Japan's fiber-to-the-premises (FTTP) buildouts are creating some good business for VDSL (very high-speed DSL) chip companies, pumping life into what would otherwise be a high-end DSL niche.

The drivers so far have been the NTT Communications Corp. buildout of fiber and the Korean mandate to deliver broadband. Along those lines, Ikanos Communications Inc. this week announced its newest VDSL chipset, promising 100 Mbit/s downstream (from the central office into the subscriber's home) and 50 Mbit/s upstream. Not to be outdone, rival Metalink Ltd. (Nasdaq: MTLK) today announced volume shipments of its VDSLPlus chips, which claim to exceed Ikanos's speed targets (see Ikanos Boosts Copper Speeds).

VDSL comes into play because of the expense of running fiber to each customer. The usual FTTP scenario in Japan and Korea is for fiber to run into the basement of an apartment building or office high-rise. From that point, VDSL running on the installed copper lines carries signals to individual subscribers; ADSL (asynchronous DSL) isn't used here because it doesn't provide enough speed.

ADSL has advanced to speeds of 25 Mbit/s, but VDSL has been progressing too, advancing past the 100-Mbit/s mark. But every strength comes with its weaknesss, and VDSL's weakness has always been its range. ADSL can reach distances beyond 20,000 feet, while VDSL has targeted links of a few thousand feet (Ikanos claims to have pushed that to 13,000 feet). For both technologies, the speed drops off as the connection gets farther from the central office. (For more details, see the Light Reading report, DSL Chipsets.)

"Japan is a very dense country. NTT and other carriers or PON supplier companies have already deployed fiber, especially in the major cities. They have already invested, and the point is how they can use the existing fiber [to get to] the last 100 yards to the household," says Hiroyuki Munakata, sales and marketing manager for Sumitomo Electric Networks, a division of Sumitomo Electric Industries Ltd.

The utility of the FTTP-VDSL combination hasn't escaped equipment vendors. Hitachi Telecom (USA) Inc. combined efforts from its DSL and passive optical networking (PON) groups to produce a box for basement connections. Sumitomo is doing the same, using Ikanos chips, with a box due to ship later this year. PON provider Salira Optical Network Systems Inc. went a step further by building its own DSLAM, a 24-port system announced in February (see OFC Show Wrap: L.A. Fusion and Salira Wins China Unicom Deal).

"At this point, there is interest by all of our current customers, and they're forecasting as much as 30 percent of their total lines being VDSL as opposed to Ethernet," says Jim Diestel, Salira's vice president of product management.

VDSL's numbers are still small, compared with the 52.5 million DSL subscribers worldwide. Ikanos is claiming shipments of 2 million ports, and many of NTT's 894,000 FTTP subscribers are connected via VDSL. But even the single-digit millions is a bit of a triumph for VDSL. "VDSL is a very niche market. It's growing, but from a small base," says Will Strauss, president of research firm Forward Concepts Co.

Quoting numbers from InfoCom Research Inc., Richard Sekar, Ikanos VP of marketing, sees Japan's FTTP market growing by about 3 million ports per year. One chipset like Ikanos's is required at each end of a connection, so that means the total available market is around 6 million chipsets per year. At a maximum of $30 per set, that means Japan -- which represents the bulk of FTTP deployment at the moment -- is about a $180 million market from the chip perspective.

But where does VDSL go from here? Substantially all the Ikanos shipments have been into FTTP buildouts, says Sekar.

The theory a few years ago was that pure VDSL services would go well in Europe, where loop lengths are shorter than in North America. Sekar claims that's about to become a reality: "VDSL is going to be deployed, for example, in Europe, replacing ADSL."

Some Koreans plan to deploy all-VDSL connections in the third quarter of 2004, but the model is particuarly attracting European carriers, who deal with reaches short enough to make VDSL practical. According to Sekar, Belgacom is set to deploy in the third quarter of 2004, with others lined up to start mass deployment late in 2004 or early 2005: France Telecom SA (NYSE: FTE), Telecom Italia SpA (NYSE: TI), TeliaSonera AB (Nasdaq: TLSN), and Swisscom.

Strauss of Forward Concepts has his doubts, however. He notes that most carriers won't deliver full 50-Mbit/s VDSL to homes because backbone networks can't take the load. Moreover, users outside Asia aren't necessarily craving that kind of bandwidth.

"What I see is VDSL getting into some greenfield sites -- new housing developments, new planned cities, things of that ilk. VDSL does not have a play inside the existing infrastructure," he says.

North America has never been considered VDSL territory, due to lack of demand and longer local loops. Infineon Technologies AG has sold some DSL chips into FTTP projects in North America, but those have been ADSL2+ rather than VDSL, says David Eastley, Infineon's senior program manager for broadband access. And assuming the RBOCs get into the FTTP game, they might not be interested in the DSL model at all. "RBOCs are going to run fiber all the way to the house," he says.

— Craig Matsumoto, Senior Editor, Light Reading