DSL

DSL Prime: We Demand Video on Demand

Video on Demand technology could make broadband viable, but content providers could still kill the business. On the brighter side, technology continues to advance, and DSL Prime provides a free DSL jobs space.

by Dave Burstein DSL Prime [January 4, 2002]

Video is now
Intertainer proves streaming is practical
At Alcatel movies in the office are just part of the job. They did a live demo for staff of a BellSouth DSL hookup to Intertainer, over an ordinary DSL connection to their office. Jay Fausch reports "It looked great. This will give the telcos a weapon to fight back against the encroachment of the cable guys. Video is real and ready for prime time." Intertainer is live in 35 U.S. cities, with strong backing from part-owner Microsoft. They use Microsoft tools to stream what is essentially MPEG-4 at 500-750K. For pre-encoded programming, that produces an acceptable picture. (Live broadcasts and on-the-fly encoding typically require data rates of 1-1.5 meg for reasonable quality.)

The general success of Intertainer streaming over existing DSL networks is surprising. They test each individual connection when you sign up, and need to reject many potential subscribers. For those who pass, most movies stream from beginning to end with few if any interruptions. DSL Prime had previously reported skepticism from many network engineers about delivering the steady data rate required for video. I was apparently wrong, at least for most of the customers who test well initially. The congestion within provider networks, in this crucial application, is proving more manageable than expected, at least at current network loads.

Everyone's dreams of large profits from VOD have been smashed, however. Hollywood studios have analyzed the economics of VOD, and are setting their prices so high that no one else is likely to make much money. That, more than the business problems of the Blockbuster/Enron deal, is holding back the telcos. The cable side is moving faster, which will probably force the telcos to match them. "Satellite TV used to be the front-runner in the race to own viewer eyeballs," Lisa Delgado reported in Wired. "But video on demand is helping cable make it a horse race."

Qwest's Nacchio: VDSL is ready to make money
"VDSL is the killer for anybody with our kind of network"
Nacchio told analysts, "The technology works, and it is available at the right price." Anton Wahlman reports Qwest has prepared detailed plans to roll out VDSL in as many as 10 cities in a short time frame. He sees the cost as low as under $1,000 per subscriber depending on what is included in the calculation. They would soon pass 3M homes, a network similar in size to Cablevision. Installing 50,000 lines in Phoenix taught them how to do the job inexpensively (technician training is crucial), but Nacchio told us last year he had decided to wait until the next generation of equipment brought the costs down.

The presumed reason Qwest is now holding off is their dramatic drop in capex of $2 billion, accompanied by layoffs—not the time to announce new initiatives. Nacchio was more politic [ed. note: political?], instead announcing the only remaining problem was regulatory. Phoenix is treated by regulators as a "Title 6" (unregulated cable) and Nacchio wants a clear ruling that expanded VDSL would not be instead considered "Title 2" (telephony, subject to competitive and unbundling rules). His clear implication, Wahlman reports, is that Qwest will go ahead if they get clearance. Motorola's Galvin believes him, and invested $20M more in Next Level. I think it's a good bet, although DSL Prime urges investors to be very careful buying NLC shares. Only a minority of shares remain in public hands, and it's always risky for minority holders.

Nortel offloads the remains of Promatory
CTDI will maintain and support
Nortel has exited DSL after an investment of over $1B, transferring the remaining Promatory business to CTDI of Pennsylvania. Richard Parsons, whose family founded the company in 1975, is CEO, and Dewey O'Donnell the executive in charge. CTDI has a base in repair and test, but has expanded into systems design and now to hardware manufacturing. The UE9000 was one of the most advanced DSLAMs when announced, and scored a number of early successes, including significant sales in Korea. Samsung won away the Korean market with a low bid ($100/port), and Nortel decided that DSL competition would be too fierce for them.

Paradyne buys Elastic's future
Gets cash for stock, Nortel as part-owner
Elastic Networks for years has had great technology, much respect, and few paying customers. Ethernet might have been a better choice, easier to provision and potentially with greater reach. But DSL was the standard the telcos had chosen, and the momentum was too great to reverse. Elastic, a Nortel spin-off, still has close to $20M in the bank from the IPO—and a stock price that Thursday was about the same as the cash value. Nortel still controls 46 percent of Elastic, and presumably was the ultimate decisionmaker.

Verizon Avenue earlier this year chose Elastic for basement DSLAMs, based on testing with video delivery, giving Elastic entree into a major customer. Variety reported Verizon Avenue execs were telling Hollywood they would widely roll video on demand last summer, but the rest of Verizon was strongly skeptical. The project is presumably still in the works, but Nortel apparently wouldn't back Elastic any further.

Paradyne, for a small price in stock, gets cash, interesting products, Ethernet in the First Mile expertise, and additional customers. It diversifies them from a perceived dependency on the unpredictable Yahoo Japan, where they compete for contracts with other Softbank affiliated companies. Nortel will now be the second or third largest holder in Paradyne, where Texas Pacific maintains control.

Occam/Accelerated sideways IPO
Another way to go public
Kumar Shah at Occam has a hot product on the way: a remote terminal that does a slick job of combining voice and data. Going public through an IPO to raise funds is tough in today's market. Accelerated Networks has a public listing, cash on hand, and important alliances. They are merging, with Shah pointing to the companies' strong cash position as a key benefit.

Accelerated has had hard times and very slim product sales, but they bring a respected voice IAD product that just scored a big win at pan-German CLEC QSC. (TdSoft is supplying the gateway to the switch, a major victory for them as well.) Siemens continues a major shareholder; there is a natural synergy between Occam's remote terminals and Siemen's CO DSLAMs, but nothing yet to announce.

DSL Prime making employment ads free
Free, no strings posting of industry jobs
We all know how many of our best colleagues have lost jobs because of the telecom cutbacks, and the e-mail I get asking for help can be heartrending. Some inquiries are from folks I knew as the top of the profession a year ago; others, from strangers reaching out. I'm therefore restoring the employment ads at the end of DSL Prime, with free ads for any company in the industry looking to hire. I know many CEOs read DSL Prime—I hope you'll encourage your HR people to take advantage.

Just e-mail me 45 words or less with the particulars of the job, which will run in two issues. The only requirement is that the ad include a direct e-mail contact, either an individual or a special mailbox at your company. (Most people, rightly, are afraid of being ignored if they respond through the usual HR mailbox.) Be specific enough about what you need to discourage people without the background you require.

For the occasional job that's too sensitive to give your company name and contact, give me the description of your needs for a blind item to contact via editor@dslprime.com. (One manufacturer recently asked me to recommend a possible board member with telco experience, for example. That's not the kind of position you advertise openly under your company name.)

I'll try this for three months, and hope it helps some people get placed. I strongly suggest to everyone looking you make yourself visible. Write letters to the editor, in DSL Prime and other publications, to make yourself visible. In DSL Prime, the "People" section is another easy place to be noticed—send a note about something you've done, or a recollection reflecting some recent news. It's perfectly acceptable to include a phrase like "when I was at Nortel" or something similar, letting readers know your situation has changed. Always include your e-mail to make it easy to reach you. You never know when someone you haven't spoken to in years may have an opportunity, and didn't know you were available.

Wish I could do more. db

Copyright 2001 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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