DSL Prime: Telcos and Governments

DT puts pressure on the German government, BT fears new competition, and in the one nation that faced down the pressure, South Korea, a truly 21st century network is being augmented. In the U.S., confident telcos and cablecos cut deployment and jobs while raising prices, pleasing the stock market.

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

"Super-fast VDSL will be provided to almost every home in the near future, thus opening up the full-fledged era of 100 Mbps connectivity"
—KT vice president O Yun-seok

British Telecom is building the one of the best networks in the world, except for the speed of the last mile to customers. BT's speeds announced to date are 50 to 85 percent slower than the 50/10 Mbps of Deutsche Telekom, which in turn will be much slower than Korea, Japan, Paris and Verizon's GPON plans. The 21st Century network really does "throw out the PSTN" and replace it with an IP network likely expected to be at least 30 percent cheaper and orders of magnitude more capable.

Suddenly, BT is facing competition from at least four other networks, building rapidly to over 50 percent of the UK population. Carphone Warehouse signed up 350,000 DSL customers in two months. James Murdoch is putting nearly a billion dollars on the table to win 3 million customers away in four years. (Story at end because of length.)

BT's gutsy move forward, seconded by BellSouth's Bill Smith and whispered admiration everywhere telco CTOs gather, is inspiring new thinking around the world. One direct consequence: USF and ICC policy needs to begin with the realization that anything short of a new IP network is obsolete "dead iron." Every penny instead should go to rebuilds, which not merely shave costs but also, by design, provide DSL to every home.

Note: Verizon and Qwest do not support the "Missoula Plan" for an increase in basic U.S. phone rates by $40 to $100 per year. I haven't researched their issues yet.

I have an analysis of Missoula coming, which is supported by "fairy tale economics." Unless you make the ridiculous assumption that all the reductions in access charges will be returned in lower LD rates, Missoula shifts $2 billion to $5 billion from consumers to large telcos. LD rates have been going up, as the old AT&T, Sprint, and Verizon/MCI no longer seek customers. AT&T in particular looks to increase profit dramatically.

As I went to press, Grahame Lynch broke the news that Alcatel Lucent will not be renamed Lucatel or anything else. Instead, they will keep both names, Alcatel and Lucent.

Deutsche Telecom Starts IPTV, Halts VDSL2 Deployment
First, make it work
DT had bold plans: 3 million homes ready for 50/10 VDSL, many installed and delivering in time for the World Cup. They've invested a billion dollars, and brought together a vendor group with strict orders to deliver on schedule. Microsoft supplies the main software, ECI and Siemens the DSLAMs, Infineon the chips and Linksys the HD set top with hard drive.

Now, a few weeks after the World Cup ends, they are finally offering the service, with limited features. They now have halted deployment to spend six months integrating the systems, getting the bugs out of Microsoft IPTV and the network, and then adding 3 million more homes by the first quarter of 2007. While not meeting the deadline must be disappointing, they are much closer to schedule than Swisscom, AT&T, Windows Vista, or most projects of this size.

"This is a very challenging project," Martin Frommhold tells IDG . "Numerous services must be combined and offered on a single platform. It makes no sense to launch a new service if we can't guarantee a high level of quality." He adds "video on demand, electronic program guides and on-demand TV archives" are not part of the initial offering. Reporter John Blau was unable to get any comment on whether DT "experienced any difficulty with Microsoft IPTV software platform." The hardware folks are happy to point fingers at Microsoft, but they have issues as well. AT&T just told analysts they are delaying some Lightspeed spending until 2007 as well.

The lead TV offering is the Bundesliga football in partnership with pay TV provider Premiere, which will be free for the beginning of the season and later priced at €9.95, cheaper than on cable. The set top box is from Cisco/Linksys, and has a dual tuner to record one show while watching another. For an HD unit, the hard drive is a skimpy 80 gigabytes. Given I just bought a 250 gigabyte drive for $60, I expect DT will choose to upgrade hard drives shortly.

Meanwhile, DT is pressing the Merkel government really hard to keep competitors out. Wisely, the EU is holding firm in favor of an open market. Matthias Kurth has suggested the companies involved find a compromise, hoping to avoid an EU/Germany conflict.

I wasn't able to confirm before press time how many of the 3 million homes actually can get the 50/10 speeds. I had originally understood that DT was placing the cabinets close enough to the homes to deliver 50/10 to almost all of them, which would be 1,000 to 2,000 feet. I've been told I may be wrong, and that some of the cabinets are 3,000 feet or so. AT&T has said the speeds at 3,000 feet do not typically go over 20 to 25 Mbps in their testing, despite the early claims of VDSL chipmakers.

Meanwhile, "Don't be a user, be a Congster." I'll try to have more information on rates shortly.

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

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