DSL Prime: The Bells' Big Plans

DSL Prime says that in the near term, SBC will maintain its lead over Verizon, but after 2007, Fios could win the race for Verizon. Of course, it's not really competition if the Bells leave each other's landlines alone, whether or not the antitrust laws are violated.

by Dave Burstein of DSL Prime and Future of TV [June 29, 2005]

Verizon Fiber in Queens, TV details leaked
Too much demand is a good problem
Checking one last point on the ever invaluable DSL Reports, I found confirmed sightings of Fios installers inside New York City. Douglaston, a suburban-like neighborhood near Nassau County, isn't the same as my Manhattan apartment, but perhaps there's hope for me.

Another poster believes Fios TV will begin customer tests in parts of Nassau county on Sept. 1st. "The service will offer 300 channels with 18 sports channels, 3X the number of HD channels that Cablevision currently offers, 1,800 on-demand programs and all of the standard local channels." That corresponds to the hints from Terry Denson on a panel at Columbia with me as well as other Verizon comments in the press. The DVR can record multiple programs simultaneously, easily done over the third wavelength. That's an impressive result in less than a year's development, with advantages and disadvantages compared to cable.

In the next LINK Future of TV.net article, I'll be reporting the technology of Verizon Fios in 2005 outclasses today's best cable, because recovering the analog bandwidth doubles the number of channels it can carry. Few cable nets will match that before 2009. By 2007, Verizon plans GPON (4 times the speed) and switched digital, giving them a technically superior system into the next decade. Cable is making plans to match—a friend at the San Antonio cable show reports 100 meg cable systems in test deployments.

Correction: That's GoDigital extending Verizon
Dennis Payton corrected a comment last issue about Verizon's technology for reaching customers far from the DSLAM. In fact Verizon has publicly noted, and I've previously reported, a deployment of GoDigital, especially in the former GTE territories. Payton writes "Things are moving very well for GoDigital and we are over 170 IOC customers using the XCel-4a ADSL Extension product to provide ADSL Everywhere in their networks for coverage beyond 18,000 ft."

Ed Whitacre, CEO of SBC, gave an endorsement to extension gear not long ago. He told me SBC can serve everyone that way, when I asked about his pledge to Bill Kennard for 100 percent broadband coverage.

SBC/AT&T: Denver, Atlanta, New York?
Do-everything box for offices around the country
It's impossible to predict whether SBC, incorporating AT&T, will significantly compete against Verizon and SBC, but Anton Wahlman of Needham reports SBC is buying Entrisphere's "do-everything" box in preparation to do just that. I reported in February "The combined reputations [of Mark Floyd, Phil Winterbottom, and Ken Thompson] gave them entree to every major bid in the U.S.," but it remains a remarkable achievement for a company Entrisphere's size to win a major Bell contract. Technical staff cutbacks at the Bells virtually force them to choose partners large enough to reassure management the job will get delivered. (It doesn't always work that way, as SBC is discovering with Microsoft and Lightspeed.)

Entrisphere's BLM is a heck of an IP switch, a DSLAM that also supports fiber, and a DLC for both VoIP and TDM phone calls. They don't call it a "central office in a box," but offer most of the necessary features, including GigE or SONET connections and a non-blocking backplane. Drop one of these in a Covad or AT&T colo cage, connect fiber, and there's little you can't do.

SBC is already serving large businesses around the country, and bought AT&T to do more of same. I've previously reported SBC buying dark fiber in many metros. The key question is whether they will also compete for consumers. The likely consumer offering would center on the 2Wire/SBC 250 gig super home gateway combined with satellite. That service isn't the same as the more publicized Lightspeed, but surprisingly attractive. Writing it up for Future of tv.net as "Separate, Not Equal, But Pretty Good—Satellite + DSL for video."

The Entrisphere can serve as a DSLAM, so SBC does not need to include Covad as part of the service. Wahlman believes SBC will choose to give them a central role, partly to take advantage of a $100 million plus prepayment AT&T made to Covad on very favorable terms. Both SBC and AT&T work with Covad already, and Covad has facilities already in place that are being upgraded to ADSL2+.

The great unspoken agreement in U.S. telecom, I believe, is that the Bells will leave each other's landlines alone, whether or not the antitrust laws are violated. Six years ago, SBC and Verizon agreed to vigorously compete across the country as part of the Ameritech and GTE mergers, but never followed through. The key event was Verizon's killing the NorthPoint deal for nationwide coverage, followed by SBC's 30 city build being dramatically de-emphasized in early 2001 and most of the staff fired. The CLECs were all going broke, and SBC took advantage to raise DSL prices, followed by the rest of the industry and the cablecos.

SBC is presumably making these nationwide plans to present to Washington to get the AT&T merger approved; few will be surprised if they only make token gestures, however. It's not impossible the future could see the giants compete, as they do in wireless. A piece I'm working on is how the FCC could stimulate wireline competition after the dismal record of the last few years. The most important step would be to dramatically lower UNE-L prices and related colo and access, which would improve SBC's prospects out of district alongside the opportunities for CLECs. France and Japan have proven wireline competition is possible.

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

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