Will the Universal ADSL Working Group Advance DSL?

ENT, March 4, 1998 by Jerry Arcuri

Digital Subscriber Line (DSL) technology has gained considerable media attention, with its promise of high-speed Internet access and use of the existing telco infrastructure. The recent announcement that Compaq Computer Corp., Intel Corp. and Microsoft Corp. will participate in the Universal ADSL Working Group (UAWG) has fueled that attention. However, despite this recent flurry of activity, there are still important questions to resolve before small business and consumers have the T1 Internet access that asynchronous DSL (ADSL) promises.

The purpose of the UAWG is to move toward the faster creation of an open standard for ADSL technology that would be endorsed by PC, networking and telecommunications companies. In addition, the working group also plans to provide simple plug-and-play installation, which would eliminate the need for special installation services inside the home. Both the development of an ADSL standard and the ease of installation would enhance DSL's overall acceptance for consumer and small-business usage, and bring ADSL to the forefront of this new technology.

In addition to Compaq, Intel and Microsoft, members of UAWG include Bell Atlantic, Sprint, GTE, Lucent Technologies, Rockwell Semiconductor and Cisco Systems Inc. The participation of major industry vendors lends considerable credibility to the working group and bodes well for the development and endorsement of an ADSL standard. ADSL rollouts are already underway, and observers expect that the UAWG work will encourage wider acceptance in the consumer and small-business market. Of particular interest to this market segment is the enhanced performance -- up to 1.5 Mbps -- over existing telephone wires, as well as an "always-on" capability, enabling continuous Internet usage.

Currently, the working group is focusing on the customer premise equipment side of the equation, including modems, PCs and technologies that will require only minimum in-home work by telcos.

However, an important element that must also be considered is the deployment of technologies on the central office side of the link. According to Randy Carlson, analyst at The Yankee Group (Boston), "there are still technology issues to resolve. The chips are not ready; there are interference problems between binder groups on the copper. There are also line-conditioning and in-home deployment issues that must be resolved." John Hunter, broadband analyst with telecommunications service provider TeleChoice (Verona, N.J.), also adds that "problems must be resolved with digital loop carriers [DLC], the devices that serve as the interconnection point between the central office fiber network and the copper infrastructure that goes to the home. There are problems with DSL technology working into the through the DLCs." Both Carlson and Hunter believe that we will not see wide-scale ADSL deployment until 1999.

Taking a different perspective, Tom Nolle, president of telecommunications consulting firm CIMI Corp. (Voorhees, N.J.), approaches the DSL issue from a broader business perspective. He maintains that improve performance and always-on capability, while appealing, come at a cost. Nolle believes that the working group avoids considering how the ISPs will make a profit when they are faced with increased backbone traffic and congestion, which will require investments in boosting their current infrastructures to handle the new loads. Nolle also points out that the ISPs have no incremental revenue stream to fund the infrastructure development, because Internet pricing is not based on usage.

Therefore, Nolle concludes that both telcos and ISPs are faced with a difficult pricing problem. On the one hand, these potential DSL providers can view DSL as a cash cow because of the increased number of prospective users. However, in their pricing structure, they must be careful not to threaten their lucrative TI private line business, which is priced relatively high -- for example, $2,000 per month -- compared with DSL pricing, which is in the $80-per-month category for 768-Kbps access. At the same time, ISPs, facing the potential influx of users demanding high-speed ADSL-based Internet access, will have to have the transport infrastructure to deliver TI speeds. And according to Nolle, it is the cost of this new back-end infrastructure that could be a fly in the DSL ointment for ISPs and telcos.