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Cable/Video

Broadband: Will It Bust a Move?

Representatives from worldwide telecom organizations say availability of "last-mile" links from customer sites to carrier Internet services will determine which carriers grow or go, in the near term.

”The last mile will drive demand,” said Eric Nelson, VP of global marketing for the Telecommunications Industry Association (TIA) during a presentation at Supercomm last week. The days when voice service revenues helped carriers to pay for data service offerings are long gone, he said. Today, broadband access techniques are being relied on to speed adoption -- and help carriers build up subscriber volumes.

The TIA, a professional group for service providers and equipment suppliers, says $713 billion is expected to come from the sale of telecom services and products in the U.S. this year (which represents about 40 percent of the worldwide total). Of that, about $12.8 billion will come from the sale of xDSL and cable modem connections to the Internet, as well as emerging access techniques like Ethernet and fixed wireless. Overall, high-speed Internet access is the highest-growth area in the telecom market, growing at over 30 percent annually, even though it’s still a relatively small contributor to overall revenues.

Globally, broadband access is clearly on the rise. According to Karen Edward Onyeije, assistant chief at the Strategic Analysis and Negotiations Division of the Federal Communications Commission (FCC), the number of worldwide subscribers grew 57 percent last year. Leading countries in the access space were S. Korea, Canada, Sweden, and the United States:

Interestingly, broadband access penetration is still minimal in many places. Despite being in the top four countries in terms of broadband deployment, Canada and the United States have only linked about 20 percent and 10 percent of their inhabitants to high-speed Internet services, respectively, Onyeije said. And in parts of Europe, such as the U.K. and France, the percentages of broadband deployment are much, much lower.

There's also plenty of room for growth in the kinds of access provided. Other than in Sweden, where Ethernet is a key access method, Onyeije reports that penetration is "very small" when it comes to techniques other than xDSL and cable. But sales of dedicated xDSL products have been dwindling, and analysts say carriers are looking more than ever to optical access for future deployment. The hope of worldwide groups is that a combination of regulatory and economic support from governments will help generate more access products and services.

The emphasis on access has been building for months. In April, a report from Optical Oracle, Light Reading's monthly subscription research service, indicated that access is the "last chance" for many telecom providers to build revenue bases for survival (see Optical Oracle: Access is Gold ). And at last week's tradeshow, a range of companies made access the centerpiece in their exhibits (see Access Is In ).

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com

Editor's Note: Light Reading is not affiliated with Oracle Corporation.
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wei48221 12/4/2012 | 11:31:43 PM
re: Broadband: Will It Bust a Move? In my country, the incumbent carrier dominates the market because it's been building its infrastructure (last mile, etc.) using public money for the past 50 years. How can any new comer beats that if the government doesn't force the incumbent to relinquish its hold of public assets?
rjmcmahon 12/4/2012 | 10:17:01 PM
re: Broadband: Will It Bust a Move? What is the issue with US RBOCs?
_____________________

Their headcount is way too high. They need to reduce staffing by 90% or more if they plan to stay in the bw business. No industry has ever been able to achieve such dramatic cuts without significant pains.

IBM used to sell microchannel PS/2s for $12K and still lost money. At the same time, clone mfgs sold PCs for $3K and made money. Even at employee discount prices the IBM pricing was 2-3 times more expensive than something bought off a retail shelf.

The US bw pricing problem is no different. The RBOCs only method of protecting revenue streams, similar to our farmers, is through government subsidy programs and protectionist policies.

Stopping the funding for corporate welfare programs is no small task particularly when politicians, not to mention the regulators, take from the same revenue streams.
Rupert_1 12/4/2012 | 10:17:01 PM
re: Broadband: Will It Bust a Move? Here is another broadband question maybe someone can offer some insight on:

A friend who lives in phoenix arizona has Qwest's VDSL service. It costs roughly $40 for 100 digital TV channels (any 3 simultaneously) and another $40 for 256kbps data (if you subscribe to TV too, otherwise it's higher).

If we normalize to $/megabit/sec, and assume 5Mbps bandwidth per channels is needed for MPEG2 TV, with 3 channels active, she is paying $2.67 per Mbps for the TV (that would include the content costs to the content owners), whereas the data connection is $160/Mbps, and is just a connection only, i.e. no content provided by Qwest. Can someone try their hand at explaining the justification for this huge disparity?

I understand that the TV system is like a walled garden and is local only, but are backbone transit costs really that high to justify this? They are both "always on" connection so total time of usage seems not to matter.

Any thoughts welcome, even if you are just guessing. I can't seem to come up with a very good answer.
toohideous 12/4/2012 | 10:17:01 PM
re: Broadband: Will It Bust a Move? > Or, will it move closer towards Bust?

Bust seems likely if the price to consumer's goes up. I pay $50 and I just barely think it's worth it. I'm a "high tech" professional. I'd guess that people who don't fit that mold are unlikely to pay more than AOL prices for access. Even if it is tons faster a bit more reliable.

Like I said it is just a guess, but I'd put money on a bust unless consumer prices for broadband comes down first.... Actually bust is not the right term - more like withering on the vine in a very slow growth mode.

I wish I had some insight into your other questions. They are really good.

-th
Rupert_1 12/4/2012 | 10:17:01 PM
re: Broadband: Will It Bust a Move? Or, will it move closer towards Bust?

What do people here think? With Verizon talking about DSL needing to be 50% higher (so about $75 per month), and cable hinting the same thing, for them to make money from it, is there really a future?

I'll drop my DSL at the next rate increase. I tolerated the last one, but the value is diminishing, if not already gone since I spend most of my day through a software VPN via DSL that isn't much better than 56k anyway.

What is the issue with US RBOCs? Smaller US ILECs claim to already be profitable with DSL and DSL is profitable at 1/2 to 1/3 of current US RBOC costs (often at much higher bandwidth too) overseas?

Are RBOCs really that inefficient compared to the rest of the world's telcos, or are they just exerting monopoly pricing power, to try to discover the threshold of pain where people finally can take no more?

Cost to user going up in the face of hugely declining equipment costs and much more efficient provisioning costs (or so the RBOCS say anyway) seems to be textbook Monopoly price control. Am I wrong?

Either way, it starting to seem pretty undesirable to have them in charge of broadband. I've seen some other discussions here, of people talking about cities building their own networks. Seemed crazy at first, but at least it seems like it has greater potential for a better long-term outcome.
rjmcmahon 12/4/2012 | 10:17:00 PM
re: Broadband: Will It Bust a Move? Cost to user going up in the face of hugely declining equipment costs and much more efficient provisioning costs.
________________

The following report has been helpful to me. Reference pages 6 and 7 (or 32 and 33 as numbered in the document) for some graphics on how out of balance the consumer bw pricing models have become.

http://www.undp.org/hdr2001/ch...
willywilson 12/4/2012 | 10:17:00 PM
re: Broadband: Will It Bust a Move? I'll drop my DSL at the next rate increase.

=================

Same here. Maybe even before the next rate increase.
greybeard 12/4/2012 | 10:16:59 PM
re: Broadband: Will It Bust a Move? > What do people here think? With Verizon talking
> about DSL needing to be 50% higher (so about
> $75 per month), and cable hinting the same
> thing, for them to make money from it, is there
> really a future?

Where I live there is demand at these prices. On the other hand, around here no one is offering it at this or any other price.

To a large extent how much the carriers can charge for DSL will depend upon what is run over it. Telecomuters and data-intensive home businesses that pay well (eg, self-employed lawyers) are likely to pay $75 just for a big data pipe. However, if you throw in voice-over-IP with both local and long distance service (included in the monthly price) then clearly you could get a considerably larger market even at a higher price.

There is a Chicken and Egg problem -- if enough people had broadband service, then the applications would emerge which would justify paying for broadband service.
OpticalZoo 12/4/2012 | 10:16:58 PM
re: Broadband: Will It Bust a Move? Video is a multicast taking up a set amount of bandwidth at all times in the core and branches off like a tree to the end user.
Where as DSL connection is unicast. No efficiency just a direct route to the end points.

That one multicast TV video is feeding thousands of TV sets. = 5Mbps in the core network (fictitious number)

Where as a thousand persons playing streaming audio at 128 Kbps from different websites to their PC are using up 125 Mbps. The number goes up for streaming video.

Also people have more problems with networking PCs and tend to need more support. Cable TV is pretty straight forward for most persons now a days. Either it works or doesn't.

I hope this explanation suits your question.
Sorry IGÇÖm a bit tired to go into great detail.

-------------------------------------------------

Here is another broadband question maybe someone can offer some insight on:

A friend who lives in phoenix arizona has Qwest's VDSL service. It costs roughly $40 for 100 digital TV channels (any 3 simultaneously) and another $40 for 256kbps data (if you subscribe to TV too, otherwise it's higher).

If we normalize to $/megabit/sec, and assume 5Mbps bandwidth per channels is needed for MPEG2 TV, with 3 channels active, she is paying $2.67 per Mbps for the TV (that would include the content costs to the content owners), whereas the data connection is $160/Mbps, and is just a connection only, i.e. no content provided by Qwest. Can someone try their hand at explaining the justification for this huge disparity?

I understand that the TV system is like a walled garden and is local only, but are backbone transit costs really that high to justify this? They are both "always on" connection so total time of usage seems not to matter.

Any thoughts welcome, even if you are just guessing. I can't seem to come up with a very good answer.
uuallan 12/4/2012 | 10:16:57 PM
re: Broadband: Will It Bust a Move? "Same here. Maybe even before the next rate increase."

You're lucky. My home provider, Adelphia, may not be around long enough to increase rates.
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