DSL Prime: Cheaper Equipment

Cheaper equipment means that telcos around the world can deliver faster and cheaper and more varied services to subscribers, as shown in North Carolina, Italy, and the UK—but that's no guarantee that they will do so.

by Dave Burstein DSL Prime [May 22, 2003]

"Modems are dead" revisited
Price, not technology, suggests including a full gateway
Chip merchants and modem makers filled my inbox with comments, some flaming. The point of the story holds up after reviewing their (mostly off the record) comments. "Router/home gateways at the price of a simple modem" is based on what TI told me about price, not technology. No one other than the chipmaker cares whether it is one die or two. A single die would seem to be cheaper to produce, but separating the analog and digital components and optimizing process technology has advocates as well. Some excerpts:

• "Maybe we can take the gateway out of our customer offering, and just provide everyone a router. Allows upgrades to value-added services, reduces handling costs, beats cable. Heck, if it's about the same price, why not." That telco comment makes sense to me.
  
  
• "External AFE gives us the same performance and cost, with more flexibility. We could do the same integration, but that makes it harder to respond to particular needs. We are able to optimize our product for a current 500,000 USB tender in a way a monolithic design couldn't." Patrick Kusior
  
  
• "At the end of the discussion, what is key is that the end market price for the modems will drive the cost vectors on the chips, whether single package, multi package, monolithic, or multi chip module"
  
  
• "If I could only tell you about our announced product, you'd see we're ahead." Hint to the CEO: maybe start announcing things, since your competitors already know. The modem makers tell them.
  
  
• "We're more advanced than TI because our line driver is not included in our single chip. It's cheaper actually to keep the analog and digital components on separate dies. Some people even package them together in a MCM, which is really just as good as a 'true' single chip." Maybe—the proof will be in the pricing.

Related interesting idea: 802.11 upgrades add $8-12 to the BOM cost of a modem/router, and I'd think including them is a no-brainer. VOIP is a similar $10 BOM, and tempting for any CLEC (or telco considering second line voice).

Telecom Italia: ADSL Alice pays up front
250,000 added Q1
30 foot tall Alice Ricaricabile (Pay-as-you-go Alice) solicits ADSL customers from billboards across Italy, as Telecom Italia (TI) seeks to convert 85 percent of Internet users to ADSL. Alice Ricaricabile's newest proposition is 50 euros prepaid for 25 hours over three months. Result: a fixed price, as well as a small saving for users consistently between 5 and 10 hours per month. TI has some of the lowest rates in Italy for light users at 14.95 euros a month plus €0.90 per hour, with competitively priced unlimited service as well. DSL is expanding so rapidly it lead to an increase in wireline revenue. Competition is also inspiring TI to move quickly, including to video on demand. e.Biscom's Fastweb is now at 290,000 subs, many over fiber and other 4 Mbps ADSL downloads. eBiscom has the Milan power company and national broadcaster RAI as partners.

Towards universal service: Britain, Italy, and South Carolina
Cheap baby DSLAMs, plummeting equipment prices, smooth operations
BellSouth has installed DSLAMs in every CO in North Carolina, and now is doing the same in South Carolina. Jeff White tells me they now have upgraded 11,000 of the 40,000 remote sites as well, typically using overlay DSLAMs inside the cabinet or attached. Alcatel offers them a convenient 144 port unit, and they now are also have economical equipment for 24-100 port deployments. They use a propensity to buy model to target new builds, with high demand pockets getting priority. White is encouraged by the early results of their Navini fixed wireless trials in Florida, which may prove the right technology for rural areas without fiber penetration. They've just bid $65 million for MCI wireless spectrum.

Italy has wired 78 percent of the nation (2,100 exchanges), CommsDay reports. Telecom Italia has traditionally insisted on the lowest prices in Europe for equipment, including probably the first modem deal under 30 euros. I don't know how low Hermann Rodler of Siemens had to bid to win a hotly contested tender for 500 exchanges worth of DSLAMs. but I'd be surprised if the price were much above the 70 euros a port typical in large Asian tenders. (Siemens recently sold 100,000 ports in China.) Telecom Italia's official projection is to go from 1.4M DSL up to 1.9M the end of 2003 and 3.5M following. Telecom Italia's domestic wireline unit posted a 1.4 percent revenue increase to 4.23 billion euros after several years of decline, thanks to the rapid development of broadband services.

BT announced they have plans to cover more than 90 percent of homes in Britain. That's a profitable deployment with today's costs, and even more so in two years. But few companies like to turn down money, and BT is being tempted to wait for government subsidies either direct or in the form of induced demand.

Copyright 2003 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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