DSL

DSL Prime News: The Inside Source

Telcos find that states will enforce promises when the FCC fails to, DSLAM prices continue to fall as chip prices dip, Powell's embarrassing mistakes, and more DSL Industry news.

by Dave Burstein DSL Prime [April 10, 2002]

"Fiber to the home? Experiments only for a long time!" is the unanimous reply from all the U.S. telco folks, including the SBC CTO. John Chambers, Bill Gates, Andy Grove, and Technet have made it their first priority, to bellhead laughter and refusal to spend the money. They tried fiber in 1995, got the Telecom Act in return, but were so burned by the old costs they're still running scared. Turns out, however, that Verizon has collected perhaps a billion dollars to fund 45 meg service—fiber or VDSL—to Pennsylvania, and the PA PUC is threatening to ask for the money back if they don't deliver.

Voice for consumers is finally arriving, with DirecTV DSL announcing this week. Plug in a SIP phone, and get high quality cheap calls around the world. The technology and infrastructure works; now the phone price must come down and the business details develop. DirecTV DSL CEO Ned Hayes will join my presentation Wednesday—say hello to the round fellow with a beard, Dave Burstein at Jeff Pulver's VOIP conference.

Jetstream cuts in half
North Carolina research closing
AT&T is close to a large order of Jetstream equipment, but a new funding round proved impractical and they had to lay off the Raleigh development team. Company founder David Frankel writes "The telecom marketplace is ugly these days; everybody knows that. Our sales in 2001 were $25M, and we've now matched our spending to our current revenues." Jetstream has partnerships with nearly every company in the switch and DSLAM business, but few providers have bought equipment and investors are losing patience. "Wild times!" Frankel adds.

ITeX for sale
Call Lehman if interested
$2.5M in Q4 revenues is too little to sustain the company, so the bankers have been called in. ITeX spun off from mega-fab UMC, which retains strong influence over the company. Xpeed was a large customer for the early Korean market, but could not maintain sales once domestic suppliers were ready. 2001 sales were overwhelmingly the Alcatel-licensed chipset, as their software based alternative proved ahead of the market. Alcatel was the largest 2001 customer, which left little margin for the middleman.

TI predicted last fall that only a few DSL chip vendors would survive, and Tioga, LSI, PCTel and now ITeX are re-organizing or abandoning the market.

Tachikawa: 3G wireless not broadband competition
"Just not enough bandwidth"
Mike Powell referred to 3G wireless as probable future competition for DSL and cable, explaining his new rules on wireline competitors. 3G technology does in fact share 1.5 meg within the cell, but my understanding is effective delivered datarate is dramatically less to each customer, and does not economically scale. At the CSFB conference, I was able to ask the world leader in wireless, CEO Keiji Tachikawa of NTT DoCoMo, whether his network would ever effectively compete for broadband consumers. His answer was immediate and clear, "Absolutely not. Not enough bandwidth."

Powell's people are failing him, resulting in embarrassing mistakes in public. Powell's a lawyer with limited experience, and only knows telecom from what he learned on the job as FCC commissioner. He can't be expected to be on top of technical details—that's his staff's responsibility. For example, he several times recently has spoken about "massive investments" that will be required in broadband, when the telcos are saying the investments will be small. SBC reports DSL costs per new customer dropping more than 60 percent, and total capital expenditure down 30-35 percent. DSL buildouts look to be perhaps 3 percent of telco costs, rapidly repaid from DSL earnings. (CSFB calculates a two year payback for DT DSL). Powell has some very devoted staff, some of whom hope to stay with him through a future bid for the White House. But they do him no favor by being "yes, sir" advisors. He also needs to start listening to folks who are willing to tell him when he' s wrong, and not just company executives.

Geday: Fewer, larger chip vendors
GlobespanVirata merger is working
"Companies like ours are spending $100M a year in DSL R&D, which is what customers expect. They also expect a organization large enough to guarantee support." Geday is happy with the early results from the Virata merger, bringing together Virata's strength in network control and Globespan's in DSL logic. "The deal gives us expanded R&D capabilities, revenues, and a very strong cash position, promising stability to our customers. Some designs need Virata processors with high performance and advanced features; others, a more integrated, lower cost product. "

The merger resulted in a $25M plus charge, some of which covered severance for those laid off (fewer than 200, from both companies). Several products that hadn't found customers were dropped.

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

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