DSL

DSL Prime News: The Inside Source

One RBOC admits that DSL really is profitable, after all. DSL Prime examines service around the world as well as new technology, and sums up the rest of the news in the DSL Prime News Briefs.

by Dave Burstein DSL Prime [March 29, 2002]

"All I need is a computer and the Internet, and I can be on a level playing field with the world." —A programmer in the Philipines in the Wall Street Journal

April 10, Ned Hayes of DirecTV is joining my panel at Voice on the Net in Seattle, a very strong conference. SBC, in the story below, confirms that DSL for data is finally achieving the results we all expected a while back. Yahoo led Japan over 2M subscribers in February, signing up twice the U.S. rate. They have major plans for voice and then video; watch both services expand to millions of customers in the coming years.

"We and the cable guys should both raise our broadband prices." —a telco CEO, speaking frankly. For the April 1st issue, a day traditional for jokes, I'm looking for ideas. The best are items so plausible they could be true. This one was and meant exactly what it seems; I was part of the conversation.

Our industry is worldwide, and one of the joys writing DSL Prime is working with people from so many cultures. Halle Berry and Denzel Washington winning the academy awards was a grand moment for all who believe in freedom. We cannot rest, but the moment reminds us all that victories are possible. When I was born 50 years ago, in much of Amerca, it would have been illegal for me to marry the woman I love, because our skins are different colors. Today, the only barriers are our own—and we will overcome them soon.

Jennie and I have been working hard lately. There's a Telecom Insider special CEO issue, and some interesting websites very close.

Two FCC officials cancelled their subscriptions, apparently because I wrote so dramatically about Mike Powell claiming he was enabling telecom competition when every pro knows his actions are stifling the little that remains. That doesn't mean I'm not aware that the economies of scale may make consumer local telephony a natural monopoly, as Powell & OFTEL imply and Seidenberg & Whitacre proudly assert. That's a hard question, with the many CLEC failures strong evidence.

But if a regulator comes to the conclusion that competition is insignificant, intellectual honesty requires slowing or reversing deregulation. Deregulating monopolies has enormous economic costs—Verizon estimates it over $20B in the U.S. alone.

SBC: DSL highly profitable
CFO Stephenson: 40 percent EBIDTA margins, low investment needed
The debate is over: DSL makes money. "Once we get to scale, DSL is very profitable, just like our other services. We've reached that volume in California and are approaching it in SWB territory as well. We cut our costs by 30 percent in 2001, and expect them to drop another 25 to 30 percent in 2002." CSFB calculates Deutsche gets payback in two years on DSL, while Korea Telecom is at 35 percent EBIDTA and rising. (I don't like EBIDTA numbers, but that's all I can get.)

Stephenson also said capex has dramatically dropped since early in 2001. (That was the Pronto halt, among other things) DSL Prime has reported equipment costs dropping fiercely, to between $150 and $250 per subscriber. I just got some backbone costs from Band-X; 45 meg of high quality transit is now $8,000 per month, half the price of a year ago. That's enough for 1,000-2,500 DSL consumer circuits. SBC, like other volume buyers, is presumably paying much less, or $2 to $4 per month per user.

Modems for $45
Ordering in the millions, SBC gets extraordinary pricing. $45 per modem is close to the typical bill of materials. But for an order like this, the chipmaker, assembler, and everyone in the supply chain cuts prices to help with the bid. Then they all pray. Recent North American bids on quantities from 50,000 modems up have been from $52-58, I understand. Most have been won by Asian manufacturers. Ethernet continues to dominate, but Ethernet/USB hybrids are drawing interest and Thomson announced a new USB model. The $45 price is consistent with the Chunghwa deal, rumored to be under $100 for modem and DSLAM combined. I also hear that VDSL gear (10 meg symmetric) is quoted in China at $125 for modem + DSLAM, and the volume prices from Next Level have come down in North America.

72,267 feet: Longest DSL loop in the world?
GoDigital extends 1.5 Mbps ADSL in New Mexico
David Krantz wrote me proudly of their customer's installation. "ENMR Plateau used our XCel-4a system to provide 1.5 Mbps ADSL 72,267 feet to a ranch over copper wire. The XCel-4a was used to extend an AFC ADSL equipped remote terminal that was already over 20 miles form the CO." The Clovis, New Mexico local telco clearly is dedicated to customers in a way more companies should be. The GoDigital unit is line powered with remotes about the size of a shoebox.

Omnitel: the little telco that could
DSL in every CO, Zhone's success
Iowa's Omnitel has 12 COs, serving 6,000 lines, the kind of density that SBC and Verizon claim is uneconomical to serve. But 2,000 of those homes connect to the Internet, and Omnitel has installed Zhone/Nortel UE9000s, expecting to sell DSL to perhaps a third of them. Scott Rodberg proclaims "OmniTel is trying to create the most positive and reliable influence we can for every one of our customers." There're 150 small telcos like that in Iowa, offering giving better service than the giants.

Zhone purchased the UE9000 product line as Nortel cut back, and is getting compliments from customers. Broadview's CTO, Ken Schulman, told me "Zhone is breathing new life into the UE9000 product." CTDI picked up Nortel's Promatory DSLAM, and also is providing improved support.

Copyright 2002 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

"The power of the printing press belongs solely to those who own the presses"
—A.J. Leibling

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1. DSL Prime News: The Inside Source

2. DSL Prime: International News

3. DSL Prime: Voice and Video Over DSL

4. DSL Prime News Briefs