DSL Prime News Briefs

DSL industry news from around the world shows that DSL can be profitable, but some DSL may be too profitable to be sustainable.

by Dave Burstein of DSL Prime and Future of TV [May 9, 2008]

Briefs

• Sales are down at Cyworld in Korea, the breakthrough social networking site that preceded MySpace, Facebook, and their peers in Europe. I don't know the field well enough to guess if this foretells trouble at the others.
  
  
• Telecom New Zealand reported "broadband and internet" income of NZ$87 million and expenses of NZ$13 million. That's a margin of over 80 percent. I didn't make this a big headline, because with wholesale/retail splits and difficult cost allocations, I could be missing something. But outsized broadband margins make sense; Bernstein is reporting U.S. cable is at 85 percent. AT&T has approximately $35 ARPU while I calculate DSL costs at between $8 and $12 in a advanced economy for a 65 to 80 percent margin.
  
  
• Cisco claimed "a major milestone": 500 units of Cisco TelePresence ordered since 2006. For a primary product of a company the size of Cisco, that's more likely "a major disaster." Which doesn't mean teleprescence will go the way of the Picturephone, but it isn't doing well.

Press

• Belaji Ojo in EE Times notes that the declining dollar shaved between 4 and 6 points off margin at TSMC. Infineon's Ziebert notes "Should an exchange rate of $1.60 [per Euro] be sustained through the entire 2009 fiscal year, this 15 percent deterioration would lead to a reduction in Infineon's EBIT of about 120 million euros." Ojo adds that Ziebart is "shifting some work from euro-based operations into dollar-based operations or to Asia. ... we already have built up 150 IT people in Melacca [Malaysia]." Conversely, companies like Corning that report in dollars are showing an artificial profit bump.
  
  
• Uverse Users calculates that AT&T has raised prices $20 for most new video customers by adding charges for set top boxes and reducing bundle discounts.
  
  
• Allan Leinwald at GigaOm is calling out the new Intel 10GiGE adapters as "Inexpensive, Powerful and Blindingly Fast." Two ports for under $1,000 works out to $40 per Gbps. Before you think about reconfiguring your home network, remember the range over copper is only 15 meters. His key takeaway from Interop was how many "network appliances" are simply basic Pentium hardware with networking software.

People

• Ed Eckert of Ikanos wins the 2008 ATIS Award for Distinguished Service to Communications Standards. He's worked darn hard for it.

Wall Street

• Nikos Theodosopoulus of UBS predicts perhaps 20 percent growth for Ciena, based on strong demand for Core Director at AT&T and Verizon. That corresponds to both companies' sales of TV and Video on Demand. We're all watching closely for hints of future Internet bandwidth demand growth, although most datapoints still say growth rates flat to down. As I finished the issue, Cisco reported dismal results from the service provider segment, surprising if traffic is still growing at the ordinary 40 percent/year/customer rate. Before Walt McCormick asks for another billion dollar Bell subsidy, please note we're talking about equipment costing less than one-half of one percent of the two companies' broadband sales. Increases of 1 percent or 2 percent of broadband sales are significant for Ciena and maybe Cisco, an issue network planners have to address, but insignificant when looking at telco profits and policy.
  
  
• Christopher King at Stifel notes that at Qwest, "primary residential access lines fell by 9.2 percent in the quarter, the worst quarter ever for the company." Qwest capex has been 40 percent less than depreciation for several years, leaving them with an increasingly obsolete network. Five years ago, Joe Nacchio calculated Qwest "maintenance capex" at about $2 billion per year. They are spending significantly less than that. The cable guys are clobbering them, while AT&T and Verizon/MCI are decimating Qwest's corporate and backbone sales.

Events

• May 19 to 22. Wisconsin State Telecommunications Association 2008 Annual Convention, Grand Geneva Resort on Lake Geneva They've been doing this for 98 years. I'm speaking on How to Beat Cable. Ideas always welcome, and I have a few surprises.
  
  
• June 2, South San Francisco 4 to 6 p.m. Vietnam's PTT is hosted by the Telecom Council of Silicon Valley. Vietnam is one of the fastest growing DSL markets in the world, and wildly different than the U.S. stereotype.
  
  
• Mercredi 25 juin (Wednesday June 25) Paris. Xavier Niel doesn't speak in public that often, but will be on a panel with his peers form SFR and Neuf Cegetel. Dignitaries including Sarkozy are likely to make predictable speeches, but I don't think Xavier knows how to be boring.

Copyright 2008 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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