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DSL Prime July 5
African Fiber & The Pirates!
Qatar Cuts Prices 30-50%
France Telecom: ?Ready To Abandon Landline Nets
http://bit.ly/mmMMT Schneider's Conclusions: WiMAX Chokes Soon, DOCSIS 160/40 in Trouble by 2015
http://bit.ly/PavUW Level 2 At Last: Alcatel's Green DSL
http://bit.ly/a24IB
Benoit: Fiber Costs $1,000/home, Needs 30+% Takeup For Payback http://bit.ly/F822M Briefs: Verizon wireless, CenturyLink, MTS/Sistema in India, Michael Jackson too big for Google, Twitter, Telecom Italia, Matthew Lasar, Henry Blodgett, Alcatel saying goodbye to switches, Hodulik sees lower wireless growth, work in progress.
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“NOFA will be published the afternoon of July 1st, 2009” That's the kickoff for the mad scramble for $7.2B in the U.S. stimulus. A special issue on Tuesday will explain how $7.2B can bring megabits to 98-99% of the U.S. and 50 megabits to over 80%, and the enemies of that result.
Didier Lombard of France Telecom is threatening cancelling the fiber build, essentially accepting that the landline business will slowly die. Hemay be playing a deep game, picking fights with the regulator as a cover for slowly getting out of the landline business. More likely, he's suffering from the American disease: feigning suicide to persuade the regulator to given him what he demands. ARCEP so far is resisting his threats.
Mr. Kevin Schneider went to DC to let them know major increases in DSL speed are really cheap (DSM,) doubling is inexpensive (bonding, < $100,) and further increases, beyond 300 meg on 2 pair (short distance, fully vectored DSM) are likely in the next few years. The ADTRAN CTO and everyone on the technical side has expected this since John Cioffi's FNF speech in 2005, and now ADTRAN, AT&T, Verizon and others are delivering the improved performance in the field.
Wish I could go to the NARUC meeting in Seattle, because I'm finding story after story of state regulators are being approached for stimulus money. I will go to Paris in September for IEC's always excellent Broadband World Forum, and hope to visit people before and after. See you there.
*** Zhone Announces the MXK Terabit-Scale MSAP for Next Class of FTTx Services
Clean-Sheet Architecture Sets New Industry Benchmarks for Non-Blocking Bandwidth, Service Intelligence, and Intuitive Management. The most advanced end-to-end FTTx solution available today. http://bit.ly/WwDTd (ad)
Pirates!
Brian Herlihy at SEACOM has been very publicly counting down to a June 27 launch of the East African fiber, including a press release just a few weeks ago. He found a world-class excuse for a last minute delay: pirates held things up. They've now laid the cable and are splicing the connections. SEACOM, TEAMS, and EASSY are fighting for first mover advantage in reaching the last great uncovered coast in the world. The Internet is growing in South Africa, cable laying costs are down, and World Bank etc. offered financing. The key mover is the amazing growth in mobile phones across the continent, with a majority of adults in much of Africa now carrying a mobile. That created enough demand that private money provided most of the capital. Herlihy's SEACOM connects to both France and India, and he promises “affordable, high quality and plentiful bandwidth throughout eastern and southern Africa.“
Satellite bandwidth in Africa can cost 100 times as much as similar bandwidth purchased in London or New York, so local operators have no choice but to severely cap bandwidth. Uganda, Rwanda and other inland nations are running fiber to the landing points as well.
*** ASSIA. The single best way to reduce operating costs benefit and truck rolls. Reliability and performance for happier customers, lower churn, fewer trouble tickets. http://bit.ly/TWmE4 (ad)
Qatar Cuts Prices 30-50%
The one meg service is now $27, half the previous cost, and two megs are $55. New four meg and eight meg tiers are over $100. Broadband prices in the Gulf are a function of competition. Good fiber connectivity means the provider's cost of the service is comparable to small European countries.
QTEL has just passed 2M mobile customers in a country with a reported population of only 1.65M people. The real population is probably higher, with many immigrants not counted. They control Indosat, just got a fixed license in Oman, and are part of the likely winning bidder in Ireland. They just placed $1.5B in bonds at 450 points over LIBOR, a price that suggests investors fear they are over-leveraged.
The previous prices were only sustainable because people had little choice. With 3G and WiMAX coming to the Gulf, Qtel is coming closer to ordinary prices. Vodafone Qatar launched in May, after paying over $2B for the second mobile license. There's still a way to go, but this may be one of the first times we're seeing wireless substitution having a major impact on DSL.
*** ASSIA benefit #1 Increase rate and range on the order of 20-30+%. http://bit.ly/TWmE4 (ad)
Schneider's Conclusions: WiMAX Chokes Soon, DOCSIS 160/40 in Trouble by 2015
Mr. Kevin Schneider went to DC to let them know major increases in DSL speed are really cheap (DSM,) doubling is inexpensive (bonding, < $100,) and further increases, beyond 300 meg on 2 pair (short distance, fully vectored DSM) are likely in the next few years. He also took sensible projections of demand for bandwidth in 4-8 years and translated that into what each home would need. From that data, Schneider believes download averages will range from 50 kilobits/second/home in 2007 to 150K in 2012.
Working from there, he concludes WiMAX/LTE won't work as a primary home network in a few years because it's shared. If many families want video over the net, wireless will choke. The current cable deployments of 155/27 shared will also have problems by 2015 or so because of video demand, but I think cable will upgrade well before that in most places. The Adtran papers and presentation are the best description of today's DSL networks for a technical reader. http://bit.ly/PavUW
The exaflood fears have proven to be garbage so far, with typical speeds rising and congestion becoming less common. That shouldn't be surprising: the sources were almost all paid by the Bells, and they ignored the Moore's Law improvements in network costs. Growth in bandwidth required per user is flat to down, but the 30-35% growth rates typical will eventually clog any network without easy upgrades. From the DSLAM or CMTS back, problems should be rare, because the routers can be replaced with far more powerful ones for about the cost of depreciation. DSL is not shared in the local loop, so the limit is the capacity of the copper to each home. Wireless and cable are shared, and he sees problems ahead.
As we go further out, everything becomes less certain. In particular, the costs of streaming quality TV have dropped so low you can support a network on advertising in the near future. There's a potential for a step function if many people choose to get all their TV from the web soon, as Henry Blodget predicts. I'm skeptical, thinking most people will not turn off their satellite or cable video programming.
More, including details on Schneider's demand predictions for cable and wireless. http://bit.ly/PavUW
*** ASSIA benefit #2 Potential power saving in the range of 10-30+%. (ad)
France Telecom: ?Ready To Abandon Landline Nets
If FT doesn't move to fiber while Iliad/Free does, over 10-15 years they will fall far behind. FT probably is just trying to intimidate the regulator, because ARCEP decided to require multiple fibers in the most densely populated areas in France. But perhaps he's not bluffing, copying AT&T's strategy to do only minimum updates for their landlines. AT&T could have built something like FiOS, but Randall's ego doesn't need a wireline network. He'd rather have the $15-25B cashflow, even knowing that cable will be far faster and pull ahead.
FT claimed running the spare fibre inside connected buildings would raise costs 40%. Jean-Ludovic Silicani of ARCEP knows it's closer to 5%:
“Installing multiple fibers adds about 5%, which the competitor pays. These are facilities that will serve for the next fifty years. It would be totally unreasonable to eliminate freedom of choice for such a low cost difference. ARCEP supports the public interest, not the interests of a single operator.” (Edited Google translation from Les Echoes in French http://bit.ly/p8lb9 in Google translation http://bit.ly/F4pFb )
Benoit Felten of Yankee Group is also skeptical, pointing FT's cost of fiber in the building will be substantially less with the sharing because the other company (Free.fr, SFR/Cegetal) has to pay half the cost. He raises the possibility “that FT might have decided that they would pull out of the wired infrastructure business altogether,” which he dismisses. The well-informed Felton in Paris is likely correct.
On the other hand, Lombard could be completely serious, just as Randall Stephenson has decided to let AT&T's landline business slowly die rather than continue investing at a normal pace. “We are a wireless company” was Randall's first major public statement,
He decided to cut landline capex in half five years ago and he cut the U-Verse DSL upgrades by a third this year. Without fiber home, AT&T will have lost 45-70% of landline customers by 2016. The copper's highest value will be for femtocells, effectively doubling his wireless bandwidth, a deployment exciting the DSL industry. It's cold-blooded to let the old telco business go (and 50,000 jobs) but that's how Randall sees the numbers. Most of us think he's making a mistake, but the result is uncertain.
Lombard just won a license in Tunisia, and has investments in Egypt, Botswana, Cameroon, Ivory Coast, Equatorial Guinea, Madagascar, Mali, and Senegal. They are considering Vietnam and perhaps India. With the fourth mobile license soon coming in France, their margins will go down and investment probably up.
Except for Saul Hansell and some on Wall Street, few people realize that big wireless companies like AT&T and possibly FT are putting copper into “harvest mode.” The companies never speak of it directly, but it can be inferred from their investment choices. Silicani and Felton are probably right that FT has no such intention, but ARCEP will have to watch carefully to make sure FT doesn't let network quality drop.
http://bit.ly/mmMMT
*** Zhone's New MXK Intelligent Terabit Access Platform Gains USDA Rural Utilities Service Acceptance for FTTx Services. Zhone stands behind applicants for the broadband stimulus. http://bit.ly/TOHZ3 (ad)
Level 2 At Last: Alcatel's Green DSL
Level 2 low power mode has been in the standard for years, but rarely used. Switching modes caused enough noise that other lines in the binder would reset, and the customer would be disconnected. The modems would automatically re-sync, but meanwhile an angry IPTV viewer may have missed a goal in an important football game.
Alcatel's solution is "artificial noise" for ADSL and "virtual noise" for VDSL2 service, which causes the modem to sync at lower power and lower speeds. Some IPTV operators are willing to sacrifice performance for stability. The noise at startup provides more margin to the connection, so it's less likely to drop due to interference. Their early trials resulted in a large drop in calls to help centers, according to data I believe was from Telecom Italia. This appears to be standard in their forthcoming VDSL line cards.
I've asked Alcatel for the data on how much speed needs to be sacrificed for this extra reliability. The data I saw more than a year ago involved a 10-25% drop in speed on some lines. Their spokesman believe that's changed, and I'll update this when I get the data. The respected Fraunhofer ESK finds the speed loss may be as little as 1% under certain lab condition. I'm getting follow-up detail from them as well.
Alcatel claims energy savings of "up to 25%" compared to earlier models, good for the planet and reducing OPEX by 2-3%. The stability and avoided truck rolls probably yield further cost savings. I know the technology works, and I'd guess that Alcatel's 25% claim is possible. I believe “up to claims” are generally inappropriate. I've no way to compare Alcatel against DSLAMs from other manufacturers, many of whom also claim power savings. In the field, the results will vary significantly depending on the system.
(Alcatel's main competitor, ASSIA, is an advertiser as you can see. Since I both sell the ads and write the stories, I've no way to separate the two aspects of the publication. Readers will have to judge whether I'm succeeding in being close to the truth.) http://bit.ly/a24IB
*** Zhone supports carriers around the world http://bit.ly/661Ei (ad)
Benoit: Fiber Costs $1,000/home, Needs 30+% Takeup For Payback
Benoit Felten has emerged as the most interesting fiber analyst in Europe. His new Yankee Group report suggests takeup, not price, is the key to reaching breakeven on fiber. Since rapid takeup is important, Felten thinks “open access” is a good policy for fiber providers, bringing in more customers.
“Increasing takeup seems to have a much more dramatic effect on reducing payback than increasing ARPU. Getting payback from an FTTH deployment in less than five years is virtually impossible without at least 30 percent initial takeup.” He adds, “Five years seems to be the absolute longest amount of time that telco shareholders are willing to invest.”
The pride of Ivan Seidenberg and Xavier Niel has created important exceptions, but otherwise most Western fiber builds have government or electric utility support. They can wait longer for returns.
Felten believes “No matter what the ARPU level is, most reasonably successful FTTH deployments (in the 35 percent to 40 percent takeup range) should expect payback within 10 years.” A smart country will find a way. http://bit.ly/F822M
*** ASSIA benefit #3 Vendor neutral. Works with all major DSLAM manufacturers. http://bit.ly/TWmE4(ad)
A good analyst writes, “I think you’re a little too critical of VZW not hitting their new network build targets in the past, though. I can’t think of a major deadline they’ve missedthe only wireless (national) carrier I would say that about. I don’t doubt their LTE build yetalthough many are skeptical, perhaps rightfully so.” I haven't followed wireless closely and don't know.
On CenturyLink, one of the top Wall Street analysts writes, “I doubt they will be interested in raising cap ex a nickel even.”
Briefs
MTS/Sistema has drastically cut their deployment of broadband in Russia, but seems to have no difficulty spending money in India. Telecom Tiger reports they have committed $180M to mobile in Bihar alone.
Michael Jackson's death caused AOL Instant Messenger to go down for 40 minutes, twitter's traffic to double and even Google ““experienced difficulty accessing search results for queries related to Michael Jackson,” Brian Selter reports. In case you think the Internet is for education http://bit.ly/6TmT1
If you want a guide to Twitter and social networking, try Mashable http://bit.ly/spfFE
Press
“Telecom Italia May Consider Selling Stake In Argentina -CEO” an unfortunate headline from Dow Jones.
Matthew Lasar at Ars Technica continues to embarrass the FCC reporters by doing a better job 3,000 miles away. In Meet the Genachowskis characterizes the announced staff as “an interesting hodgepodge of reformers and new media types.” He backs that up the details including the books written by Chief of Staff Ed Lazarus. Black Hills/White Justice: The Sioux Nation Versus the United States, 1775 to the present is a tale of injustice, enhanced by what Ed learned from his father, long time advocate for the tribe.
Henry Blodget, once Merrill Lynch's top Internet analyst, is very strong in his opinions at the Silicon Alley Insider. “The traditional TV industry -- cable companies, networks, and broadcasters -- is where the newspaper industry was about five years ago: In denial. ... As with print-based media, Internet-based distribution generates only a tiny fraction of the revenue and profit that today's incumbent cable, broadcast, and satellite distribution models do. As Internet-based distribution gains steam, therefore, most TV industry incumbents will no longer be able to support their existing cost structures.” Worth a read at http://bit.ly/KPnT9 He's absolutely right on the cost structures, with Anthony Crupi say advertisers expect network ad rates to come down 7-9%. My guess is the move to over the top TV will be fairly slow. Hulu etc. are showing in the traffic numbers, but not nearly that dramatically. It's well under 5% of traffic on most networks, far behind YouTube.
Telecom Asia reports the former heart of Alcatel's business traditional and NGN switches is for sale. “It is a global decision and the entire R&D of fixed-line products of Alcatel-Lucent will be sold,” they report from a Chinese source. This is primarily a maintenance business today, as many carriers are keeping the old gear running.
People
Kevin Schneider of ADTRAN does have a PhD that allows him to be Dr. Kevin. The “Mr. Kevin” up top is a reference to the classic movie, Mr. Smith Goes to Washington.
Wall Street
John Hodulik is seeing much lower U.S. wireless growth, especially in postpaid. He concludes “ARPU is key to maintaining wireless growth. Wireless service revenues grew 4.7% annually, down from 5.2% in 4Q, driven by roughly 2% annual decline in non-data revenues and 32% annual growth in data revenues. Data now represents 26% of total revenues, with Verizon leading the group at 28%. Blended ARPU fell 2.0% annually in 1Q09, slightly worse than the 0.9% decline in 4Q. MOU continued to fall for the third straight quarter to 832/mo.” Last I looked, most of U.S. “data” revenue was still SMS, as high prices hold back mobile broadband except the iPhone.
*** TWO FREE Summer Reading Broadband eBook Downloads. Did AT&T, Verizon and Qwest charge over $300 billion for fiber optic networks that weren’t deployed? Did the FCC rewrite broadband history for political reasons? Should America’s national broadband plan be – Get the money back and Divestiture II? http://www.newnetworks.com/broadbandcommentsrelease.htm (ad)
Some work in progress:
Headline After Headline: Broadband Leaders Have Slower Growth http://bit.ly/F2jb1
How to Create More Spectrum http://bit.ly/7Gwwj
End of Spectrum Scarcity? http://bit.ly/11igpL
The Buck Stops Here, Mr. Chairman http://bit.ly/1BTtyv
Broadband Earmarks. Why? http://bit.ly/TgO9E
Failures of Structural Separation http://bit.ly/vYlHR
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Copyright 2009 Dave Burstein Volume 10, #13 Issue date 07/05/09
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