DEMAND FOR DSL STRONG, BUT TECHNICAL GLITCHES SLOW ROLLOUT
ATLANTA -- Growth of residential DSL could be twice that of cable modems, but operational problems are likely to slow rollout, Gartner Dataquest survey found. Survey is good news for DSL and shows “high-speed Internet access in the U.S. is in the mainstream and quickly replacing dial-up,” Dataquest Vp-Chief Analyst Kathie Hackler said at Supercomm 2001 here. In U.S., high-speed Internet access (cable and DSL) grew 67% in 2000, compared with 7% gain in dial-up connections. One-quarter of U.S. households could have high-speed Internet by end of 2001 and broadband access will account for 45% of consumer Internet access by 2005, Hackler said.
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Research firm surveyed homes in Feb. 2000 and Nov 2000. In Feb., 3.4 million households with dial-up Internet access planned to purchase cable modem Internet access, compared with 2.2 million considering DSL. By Nov., interest in cable remained at 3.4 million, but interest in DSL increased to 3.8 million households - - up 47%, Hackler said. In homes without Internet access, Dataquest found interest in cable modem and DSL about equal. “Growth of services depends on how well the promise of DSL is delivered,” she said. Operational issues could thwart rollout to level below consumer demand and regulation could continue to be significant factor in broadband evolution, in general slowing deployment, she said: “DSL will still continue to lag cable in the next few years as cable enjoys its ‘first mover’ advantage.” Bandwidth has become commodity and applications will drive profitability even in consumer environment. Internet security and home networking are likely value-added services to residences, Hackler said.
SBC spokesman sought to dispel “conventional wisdom” that DSL rollout was fraught with technical problems, saying problems had been solved, at least with carrier. “The news you've been reading about DSL disasters is probably old news,” said Thomas Starr, who also is vice chmn. DSL Forum. According to SBC statistics, in months since mid-2000: (1) Flowthrough provisioning at SBC had improved to 95% from 35%. (2) Customer self-installed DSL deployments rose to 70% from zero. “Less than 5% of these needed tech visits,” he said. (3) Number of DSL circuits activated per day tripled. (4) Service intervals fell to less than 10 days from more than 30. (5) Deployment schedule was met more than 90% of time, from under 50%.
Stumbling block for residential DSL rollout is limited profitability potential, with business DSL services better target for service providers, Cisco Systems Mktg. Dir. Enzo Signore said. Potential size of residential market is about 100 million homes compared with 10 million businesses, but business will be more profitable, Signore said. “Demand for the services is there -- growing at 20 to 30% quarter after quarter -- but the largest profit potential for DSL is business customers, where most are still using ISDN or 56 kbps packet data services,” he said. Citing Jupiter Research figures, Signore said 98.7% of businesses would have broadband Internet access by 2005 compared with 41.3% this year. Consumer data service is for single user, offers “best effort” delivery with no security and is at commodity price, he said. By contrast, business DSL service is for multiple users, requires service level agreement to meet high-availability expectation, offers security and built-in virtual private network services (VPNs).
Signore suggested progression of services from basic to advanced that providers could offer businesses: (1) Basic high- speed Internet access. (2) Vendor-managed data network service. (3) Managed firewall services for data security. (4) VPN services. (5) Voice-over-DSL and IP telephony. (6) Videoconferencing and video multicasting. “More sophisticated services mean more revenue, and these services can be deployed over ADSL infrastructure,” he said. Competitive carriers have embraced business, Hackler said, leaving residential market to ILECs and only DLECs to survive will cater to business customers. “Those that do survive 2001 will have better valuations,” but in next 12 months most DLECs will either abandon their current business models, be acquired or disappear, she said.