DSL Prime News Briefs

DSL industry news from North America and around the world.

by Dave Burstein of DSL Prime and Future of TV [February 18, 2005]

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• "Do you have any projections from 2002 about residential DSL customers?" L. asked. I pointed him to Danny Briere, Matt Davis, and Tim Johnson, analysts I respect, but would welcome others who can share some data.
  
  
• R. notes Alcatel's quarter faced another problem, "the transition to ADSL2plus. Notably, ADTRAN had a similar shortfall and only sells in the US. I believe that carriers wanted to flush current ADSL inventories in the quarter before transitioning to 2plus," adding "2plus has its well publicized challenges in increasing bandwidth, but, more importantly, it does offer a significant number of operational advantages that the RBOCs want very badly." Makes sense carriers have been minimizing DSLAM purchases until they are ready to move to ADSL2+.
  
  
• Ken Hood writes 'Nice work on the angle of understanding the losses inherent with pursuing a pure price driven market share strategy. China is the Holy Grail for volume for mass applications, but ADSL profits can be elusive even for Chinese companies who buy the same chips as everyone else. I think it is an astute observation that Chinese companies are expanding abroad not only because of growth, but because the domestic Chinese market offers minimal profit in the mass applications due to very intense competition. You also have to factor in the generous lending, which is effectively a subsidy. We know from history that subsidies create unsustainable economic behavior and making money eventually becomes the imperative. Market Research firms all seem to track DSL market share by ports shipped, and dollar value, neither of which give an indication of give an indication of sustainability unless you have a dominant position like Alcatel. Some will fight for more share, and others will pursue a differentiation strategy, which seems saner unless you've set up with cost as your main advantage. The Chinese vendors have been doing a great job gaining share in select markets, but we are now seeing them change tactics, and in regions where they have achieved penetration we are now seeing them take steps to try to move away from the pure price/financing strategy as they start to try to make money. '"
  
  
• Another datapoint from China is Nancy Dang's estimate only 15 million families have salaries greater than $10,000 U.S., or fewer than the number of DSL lines installed. Below that income level, even the $16/month Chinese service is a big hit on the budget.

Briefs

• Alcatel will support bonding on their DSLAMs. This is a very short brief, because although the announcement of their BellSouth contract mentioned bonding, no further details were available when I asked the company. Heck—this isn't a big secret; EE Times already reported Alcatel's chip vendor, Broadcom, was sampling a bonded version.
  
  
• Redback's contract win at Chunghwa deserves more than a brief, because that's an endorsement from a major operator that Redback can manage a million user IP TV network. I'll try to get back to this story, which was reinforced with the BellSouth win as well. I note Steve Kamman at CIBC just raised his rating based on these wins.
  
  
• Arris renegotiated their contract with Cox to bring down the price of cable telephony gear dramatically, noted Steve Kamman, to prevent Cox from moving to pure VoIP rather than the Arris circuit-switched equipment. The lower cost of voice over cable gear is fueling an aggressive expansion.
  
  
• If SBC, as Campbell reports, goes for a multiset set top, the only two demonstrated products are Entone and Motorola/Next Level. Both cost, in any openly discussed bids, more than the $250/home that SBC is projecting as the complete cost of the FTTN system. As reported in FutureofTV.net, lower set top costs are more likely 2007 than 2005, although vendors have often bid below cost for this kind of $200 million contract. Scientific Atlanta, Amino, and others presumably have units in advanced design as well.
  
  
• Press Jason Meyers of Telephony laments "how the spate of mega-carrier mergers could threaten innovation and slow the adoption of new technologies: It appears to be happening already. As it prepares to merge with Sprint, Nextel reportedly is ending its trial of Flarion's Flash-OFDM broadband wireless technology. ... none of this can be good news for the acceptance and integration of new technologies--at least in the short-term." Everything I've learned covering telecom suggests the best way to move the industry forward is with strong competition, which means the mergers that cut U.S. wireless carriers from 6 to 4 should never have been allowed, and the coming demise of AT&T and MCI, both already half-dead, will compound the problem. Pip Coburn has an explanation of this the business schools will soon glom on to, that mega-corporations only move forward when they have enough pressure to overcome the "total perceived pain of adoption" of something new. Ideally, that pressure is strong competition (such as Free.fr in Paris and Yahoo BB in Tokyo); when competition is weak, you need an active government agent, currently out of style. Catch Coburn in the final panel at Fast Net; he's not as visible as a Jim Cramer, George Gilder or Henry Blodgett, but he's the one to follow.
  
  
• The Wall Street Journal adds, "The three most recent carrier deals, as well as a potential acquisition of MCI Inc., will shave equipment spending in the U.S. by $850 million next year, and $600 million the year after," from Steve Levy at Lehman.
  
  
• Recently "By KEN BELSON and MATT RICHTEL" or "By ANDREW ROSS SORKIN and KEN BELSON" have become significant bylines, indicating the Times is catching up to the WSJ in effectively reporting as a team. One of the great strengths is the Journal is almost a dozen reporters in telecom and related fields who actively and effectively work with each other. The Times doesn't have that concentration, but since Belson came from Japan he has been in the middle of some crucial collaborative reporting. They noted Dorman's intent "I've offered my services as long as [SBC] want me to be there." Externally, Dorman, who has good relations with wall street and the press, is a much stronger candidate to succeed Whitacre than heir-apparent Randall Stephenson, although that may make little difference to the tightly controlled SBC board. With Sorkin, Belson matched the WSJ in breaking the first stories on the SBC-AT&T deal. For the record, Ken is Jennie Bourne's very gracious neighbor.
  
  
• The scoop on the signed SBC AT&T deal goes to Sanford Nowlin of the San Antonio Express, SBC hometown paper. He spent Sunday at the paper, waiting for the final confirmation on a deal he was confident he had the story about. Bill Day writes, "the official word came around 12:30 early Monday morning—at which time the paper was already on the press. But we were able to 'fly' a copy of the story onto the front page, so that San Antonio subscribers got the news in their Monday paper: SBC had signed a deal to buy AT&T for $16 billion. The Express-News was the only paper to have that on Monday, and it's due to Sanford's hard work and meticulous sourcing."

People

• Chris Stern has moved from the Washington Post telecom beat to covering media and telecom for Global Medley, joining Jessica Zufulo. He writes "I loved working at the Post but after covering entrepreneurs for ten years I found myself aching to see what life was like outside. So when Medley came along, I struggled but decided in the end to take a risk and jump into something brand new." Zufulo and Stern are among the best informed in D.C., and with Blair Levin's Legg Mason team should be an investor's first calls in D.C.
  
  
• Connie Hughes of New Jersey, Larry Landis of Indiana, and Paul Alfonso of Massachusetts have joined the Federal-State Joint Conference on Advanced Services. I'll be asking them all for interviews soon about how to achieve universal service.
  
  
• For the DSL Prime Fast Net code and the job ads, visit the DSL Prime website.

Wall Street

• Campbell makes a key point, which I also recently heard from Richard Siderman of Standard and Poor's, that cable VoIP will be generally available, and producing revenues, years before telco TV.

Copyright 2005 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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