DSL Prime: The Market

The chip market is closed up in the U.S., with no competitor to Alcatel crossing the 10 percent market share threshhold. Also in the U.S., the telcos continue to win "price freezes" that deliver record profits in an industry with steadily declining costs.

by Dave Burstein of DSL Prime and Future of TV [July 3, 2006]

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 percent 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.

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 4.9 million 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 $8 million 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 $7 million 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 percent 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 percent 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.

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 fee

Briefs

• Google gets the press coverage for cooperation with China on censorship, because they at least have the decency to care. But Cisco is far more deeply involved, and has no shame. Michael Cai notes "China has the Great Firewall that can cut off the access to the servers and groups of IP addresses. China's firewall is very advanced. … The government is using advanced American technologies, predominantly from Cisco systems."
  
  
• August isn't the traditional time for conferences, but Victor Harwood at Digital Hollywood has done an excellent job putting together Building Blocks, in San Jose August 15 to 17. Many of the huge group of speakers I know to be excellent, and he's invited several folks in the video space I'd like to meet.
  
  
• Jeff Pulver's VON and Video on the Net in Boston will be September 12-14. Jeff always looks for interesting folk you wouldn't expect to meet at a conference, and has Bram Cohen of Bittorrent doing a perspective. For the record, my consulting gig at Pulver is done, although Jennie works there.
  
  
• The Broadband World Forum Vancouver is also September 11-14 and features telco CTOs Mark Wegleitner and Ibrahim Gideon.
  
  
• The BBWF in Paris October 9-12 is a real standout, loaded with leaders of European telcos.

Press

• Yoshi Dreazen, before the war a telecom reporter at the WSJ, made the front page with his modestly titled story "Employees of Contractor Barred From Iraq Resurrect Its Business." It is a remarkable tale of corruption unchecked in wartime.
  
  
• Thanks to Tom Abate in the San Francisco Chronicle for including me in his story, Speed Bumps on the Information Highway. Abate blogs a team spent 200 hours on this story, including a great graphic here. It's an honor to be quoted in the Chronicle, where David Lazarus is doing some of the best tech reporting in the U.S. despite enormous pressure from AT&T on his publisher. Randall Stevenson at AT&T should be personally embarrassed by the attempt to intimidate the press. The last telco move like this was when Joe Nacchio pulled his ads from the Denver Post. I hope Stevenson doesn't have as much to hide as Nacchio did.

People

• Henry Sinnreich, key SIP developer, has moved from Pulver to Adobe. Henry has been working on video and peer to peer uses of SIP, and I suspect some interesting things are up. James Enck suggests "Contemplate for a moment the number of desktops globally which support some version of Flash (think "all of them"), then consider the growing number of sites/communities built in Flash (YouTube for a start), and then think about how Adobe might want to capitalize on that valuable real estate position by incorporating voice, video and presence. Then be afraid, be very afraid." Google, ABC, Brightcove and most new entrants streaming video over the net are choosing Flash because of unreasonable royalties from the MPEG LA, a scandal that deserves more reporting.

Wall Street

• While telcos are being hit by negative long-term trends (including VoIP bypass and cable competition), profits at the moment in the U.S. are holding up pretty well. Most of Wall Street, but not Washington, knows the primary driver for profits is reduced wireless competition and related higher prices. Few have listened closely while Randall Stevenson explains the company's other key improvement, the increased rates they are getting state by state. Janine Migden-Ostrander, the Ohio Consumers' Counsel, blasted the state for the latest price increase. Something is profoundly wrong when the cost of delivering phone service plummets with technology and the cost to the consumer keeps going up. That implies neither regulation nor competition is working properly.

Copyright 2006 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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