Post of the Day
November 17, 1999

Board Name:
JDS Uniphase

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Subject:  Re: The last mile
Author:  mfkelly

I've worked in the telco industry (software engineering background) for a LONG time, and I've been actively involved in business planning for E-commerce for several years. While the answers aren't totally clear for the Canadian market, a few clear trends are emerging.

1st: Cable modem installations are out pacing DSL installations by a wide least 5:1

2nd: The REAL value in the residential market is in maintaining that electronic point of contact, which can then be used to provide not only all aspects of telco service e.g., local, LD, Internet but also broadband services such as digital video. This level of service can (theoretically) be provided by both cable and telcos at the moment, with other players lying in the weeds such as electric, gas and water companies.

Since the "one-stop shopping" aspects are emerging as so important to the success of carriers, I think there are two key battlegrounds which will determine the ultimate winners. Obviously, broadband capabilities for the local loop is the first key element. Full fiber is still the most expensive alternative, with hybrid fiber/coax next on the economic pecking order. Wireless is cheaper still, assuming that bandwidth limitations can be resolved. Satellite is (by far) the cheapest alternative in terms of POP costs, but the interactivity index is poor, especially if a geo-sync bird is used. MEOs or LEOs improve the interactivity, but raise the cost of the network.

The second important ingredient needed for long term success in this market (assuming a supplier has the necessary deep pockets) is a "back room" operation capable of collecting, analyzing and using all the billing and usage data generated by a network's customers. It's important to realize that the actual carriage of traffic is a commodity service at best and often a loss-leader. Efficient billing, low customer churn, and the ability to transform usage data into marketing data will separate the winners from losers.

In terms of today's market, however, one thing is clear: Cable modems are kicking DSL's butt in the open market in Canada. I work for a telco, and could have DSL if I wished. I have a Tera modem provided by Rogers. I love it. However, Rogers have one of the worst "back room" operations in the business and most of their customers hate them. When another alternative emerges, Rogers cable modem customers will bolt in a New York minute.

Just a few random thoughts from north of the Border.