire, enough to reach the fortieth floor of most buildings. In 2004, Ikanos and Metalink brought to Fast Net the first 100 meg downstream chips, although the upstream was only 30 meg. With Metalink offering similar capabilities (with QAM VDSL, not DMT), prices were reasonable from the beginning, $75-150 for DSLAM plus modem, and have gone down now. The other cost, running the fiber to the basement, varies widely. Where Verizon already has fiber in the building, this is a no-brainer. In many other locations, it’s practical to blow fiber through existing conduit at reasonable coast. Digging up streets, especially in Manhattan, of course is much more expensive, although the distances are often short and the population density extraordinary. Japanese and Korean carriers have been buying the gear in the millions. It works. I don’t know what speeds Verizon will choose to offer. Japan is selling 100/50, Germany 50/10. The latter keeps nicely out of the way of the video offering. While AT&T is struggling to fit a single HD channel into the 20 meg Lightspeed, Verizon will be able to run five HD 9 meg channels and 50 meg of data. Larry, Ivan: Please do 420 West 119th Street ASAP. All would be forgiven. Q1 2006 150M Point-Topic DSL Forum numbers Total DSL subscribers, which put the larger countries on top 1 China 29,357,000 2 USA 22,224,006 3 Japan 14,571,000 4 Germany 11,100,000 5 France 10,214,000 6 UK 7,921,500 7 Italy 7,024,300 8 South Korea 6,422,406 9 Spain 4,294,800 10 Taiwan 3,762,000 11 Canada 3,479,265 12 Brazil 3,323,900 13 Netherlands 2,587,000 14 Australia 2,494,000 15 Turkey 1,843,852 16 Mexico 1,831,500 17 Poland 1,429,429 18 Sweden 1,382,500 19 Belgium 1,344,252 20 Switzerland 1,189,000 21 Finland 1,091,400 22 India 1,088,935 The welcome addition is India, finally getting on track. A year ago, Minister Maran called for two million connections by the end of last year. BSNL responded with a price of $9-12 dollars (low speeds, low cap), but they weren’t able to service the customers in volume until early this year. DSL as % of phone lines, in countries with over 1M DSL subscribers 1 Finland 38.3% 2 France 30.0% 3 Taiwan 28.7% 4 South Korea 27.6% 5 Belgium 26.2% 6 Netherlands 25.9% 7 Italy 25.6% 8 Australia 23.6% 9 Spain 23.0% 10 UK 22.5% 11 Switzerland 22.3% 12 Sweden 21.0% 13 Germany 20.7% 14 Japan 20.5% Broadband countries by number of connections per 100 households 1 South Korea 2 Hong Kong 3 Iceland 4 Israel 5 Taiwan 6 Singapore 7 Netherlands 8 Canada 9 Switzerland 10 Denmark #1 South Korea is over 80 per hundred homes, while #10 Denmark is close to 60 per hundred. Canada’s presence on this list is clear refutation of the claim that the poor performance of the U.S. is primarily a function of lower population density. Folks in D.C. serve their country better starting with the truth, not excuses. John Kneuer, Acting NTIA Administrator & Asst. U.S. Secy. of Commerce-Communications & Information has his head in the sand with a Pollyanna comment “The U.S. leads the world in the number of broadband lines in service and that service deployments are growing strongly.” (TR) The U.S. has 2-5 times the population of any other rich country, so of course we have more total lines. The population size means the U.S. also has more automobiles, telephones, schizophrenic imbeciles and foolish politicians. Goldman Sachs fails Wintegra IPO Day by day, cutting back They cut the price. They tried for an extra day, but Goldman couldn’t come up with orders for 4.9M shares. Finally, Goldman wanted another price cut, but the company said “fuggedabodit,” according to Roee Bergman at Globes. Wintegra reported a modest profit for the first quarter and $8M in cash, so could choose to operate modestly going forward. They are growing quickly, from $4.5 million in 2003 to $9.3 million in 2004 and to $19.6 million in 2005 and over $7M in Q1. That high growth rate would ordinarily suggest they would need to raise money, but they are currently cash flow positive. Wintegra chips run DSLAMs and other gear from Carrier Access, Cisco, Corecess, ECI, Fujitsu, Lucent, Motorola, RAD Data, Siemens, Tellabs, Zhone, and ZyXEL. They are doing well in a competitive market, facing Agere and Freescale. In 2005, Lucent accounted for 24% of sales, a worry because Alcatel is about to swallow Lucent and presumably end their DSL line. (Did anyone else notice that after Alcatel takes over Lucent, they so dominate North America that no other vendor has even a 10% DSLAM market share? The antitrust department has already signed off on the deal, however.) Essentially, the chip designers at Wintegra have integrated most of the DSLAM functionality on the chip. Chips this complicated take major design work as well as many components. Wintegra integrates a microprocessor core from MIPS Technologies, I 2 C and UART technologies from Palmchip Corporation, Ethernet logic technology from Mentor Graphics Corporation, and memory modules from Virage Logic Corporation. “Up to 20 meg” ADSL2+ often less than 10 50% get 9 meg or more, 75% 5.5 in good district Of about 500 customers in the Perth Australia suburb of Riverton, Ÿ Ÿ Ÿ The results are from Greg Bader, CTO of iiNet, an Australian independent. They are adding 6K customers a month on ADSL2+ DSLAMs, despite Sol Trujillo’s intense struggle to raise prices and use the government to kill Telstra’s competition. They now have 100K customers on the faster units, while giving on their website these suggestive figures. Results are likely very different with the short loops of Italy, Paris, New York or Boston or long loops in the American West. Michael Malone, iiNet CEO, notes many territories will do better than the results above. “Riverton was an odd choice for us, but we chose it as a counter to the Sydney suburbs. The Sydney suburbs are pretty high density inner suburbs. Riverton is more like central suburbia, average blocks are 800 square meters (close to a quarter acre) and the suburb is large.” “Up to 22 meg” across Canada 70 COs, 2-3M homes at Primus for $62 (U.S.) voice + data Primus is selling ADSL2+, no speed limit, for the same price as 1 meg ADSL, the strategy that changed everything in Japan and France. Comparable offerings from Bell and Rogers, with much slower speed limits, cost 10-25% more. Primus didn’t move to the $25-40 prices for voice + data that won six million customers in France and Japan and persuaded half a million to sign up with Carphone Warehouse in two months in the U.K., but the increased speed alone should draw customers from Bell. If you are in the right location, Primus is offering “up to 22 meg downstream DSL” and a complete local and long (U.S. and Canada) phone package for $70 Canadian ($62 U.S.) ADSL2+ performance goes down with distance; I’m about three quarters of a mile from my Verizon CO, and would probably get 10 meg or so, still a major improvement on the 3 meg Verizon offers. Primus Canada President Ted Chislett tells me tells me some of his customers actually are getting the 20 meg speeds. Primus has targeted COs serving large urban populations, so they may have shorter loops than the Australian example above and could perhaps deliver 10 meg to about half. The Zhone gear allows just about any connection the customer wants, including fiber, metro Ethernet, and even T1. It connects efficiently to the Primus VOIP systems. If I were in Canada, I’d buy the faster, cheaper service right away, but it’s too early to predict whether the Primus deal is attractive enough to create a stampede. Primus is probably smart not to push for fast growth, given the mixed operational history of the Primus Lingo VOIP service reported at DSL Reports. One Lingo user posted “Virtually there is no support.” Primus in the U.S., the parent company, faces NASDAQ delisting and recently had to refinance debt. Rogers Cable also is offering DSL in about 100 COs with ADSL2 DSLAMs in cities including Vancouver they do not cover with cable. They were installed by Sprint Canada before Rogers bought them out. Terry Canning tells me they’ve decided for now to offer DSL speeds similar to what they offer on cable. With little more than a few lines typed on a management console, I believe, Rogers could offer the 10 meg and higher speeds within a few minutes of making the decision. Bell is currently rebuilding around similar technology, ADSL2+ and VDSL (low profile), often from nodes closer to people’s home. The shorter loop from remote nodes mean they can offer many subscribers a real 20 or 25 meg if they choose. Bell also plans to give many homes two lines bonded for speed at longer distance. Currently, Bell is talking mostly about IPTV, and suggesting they will only sell the fast connections at a high rate. Their top people, however, have seen the French and Japanese examples where one company offered unlimited speeds for a low price and everyone had to follow. Videotron Cable is the Canadian price leader, taking many customers from Bell in Montreal. So far, Bell apparently hopes Videotron will join the polite understanding that has allowed Canadian prices increases this year. Bell President George Cope told wall street he was going to “increase margins” and put through a DSL price increase with the connivance of Rogers and Shaw. Will Videotron and now Primus actually keep prices down? Key Merrill Lynch analyst Glen Campbell notes that Videotron is among the most successful cable companies lately, in profit as well as customer count. He believes Cablevision, also price aggressive, is succeeding for similar reasons. Perhaps that will inspire sufficient competition, important because the new Canadian regulator has little courage to fight the duopoly. VDSL: Centillium jumps in as millions of chips are shipping Hanaro at 100, DT at 50/10, AT&T at 25/1, Swisscom, Belgacom Centillium is close to delivering a VDSL chipset, promising evaluation boards to customers in July. Faraj Aalei’s company was an early leader and is especially close to the Japanese market. The company is choosing to not yet publicly share technical details, so I’ll probably have to wait until some of their customers tell me about the chips. On-the-record I know three chips in production (Ikanos, Conexant, and Infineon) and four expected “real soon” (Broadcom, Centillium, PMC-Sierra, and Texas Instruments.) By yearend 2006, about 20% of the dollar value of DSL chips will be “VDSL.” The customers are looking for all the rate and reach they can get, along with manageability and compatibility. I believe that means latecomers will have a shot at winning market share, if and only if they show distinct technical or price advantages. None of the chips have proven superior so far, the technical lead at a world class telco told me about 60 days ago. He also tells me that none of the chips he’s tested can do the promised 25 megabits at 5,000 feet. Based on his tests, he wouldn’t expect that speed past 3,000 feet, and is planning accordingly. I’ve asked all the vendors to provide me independent test data to report, but none have been confident enough to share that data publicly. If any chipmaker really is significantly better, please get me solid data and I’d love to write the story. Stories I’m tracking (ideas welcome) Alcatel’s big deal at Telefonica KPN ready to do VDSL from 23,000 Dutch cabinets DSL network management conflicts. I hope ATIS helps me find the facts. Alcatel vendor financing of a CLEC in Thailand VDSL performance at 5,000 and 15,000 feet Briefs
June 19, 2006 Word came tonight that Nokia will absorb Siemens’ telecom products. Not a surprise, but a very tough blow to 55,000 employees. Lucent is about to disappear as well, after the U.S. antitrust division ok’d the Alcatel takeover. In Asia, Harbour Networks is going, while Chinese-American company UTStarcom’s problems cost their founder his job. This is a tough industry, even as it grows by ten million subscribers per quarter. Look soon for a special issue of DSL Prime, Wi Revolution. I’ve concluded VOIP over wireless will grow explosively in a few years. The common wisdom is wireless voice carriers have good years ahead, but I see a massive reset coming as even big ones - Verizon, France Telecom, Vodafone - will find competition at half the price in the heart of their business. Mobile WiMax is working, receivers are about to become cheap, and spectrum coming to market. New television and data services will naturally allow voice calls as well, hitting at the heart of telco profits. I’ll include Anton Wahlman’s ideas on WiMaximus, finding more than a niche for wireless despite low speeds. I’ll also pick up from a Columbia University session Shelly Palmer’s ideas that wireless will knock out DSL and cable as the primary connection, although I wouldn’t go as far as Shelly. DSL Prime isn’t changing primary focus. I’m just chasing a few stories that affect the entire market. Bravo to AT&T for the $100M donation for computers for the poor and Internet connectivity. That’s a lot of money, even for a giant telco. Thanks also to S. and L. at AT&T. They factchecked a item I wrote, told me I had it wrong, and saved me from a serious mistake. In Washington, the next FCC meeting will feature much grand rhetoric on how they are "saving universal service" and "bringing the Internet to every school." The Bells and the rurals have cut a deal to rearrange the shares of the USF rakeoff, financed by a tax on VOIP and probably Internet services. Good reporters will ask how much of the $10-15B in USF and ICC really goes to those laudable purposes. Everyone at the FCC knows much of the money is wasted, much of the rest an incumbent subsidy passed on to investors, and that far less than half the money goes where's it's needed. I'll bet no official will say anything of the sort, of course. Few if any reporters understand the issue well enough to write a story about where the money really goes. Expect a lot of gossip instead. Kevin had to pull the broadcaster's four station must carry proposal off the agenda. He's usually careful to count his votes beforehand, so lots of speculation likely. Siemens and Lucent becoming history 250 years of pride They are about to tear down Eero Saarinen's Bell Labs building, forcing Claude Shannon’s ghost to find another track for his unicycle. Once upon a time in Holmdel they pointed a satellite antenna straight up and discovered cosmic background radiation. Penzias and Wilson won a Nobel for that one. DSL itself traces directly back to Shannon’s information theory, which inspired people like Joe Lechleider of Bellcore to explore just how much a copper wire can carry. Tears are also being shed in Munich, where even the local train station is called Siemenswerke. Werner von Siemens was a telegraph pioneer, whose undersea cable expertise created one of the first multinational corporations. How many of the remaining 55,000 employees will be pushed out is unclear. Their DSLAM product line scored a major win at DT recently, and has been winning market share. Siemens and Lucent were primarily based on the sales of telephone switches and related products. Over the last ten years, technology like softswitches and VOIP has developed to handle calls at a tenth the cost. A $100,000 softswitch from Thomson/Cirpack can substitute for millions of dollars of Siemens or Lucent gear. Even when Siemens wins a softswitch or IP contract, the total dollars involved are far too little to carry the corporate overhead. The emerging markets - DSLAMs, data switches, optical nets - can only replace a fraction of the revenue loss. Layoff after layoff didn’t solve the problems. That’s especially true at Lucent, where the R & D cutbacks in 2001-2 left the company with uncompetitive product lines in 2006. Dennis Berman in the WSJ also points to the emerging Chinese vendors that wore down Siemens (and Lucent, I'd add.) Huawei's total sales are only half Lucent's or Siemens' volume, only a minor share of the market. But Huawei's presence in every bid holds down prices. Lucent may hold on to DSLAM sales in Poland, for example, and Siemens has sold DSLAMs in China, but buyers keep the price down by threatening to switch to Huawei. Michel Rahier of Alcatel three years ago told me he saw Huawei as his greatest danger. Alcatel responded by buying Shanghai Bell, and moving not just production but research to China. They just celebrated expansion in Chengdu, the ancient inland capital, where they have 300 engineers and are hiring. Even before the Lucent deal, Serge Tchuruk warned Alcatel’s U.S. employees of more layoffs once SBC was dealt with. Editorial: Research, nurture and grow Condemning Asian growth solves nothing I buy shirts made in China, and AT&T buys Alcatel DSLAMs from China as well. Although I care about the future of my country, it would be total hypocrisy for me to advocate “buy American” or advocate protection for Lucent. It’s a tragedy for the U.S. to lose our once great telecom industry, especially for my neighbors in New Jersey. Bell Labs is the symbol of American engineering, a source of pride in decline for two decades and soon mostly a shell. Condemning the Chinese and Koreans is no answer however. They are just hardworking people doing their best to win economic battles and make a living. Huawei’s government helps some, especially with easy credit, but Western companies receive government favors as well. The only way for countries like the U.S. and Germany to maintain a high standard of living is efficiently produce better goods. We can’t do that in telecom when research and development has been cut 60% in the last four years. There’s an incumbent subsidy of $10-15B buried in “USF,” “ICC” and other programs beyond the actual cost of universal service and connecting schools to the Internet. Switching even a quarter of that to restoring the U.S. to excellence would be a smart move. Some of the best engineers in America, some with 20 years of experience, haven’t been able to find a job amidst the cutbacks. Companies that only think of the next quarter ultimately suffer. So do countries who don’t build for the future. Hanaro Korea: 100 meg and IP TV Powercomm takes 600K users Hanaro and KT are struggling with essentially zero subscriber growth. Hanaro has upgraded 600,000 users to 100 megabit service, and now sees their future as an IPTV play. There’s little room for broadband growth after the country passed 70% take rates, with only 1M new subscribers in the last three years. LG group company Powercomm in the game, licensed for retail sales only in the last year, is gaining 70K or more subs a month, taking almost all the growth. Powercomm and the cable companies are marketing aggressively, preventing KT or Hanaro from expanding margins. Hanaro, whose original growth inspired KT to build, required a $billion bailout from the Americans AIG and Newbridge Capital. Korea Herald reports rumors the Americans want out. AIG has to cut back, after Eliot Spitzer imposed fines for massive fraud. Hank Greenberg, a few years back lauded in Korea as the savior of Hanaro, resigned as CEO amid multiple investigations. KT is honored worldwide, but broadband success hasn’t been enough to prevent layoffs and flat profits as the landline business declines. That Netopia USB modem is small No power box needed, either Joseph Laszlo at Jupiter is enthusiastic. The Netopia Pocket Modem weighs only 3.5 ounces, “works off USB, needs no external power, and contains on the device all the software needed to adjust a PC's settings and basically install itself.” Laszlo adds, “This one is different. The radical shift of form factor gives DSL guys something that not only IS easy to install, it looks easy to install, and that's important with mainstream consumers.” Alex Goldman of ISP Planet notes that on the new DHCP DSL networks, the modem can install itself on Windows XP without even requiring the user to type in a password if DSL is active on the line. Users with Macs, Linux, and older versions of Windows are not as lucky. USB modems have always been smaller and cheaper. One bid at Telecom Italia went under $20 for the USB modem years ago, when Armando Geday at Globespan had an inventory of chips to dump. USB generally fell out of favor in the “DSL Hell” days. Telcos paid more for external modems because they could be tested directly even if the computer had problems. Dell’Oro reports nearly half of DSL customers take a modem without a router built in, so the market opportunity is large. Hong Lu steps aside at UTStarcom DSLAMs in Japan, PHS in China dropped off UTStarcom, which became a major DSLAM vendor supplying Yahoo BB’s remarkable growth, is a California based company whose crucial customers are in China and Japan. Hong Lu, CEO and founder, built the company from nothing to over a $B a year of sales, primarily with a new class of equipment, the “personal handy phone” or Xiaolingtong, that brought the cost of mobile calling in China down to $10 per month. Originally a Japanese development, the cross between a home cordless phone and a mobile handset became a phenomenal product. UTStarcom alone has sold over 50M units. UTStarcom also expanded into expand into softswitches, remote terminal that were re-engineered into DSLAMs, IPTV, and CDMA phones. Masayoshi Son met the Taiwanese-born Lu as a graduate student at Berkeley, and Softbank financed the company. Yahoo BB’s business plan - sell DSL at half the price of NTT - required inexpensive DSLAMs he initially purchased from Korea, paying half or less what NTT was spending with preferred vendors. Son offered to test UTStarcom’s new DSLAM and ultimately bought millions of lines, demanding some of the best pricing in the world. UTStarcom also joined Huawei, ZTE, and Alcatel Shanghai Bell as a major DSLAM vendor in China. Bringing low Asian prices to other markets, from Vietnam to Paris, made UTStarcom a contender on bids around the world. They’ve shipped one million DSLAM ports to Europe, including Tiscali in the Netherlands. Huawei and ZTE had a similar strategy, bringing down prices in Europe as well as Asia. Lucent, Alcatel, Siemens, and ECI decided to meet those prices on particular bids, however, and retained most of the developed country sales. Huawei is making inroads, but the other Chinese companies, including UTStarcom, found more success in mobile phones and select markets. The Chinese have major market share in Brazil and elsewhere in Latin America, while Huawei is becoming the crucial supplier across Africa and Eastern Europe. All proved tough markets for UTStarcom, and the dependence on China Telecom and Netcom proved disastrous when Chinese growth leveled off. Revenues and earnings plummeted when CT did not take delivery on any new Xiaolingtong equipment for a quarter, DSL in Japan fell behind fiber, projects in India hit roadblocks, and traditional CDMA phones dropped in price to $30-40 from the world’s most famous makers. Motorola, Nokia, and Samsung are actually taking mobile phone market share from independents even in China, having brought costs down and improved marketing. IPTV products hit some bumps, but now are winning customer praise and have a strong upside. UTStarcom bought Audiovox to gain a large volume of sales outside of Asia, but the handset market is so low-margin the Audiovox division remains far from profit. Ying Wu, a brilliant engineer with Bell Labs experience, has been running the Chinese operation and will take over as CEO. Unlike bubble companies, UTStarcom has a strong core of successful products, sales that are still running at a billion dollars per year + Audiovox, strong engineering talent with a low Chinese cost base, and many strong customer relations. $Hundreds of millions of R & D in CDMA phones, IPTV, gigabit EPON and other products may now be ready to earn major returns. Hundreds of million in cash and low debt gives them the time they need. Still, Wu’s job won’t be easy, after financial restatements, layoffs, and a series of losses. Harbour fails to Huawei Chinese fierce competition claims another Strikers are in the streets in Shenzhen, angry because of the absence of severance pay as Li Yinan liquidates Harbour Networks. Warburg Pincus initially funded the ex-Huawei executive’s plan to build a competitor to his former company, but a billion-dollar IPO failed and losses continued. In December of 2005, Siemens signed an acquisition agreement to pay a total of $110M for most of Harbour, Chinese magazine Cai Jing reported. Nanfang City Daily reports the DSLAM production line may go to ECI in a separate $40M deal. Thanks to Interfax and Pacific Epoch for coverage of this story. Om wants to create “ESPN of broadband” Online journalism setting the standard Om “Scoop” Malik now is giving up his day job at Business 2.0 to grow his much-read California-based telecom information blog, GigaOm, seeking the success of Paidcontent’s Rafat Ali and Mike Arrington’s Techcrunch. Om joked that Valleywag punked his announcement, after they scooped Scoop on his own news, funding from Jon Callaghan of new venture capitalist True VP. Neither The Times nor The Wall Street Journal got the story before GigaOm, as usual. Om writes he intends to make it “more fun for readers, [who can] participate in the site in a more meaningful way.” GigaOm and James Enck’s EuroTelco Blog are primary sources for me. Add NYT, WSJ, customized Google news feeds for other papers, Yahoo Finance for company news, and DSL Reports and some Wall St. sources to keep current in about an hour a day. Briefs May 31, 2006 "I was stopped from writing anything bad about China in the New York Post. ... News Corp. will go all out to flatter ... China when it thinks it can score a satellite TV deal there." Former Murdoch writer Ian Spiegelman (NYDN) Net Neutrality is about whether Ed Whitacre or Ivan Seidenberg should decide what TV streams you can watch. Freedom of speech matters. ADSL is so last century. Today, it's fiber home or fiber + VDSL at 50 meg or more. Japan is the first country to see a major drop in DSL as 5 million switch to fiber home, and Germany, France, Holland, Verizon and (new) the city of Seattle all are moving to upload speeds of 10 meg or more and downloads of 50 meg or more. Cable knows this, which is why Brian Roberts of Comcast tells me they’ll be rolling out 50 meg down, 15 meg up “pre-DOCSIS 3.0” in 2007 in selected markets. Meanwhile, Australia, Canada, and more than half of the U.S. are likely to spend the next decade with a second-rate Internet, 60% to 90% slower than leading countries. Anywhere people have a choice at a plausible price, they are buying faster speeds than the 6 meg down, 600K meg up of ADSL available since 1999, or even the 20 meg down, 1 meg up of the new generation. Wall Street is asking whether laggards like AT&T will be clobbered. (Answer: the only thing that might prevent a disaster is if cable also moves slowly. Two competitors often collude.) On the other hand, Japan is replacing ADSL with fiber, over 4 million already connected. So is Germany, France, Holland, Verizon and (news) the city of Seattle. The fix is set in D.C. for the House to pass a national video franchise for the telcos, probably on Friday. The main impact of the bill will be to reduce, not expand, the telco TV rollouts, but expect some uninformed reporters not to catch that. The telcos think they are dead if they don't have TV to challenge cables, and Verizon CEO Ivan Seidenberg has been consistently clear he will build whatever the regs. SBC's CTO told reporters the same thing. That makes any claim of "increased competition" simply stupidity, especially for the 10-20 million Americans the bill allows denying service to. The biggest payoff for the Bells is getting out of local requirements for near-universal service and consumer protection. Real Net Neutrality rules won't be included, although Verizon's Tom Tauke is looking for a "feel good" compromise that won't mean anything. Everyone except me in U.S. telecom is in Chicago for GLOBALCOMM, where the refrain will be “Why did those idiots at USTA split off from SUPERCOMM and weaken America’s best show?” Particularly since the USTA TelecomNext was a disaster. Reporters and analysts will be digging for clues on who’s ahead for Verizon’s $400M GPON order, how soon British Telecom and others will deploy WiFi/WiMax and run voice over them, and whether anyone can stop the stampede to Microsoft for TV. I’m staying back home, where Jennie’s video studio is taking shape and I’m finishing stories including: DSL drops 10% in Japan World’s first DSL cutdown as fiber jumps 130% The world’s first major decrease is DSL use has now occurred in Japan, according to a survey of the Ministry of Communications. Have no fear for the future of the 47M Japanese broadband users, however; the drop was caused by a shift of millions of users from DSL to fiber. MIC reports “the usage ratio of fiber-optic circuits grew from 6.1% to 14.8%, that of DSLs decreased from for the first time from 39.2% to 34.2%. The same trend was seen in companies and offices.” Korea has also shown minor drops, plateauing around 70% of households. Japan’s broadband coverage is about to pass 50% of homes, Yasamasa Goda of Merrill calculates. Goda notes that broadband expansion slowed significantly when penetration passed thirty percent, similar to the slowdown when mobile phones passed thirty. The mobile phone expansion slowed again (but continued substantial) at around 50%, which may be replicated by broadband. That could change, however, if the DSL providers losing share to fiber respond by dropping prices. The direct cost of offering DSL service (high volume, the phone line already in place) is $5-8 per month, so that Japan’s $20-35 DSL + VOIP prices could come down if necessary. Companies like Softbank/Yahoo BB are finally making a profit, so reluctant to move prices, but may have no choice. Goda notes "ADSL operators may start full-scale efforts to prevent defection." That will bring DSL prices down even more. Qwest for sale Notebaert in NY Times, Anschutz off board Dick Notebaert, Qwest CEO, is a very effective and careful public speaker. He knows exactly what he wants to say, and I read this interview with Ken Belson in the NY Times as an invitation to bid for the company. Belson: Might you be more of an acquisition target? Notebaert: If I looked at it as a consultant or an adviser, I would look at Qwest today and say most of the things that made me uncomfortable before are gone. Again, the government at every level we're O.K. The debt load's down, profitability's up. Everything's squared away and there's no threat of bankruptcy, which you might have thought about a few years ago. And the company has solid performance characteristics. And it's throwing off good cash. It's profitable. And it's got a wonderful group of employees. So I don't think we're unattractive. Phil Anschutz, who controls 16% of Qwest, resigned from the board three months ago and so did his aide, Cannon Harvey. Time would give Anschutz credible denial of inside information when he sells. His $1.5B sale while Chairman during the midst of the “$44B accounting fraud” created talk of an indictment, so he has to be very careful and resigning from the board would cya. Notebaert’s comment I take as confirmation. The logical buyer is Deutsche Telecom, which five years ago was ready to pay over $80B for the company. Because they have a mobile network in the U.S., there’s a natural synergy. AT&T and Verizon/MCI, on the other hand, duplicate Qwest backbone assets. Sprint is spinning off wireline assets, not adding to them. Qwest’s desperately low capital spending is the third reason I think Anschutz and Notebaert want out. Quest capex is 45% lower than depreciation, leaving the network increasingly obsolete and vulnerable to competition. That props up income in the short run, allowing the company to report the first (very modest) profit in several years, fully audited and conforming to GAAP as far as I know. I am very carefully saying “misleading”, not fraudulent, and I’m not suggesting any improper behavior. This DSL Prime story is not a report, like Simon Flannery’s a few years ago, hinting at illegal activity. That exposed a major scandal, and I have no reason to believe anything of the sort is going on. What I’m seeing is an investment cutback that legitimately creates earnings but leaves the company extremely vulnerable. A quick getaway makes sense. A more cynical way to look at it is Notebaert and Anschutz are smart enough to sell before cable VOIP, Seattle and Utah municipal networks, and wireless substitution clobber the company. One of Qwest’s major challenges is the greater capital resources and customer power of SBC/AT&T and Verizon/MCI. Not long ago, Qwest bid more than the company could afford to try to keep MCI away from Verizon. The nearly universal comment was Qwest was dead if they lost the bidding war. Few of those doubters have said anything about Qwest rising to new highs on the stock market. The effects on Qwest’s income of the backbone takeovers may not be so dire, however; AT&T and Verizon now control so much of the backbone and enterprise voice market they may be forming an effective cartel and driving up prices, a story I’m trying to understand. One enticement to buyers is Qwest’s apparent success in winning a large government subsidy through the so-called “universal service fund”, most of which is just an incumbent subsidy. D.C. insiders are already calling the new proposals the “Qwest welfare agreement,” based on currently leaking details. That money will be shoveled straight to investors, not used to improve the service or prices for rural service. This item is not based on either wall street rumor or an insider leak. I’m going solely on Notebaert’s comments and the analysis outlined above. I don’t think a deal is in sight very soon, and know things could easily change. The original title of this piece was “Qwest talking sale.” Reviewing the issues, I stuck my neck out and changed the title to “Qwest for sale.” I made a printout of this column in case I’m wrong. Unless Qwest drops to half the current price (making a bid unattractive to the owners), if it’s not sold in 12 months I’ll eat this column. Just as Bob Metcalfe did, I reserve the right to blend it with more wholesome ingredients. Vonage: IPO down, but $2B value still amazingly high Not the “worst” at all Because the Vonage IPO was ridiculously overpriced at $17, the WSJ called it “the worst IPO debut in nearly two years.” It dropped from $17 to $12, 23% in two days, disappointing Wall Street, and you could hear the howls from Wall Street to Estonia. This is nonsense: the company raised $500M and has a market cap of $2B, remarkable for an outfit with massive competition, operational problems, and likely to lose hundreds of millions this year alone. Jeff Citron didn’t have a “failed IPO”; instead, he did a remarkable job creating an image for the company. IPO lust and irrational exuberance from 2001 explains the price received, while common sense taking over explains why the stock fell soon after. I happen to use Vonage, and so received all the company IPO solicitations. The claims by buyers they were mislead have no basis. The information provided by Vonage make the risks and obstacles clear, as did dozens of respected commentators. While trivial breaches of the rules may prevent the “shareholder suits” from being immediately thrown out of court, the disclosure was clear. Anyone who did their homework or read the prospectus on the web knew this was a very high risk investment, and the valuation very high. Scoop Malik was blunt about the Vonage IPO: “Seldom have more doubts been raised about any company going public.” He’s not the only one who gave warning. The issues the company faces are very, very tough. PMC-Sierra jumps into DSL chips New VDSL2 AFE, ADSL2+ core logic Hamish Dobson sees DSL chips as a natural complement to PMC’s network processors, allowing them to design home gateways that work with ADSL, VDSL, and their newly acquired PON business, Passave. Dobson sees the high performance of their processors as a key competitive edge, noting that QOS, 802.11n wireless, full TR-069 compliance and other demands are stretching the computational power of most existing DSL designs. In addition, their release highlights “a 16-bit digitally controlled crystal oscillator (DCXO) that provides better than 0.02 ppm frequency resolution, and an optional 1.8V regulator that allows the PM4380 to be used in a system that only provides 3.3V and 5V.” Their ADSL2+ logic chip is licensed from Aware, suggesting it will be highly compatible with the Infineon chip and the ADI chip version sold by Ikanos. They also offer a companion ADSL2+ analog front end. In VDSL, they only announced the Analog Front End, which they believe will be compatible with a digital chip from what Dobson identifies only as a “tier one vendor.” Ikanos, Infineon, and Conexant are the three VDSL chip makers actively in customer tests, and all have their own AFE. So PMC is implying another VDSL digital and logic chip is soon to reach the market, although he suggested it might be logical to also assume that PMC-Sierra would have an offering. Aware is ready to license most of the design they would need. Linley Gwennap notes PMC is the first to use the high performance MIPS 34K CPU. "The CPU can be divided into two virtual processor elements (VPE) and thereby present itself to the OS as a two CPUs. ... Using these features, PMC can implement control-plane, data-plane, and voice processing simultaneously on the 34K CPU, eliminating the need for multiple CPU or DSP cores." They have only very limited test results to share and no customers to announce, suggesting volume shipment is not expected soon. Good to see another vendor jump in as Analog Devices, ST Micro, and LSI Logic seem to be backing away, and rumors swirl about others dropping away as the market switches to “VDSL“ variants, both high and low speed. Million reasons to believe Whitacre’s “We have 100% DSL coverage” Ciena/Catena million SLC upgrades, Telstra says it’s cheap Ed Whitacre, SBC CEO, startled everyone in 2004, when he answered my question about universal broadband, "We can reach all our customers. It only takes an hour to install." Although I knew that would startle even his own engineers, I reported him verbatim (and accurately) to make the point that the distance limits of DSL could be easily overcome. In fact, SBC virtually froze investment in broadband coverage in 2001 as part of reducing capex to 30% less than depreciation to goose the stock price. Dozens of smaller telcos in the U.S., including rural cooperatives, had already proven the technology works fine and the payback is reasonable. Ciena’s Malcolm Loro tells me they are closing in on a million units sold of their solution to the problem of the unserved, the Catena upgrade for existing SLC remote terminals. Six month sales increased over 35% to $47M in Ciena’s Broadband Access Group (the old Catena), and it was the most profitable segment of the company. There are millions of U.S. homes behind the old Lucent terminals that can easily and inexpensively serve with Ciena. Doug Campbell at Telstra told the Australian Financial Review it would cost Telstra a "nominal amount" to fit the Extel equipment to each phone line required. DSL Prime reported in 2004 that the equipment cost would be “under $100” if ordered in quantity by large telcos. Given a charge of $200-400 per year for each DSL line, even adding installation makes extenders affordable for nearly all those currently unserved. Kevin Martin can look Ed Whitacre in the face, say “heck, you said you can do this and make money.” That would cut in half the number unserved in a few months. Martin doesn’t want to hold up the AT&T-BellSouth merger, but the companies are even more reluctant to have any problem. Martin will probably never again have such a powerful bargaining chip. ECI, NEC assert their places France, Germany, Turkey, Hong Kong NEC quietly has shipped 10M ports of DSLAMs, with engineers at their Australian facility taking the lead. They now have won an order from Turk Telcom for 220K lines, following on 300K lines already shipped. Turk Telecom has discussed a million line IPTV build for several years, but the political climate and privatization have delayed the rollout. They’ve also supplied a million lines to Telstra, taking the supply contract away from Alcatel, and half a million lines to PCCW, the world’s largest telcoTV build. ECI is winning work from BT and DSLAMs for IPTV from <an unnamed major European carrier> that presumably is France Telecom. ECI jumped ahead of the industry three years ago, with one of the first non-blocking IP DSLAMs. Despite the political advantages of Siemens and Alcatel, ECI has maintained substantial market share in both DT and FT, especially as TV is becoming a crucial service offering. They’ve also added Niel Ransom, once Alcatel’s CTO, to their board. Board members are typically windowdressing, but Niel brings the experience of building Alcatel’s industry leading position and then pulling the company to fiber. He’s one of the world’s most respected broadband engineers. Briefs
Build your own phone record computer So cheap every country can do it A record of who called whom, when, and for how long fits easily in 30 bytes. Assuming 200M callers in the U.S. and ten calls a day, a year's file is 23 terabytes. Adding indexes and a duplicate for backup is still under 100 terabytes. Google has constructed the equivalent of dozens of these around the world. A picture of a six year old 18 terrabyte server fits in five racks http://terraserver.microsoft.com/About.aspx?n=AboutTech . A similar unit with 2006 technology would hold 100 terabytes. 20 racks could hold every call since 2001 and fit in a large, well air-conditioned room. More likely the actual unit cost much more, fitting a “mainframe” style that offers smoother operations and marginally faster operation. Because it is now so cheap and easy enough to store this information, expect many other countries to follow. If I were a cop, I’d love to have this info. OECD: Europe jumping ahead Netherlands, Denmark, Iceland in near dead heat with Korea Korea a year ago hit a plateau at about 70% broadband, allowing Taiwan and the fast growing networks in Europe to catch up. These five countries are at about 25 broadband lines per 100 inhabitants. Growth in Europe remains strong. Tim Johnson and team at Point-Topic first reported the trend, and the OECD data confirms it. www.oecd.org/sti/ict/broadband has the data, including the breakdown between DSL and cable. Only in the U.S. and Canada is cable ahead; nearly two thirds of world broadband connections are DSL. The OECD notes “Korea’s broadband market is advancing to the next stage of development where existing subscribers switch platforms for increased bandwidth. In Korea, fiber-based broadband connections grew 52.4% during 2005. This switchover effect is evident by the net loss of DSL (-3.3%) and cable (-1.7%) subscribers during the year.” Fiber is also the trend in Japan, with 4.6 million fiber subscribers at the end of 2005. Iceland Korea Netherlands Denmark Switzerland Finland Norway Canada Sweden Belgium Japan U.S. UK France Luxembourg Austria Australia Germany Italy Spain Portugal New Zealand Ireland Czech Hungary Slovak Poland Mexico Turkey Greece http://www.oecd.org/document/39/0,2340,en_2649_201185_36459431_1_1_1_1,00.html Next issue, I’ll add selected data from countries not covered by the OECD, including China, Brazil, and Taiwan. I’ll rely on Point-Topic, the best data source I know for broadband. Visiting www.point-topic.com, I discovered they will soon release a Global Broadband Statistics database covering 250 operators around the world. As that goes into beta, they are bundling it with their Operator Source service at an interesting discount. Point-Topic prices their commercial services attractively (from $1250), and makes some of the most important information available free. U.S. Q1 The trend continues. Cable is holding prices above $40, resulting in slower growth but still 20%+ per year. DSL prices are more likely in the $30, with limited offerings, especially Verizon, under $20 and winning customers from dialup. DSL growth in customer count is higher. Cable seems happy to be extremely profitable instead. AT&T Verizon BellSouth Qwest Sprint Covad ALLTEL Century Tel Cincinnati Bell Top 10 DSL Comcast Time Warner Charter Adelphia Cablevision Insight |