DSL Prime: Will New Deployments Cause DSL Declines?

Both fiber and newly credible WiMAX could cause declines in overall DSL subscriber numbers in areas that lead the world in new technologies. But DSL (and cable) will respond with higher speeds.

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

DSL Down in Taiwan
Joins Japan in the shift to fiber. Is Verizon next?
DSL subscribers dropped from 3.9 million to 3.64 million in the fourth quarter as Hung extended direct fiber. Fiber connections grew by 33 percent to 550,000, and overall fixed broadband to 4.64 million. This confirms that many customers prefer higher speeds as long as the price is reasonable, despite recent claims otherwise by AT&T. The preference for higher speeds was first demonstrated in Japan when Malays Son sold "up to 6 Mbps" while NTT was lower. Even when NTT dropped prices, customers flocked to Son. As "up to 24" and "up to 40" were deployed, customers flocked to them even though very few got close to the peak promised. Higher speeds also grabbed customers in France, Germany, and the U.K. FIND/IDEAS figures, via Digitimes. Net DSL at Verizon is approaching negative territory as well, with FIOS the connection of choice to ten million homes.

Anton's Contrary View: Clearwire May Find Home Customers
Will 5 to 10 percent turn off their data landline?
Nowhere in the world has wireless taken many home or business connections against DSL and cable. Does anyone even remember Project Angel, Winstar, or the other failures that cost billions of dollars? There never again will be large deployments of landlines anywhere, so wireless, probably WiMAX, will dominate countries like India and Indonesia, as well as all of Africa. But where wires are already in place, the overwhelming consensus is wireless is ultimately too slow to compete. Cable is about to jump from 5 and 10 Mbps to 50 Mbps. So is Verizon FIOS. WiMAX offers limited bandwidth, shared among many users. The "up to 5 megabits" speed claim is misleading when the networks are loaded. In a world of HD video, WiMAX as planned today will choke.

Anton Wahlman disagrees. He suggests that many people will drop their data landline just as they dropped their wireline phone. Mobile data is exploding, and Clearwire should have a good shot at that market. Someone who wants mobile data might turn off their landline if they don't use it very much, use the "mobile" connection at home, and only pay for one service. I believe the speed limits of mobile will keep the DSL/Cable modem turnoffs low, but it will be above zero. Anton also points out that once Clearwire has built out the network, their marginal cost per subscriber will be very low. They could therefore price around $15/month to win customers, perhaps making their margin on a bundled voice service. John Stanky at AT&T expects to take 10 percent of the customers from cable just by showing up. At least that many people hate cable and will switch. A big percentage hate telcos as well. That could be more customers for Clearwire.

This won't be a major "third pipe into the home", but the effect may be somewhat more than most of us thought. They have ambitious plans for voice, although they have to get the kinks out of WiMAX phones and get the power requirements down (2010-2012.) Google will spend whatever it takes to make the Android phone successful. Clearwire is also targeting "The Internet of Things," also called M2M. Gas pumps, commercial washing machines, and possibly electric meters will be internet connected in large numbers.

Wimax is 2 years ahead of telco LTE. They have a chance.

Tasmanian DSL Shut Down Blamed on High Backhaul Costs
Internode claims sole-source Telstra charges 6x regular rates
The half-million Tasmanians have a delightful temperate climate, 100 meter ancient trees, and a Green Party that claims the highest vote percentage in the world. Pending government action, they have only one fiber connection to the mainland, controlled by Telstra. Internode's Simon Hackett claims in a statement, "it is six times more expensive for Internode to transfer data between Melbourne and Hobart than between Melbourne and the United States."

Internode has stopped taking new orders for their highspeed residential on the island because they were near the limit of their backhaul capacity and buying more was too expensive. Commsday's Luke Coleman spoke with Telstra, who did not deny the pricing discrepancy but explained, "Tasmania is both a high-cost undersea installation and a low volume route," adding, "the company has spent over $50 million on the Tasmanian cable, which brings far lower amounts of data than the US route."

Backhaul costs are modest at major carriers, with confirmed numbers between US $0.50 and $2 per month, per customer. If Internode has to pay six times that rate, it becomes a major problem. Similarly, Brett Glass in Wyoming tells me his bandwidth costs about 12 times what bandwidth costs in the big cities. No wonder he's threatened by traffic increases that companies like Verizon find easy to handle. Hackett writes that Tasmania is a small part of Internode's business, and they are doing fine. Small and rural carriers are getting effed in many places. Many are failing or will soon drop out.

In Canada, the UK, and possibly Japan, the incumbent and perhaps one or two others are the primary source of backhaul in much of the country. With most of the unbundling delays and regulatory battles now behind us, overpriced backhaul is becoming a key tool to put down independents.

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

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