Post of the Day
August 15, 2000

Board Name:
Rat's Broadband Bandwagon

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Subject:  Wireless, DSL, and Cable
Author:  VicIsGod8

Well it is yet another battle Vic will describe to you in his action-packed story. Rather than AOL taking on Microsoft (MSFT), Deutshe Telekom (DT) and others for dominance over the internet, I shall debate the power of the two dominant broadband technologies and wireless.

Before we even start this post, I should probably define some "basic" terms that EVERYONE expects you should know. The two essential terms are "broadband" and "narrowband." Narrowband is an internet connection that is 56k or slower. These types of connections make it difficult (and seemingly impossible) to download large media files that include sound, pictures, and videos. While using a traditional narrowband connection, which about 95% of the United States is still using, your phone line is busy, and you cannot use the phone (unless you have more than one phone line). Broadband is a much faster alternative to slow 56k (and slower) connections. The currently available broadband technologies are DSL, cable, satellite, and various wireless connections. There is always T1, T3, and various other forms of broadband connections, but they will someday fade away because they are very expensive and will eventually be eclipsed by the "forever-advancing" DSL, cable, wireless, and satellite technologies. You can use your phone if you use any type of broadband connection. High bandwidth, high performance broadband connections are obviously the future, but what types of broadband will lead the day?

Within the United States, the dominant form of broadband is cable. For every 3 cable users, there is a little more than 1 DSL user. Wireless and satellite connections to the internet are obscure and rather rare in the United States. This will, of course, change someday, but not right now. Outside of the United States, the fastest growing broadband technology (especially in Europe) is wireless. In my not so humble opinion, cable, DSL, satellite, and wireless connections will have their niches, and will all be around in 10 years.

Cable

Cable has a clear advantage in the broadband world in the United States currently. Cable can be faster than DSL (not ALWAYS faster, but it usually is). Unlike common myth, cable does lose speed the farther away you are from the central cable location. Unlike DSL, this loss of speed is very minimal. The factor that slows down a cable connection to the internet is the number of other people that are connected to the same cable node as you are. Everyone in your neighborhood that has a cable connection is "sharing" your cable connection. You can reasonably (or unreasonably in certain situations) expect to get 1.5 Mbps downstream with cable, but that fast connection will not be consistent, and it will slow down dramatically as more people in your neighborhood sign onto the internet via cable. You can get up to 3 mbps, but that only happens in your dreams! Upload speeds can be about half as the download speeds, but they are sometimes limited to a "sluggish" 128k. 128k seems really fast if you've spent your life on a traditional regular dial-up modem.

Cable can be fast (and for most people, it is REALLY fast compared to your old 56k modems and slower), but it gets slower and slower as more people use it. Because of cable's attractiveness, more and more people will log onto the internet via cable. This will slow your cable connection down more and more. Many analysts (and I) believe cable's popularity (as well as all other broadband technologies) will skyrocket, thus causing your cable connection to get slower. No matter how slow it gets, it will always be faster than narrowband connections (unless somehow all other broadband technologies die, and everyone in the world getes a internet connection via cable).

DSL

DSL can get a little complicated and complex. Before I get to far in discussing DSL, I should tell you what it stands for. DSL means Digital Subscriber Line. It is the second most popular form of broadband in the United States, and some analysts believe it will ecplise cable as the most popular form of broadband in the United States by as early as 2003. (This 2003 number is EXTREMELY optimistic about the growth of DSL. I believe DSL will eclipse cable someday, but that is probably a good 5-8 years away.) DSL's maximum speeds are slower than cable, but this will not be enough to prevent the technology from eventually taking over cable as the leader in broadband in the United States.

Cable can be faster (and at this point in time, usually is faster) than DSL, but DSL is still lightning fast if you are used to 56k and slower. DSL is probably a little more complicated to understand than cable. Unlike cable, there is no extra line coming to your home. DSL works through your phone line. Amazingly, you still have access to your phone (even if you have only one phone line) while you are connected to the internet via DSL. "Wait, wait, wait! Hold up Vic! How is that possible?" While phone calls occupy the "low frequencies" of your phone line, the "high frequencies" are used by your DSL connection to the internet. It's almost like you have two separate lines coming into your home.

There is not one single type of DSL. The cheaper DSL, which is ADSL (Asymmetrical DSL), allows download speeds ranging from 144kbps all the way to 1.5mbps. The speed you get depends on how much you pay, and how far away you are from the Central Office. ADSL upload speeds are generally 384kbps and downward. (Remember to keep in mind that these speeds are the maximum for DSL, and the actual speeds [like cable] are often [if not always] less than the advertised speeds.) The other type of DSL is SDSL (Symmetrical DSL). SDSL, unlike DSL, allows upload speeds to be the same as download speeds. This is extremely useful for videoconferencing and seemingly (but not really) "futuristic" purposes. Another type of DSL is IDSL, which allows you to receive DSL outside of the 18,000-foot range. IDSL allows you to receive downstream of 144kbps, and that has a range of about 30,000 feet. One last thing I should note about DSL is that DSL is not "shared" like cable. This is, in my humblest opinion, the reason why DSL shall become the dominant broadband form in the United States.

Wireless

In my opinion, this is the hardest one to analyze. The wireless technologies have evolved more rapidly than DSL or cable (or that is what most people think, but I will discuss this a little more later on). Qualcomm's (QCOM) HDR, DoCoMo's i-mode, Sprint PCS (PCS) [the tracking stock of Sprint (FONS)], and numerous other technologies have evolved in the wireless world. The wireless internet is definitely growing at a rapid pace outside of the United States. Wireless technologies (not just in terms of the internet) are growing slower than in many other parts of the world, such as Europe and Japan (and some other parts of Asia as well). I believe that the wireless revolution will become reality in the United States much later than in other parts of the world, and may not catch up to the rest of the world for a long time (that is assuming if they ever do catch up).

Let's take a look at AT&T (T). T is obviously a leader in the wireless business in the United States. Although they are not the most technologically advanced, they are a major factor. Their wireless systems run on TDMA (Time Division Multiple Access). This is "ancient" considering the evolution of technolgy, especially wireless. QCOM's CDMA is starting to become a real threat to the European standard, GSM, which is not all too far behind CDMA technologically. GSM is still the dominant wireless technology by far. This is hard to believe for many people, but the United States is getting slaughtered in advancing wireless technologies!

There are many wireless internet connections. Each one has its benefits and disadvantages. Everyone has their favorites, but I will take QCOM's HDR (High Data Rate) as the "standard" for internet connections. It is definitely not the most popular right now, but I'll just use it as a guideline for a wireless internet business model. HDR can get 2.4Mbps downstream. Its great advantage to DSL and cable is that it can connect you to the internet whether you are in a motel with no phones in the middle of nowhere or if you are in a big city like New York. Wireless internet connections are becoming increasingly popular outside of the USA, but rather sluggishly in the United States. (I keep bringing this up. This fact is extremely crucial in my mind. Although only a small fraction of the world's population is in the United States, I believe the wireless revolution will only reach its full potetial if the United States joins it.)

Satellite

Satellite connections are the most "high-tech." Satellite is just not popular as a medium for television compared to cable. It just is not a popular form of broadband either. You have to upload through 56k connection phone lines. This is extremely "painful." Of course, two-way satellite connections are being deployed, but it is too new to judge whether it will be a success. I would not bet my life on the fact that satellite internet connections are the future. However, people in rural areas sometimes have no other option other than satellite for means of broadband. Satellite connections will have their niche, but won't be as important as DSL, cable, wireless, and possibly others.

Price

Cable generally costs about $40-$50/month. DSL ranges from a price of $0/month (from services providers such as FreeDSL.com) to several hundred dollars per month. Satellite connections price ranges and wireless connection price ranges vary dramatically. It is difficult to analyze who is a better deal, but cable seems to have the advantage at a first glance. If everyone sees this "advantage," cable connections to the internet will get slower and slower. That "advantage" may not be such a great advantage after all in the long-term. This is why it is hard to tell who has a better deal.

Security

Security is extremely crucial to individuals connected to the internet, and ever more important to businesses. Cable is "shared." Just the word "shared" causes a little bit of concern if you are looking for security. Wireless is pretty safe, but probably the least secure among the three technologies. DSL is probably the best way to go if you find security to be the most important thing on your list. It is hard to tell because computer hacking is evolving at a rapid pace.

The Future of Cable and DSL

The abilities of the fiber optic cables that carry your internet connection will be amplified in the future by an "opto-chip," which sends speeds at rates faster than any wireless, DSL, cable, satellite, or any other type of connection can. Lucent's (LU) Bell Labs deomstrated that cables lines could deliver information over the internet at a rate of 3.28 Terabytes/second. This is probably the final phase of the internet via cable for the medium-term outlook. People can share this super fast connection, and still have a connection that is "mind-boggling" at this point in time. Right now, this type of technology is not economical, and may not be economical for a little while. I believe technology will always have its way to become a standard if it is a good technology. Obviously, this is a good technology that is incredibly powerful.

"Cable is going to win in the long-term, no doubt about it." WRONG!!!!!! There is a serious amount of doubt. Here is why. Scientists are developing terabit lasers that will be able to handle all the daily phone calls of AT&T plus the rest of the data on a single laser. This will make DSL cheaper, faster, and more available to everyone. DSL is consistent in the speed it delivers you. It is more "secure" than cable. This is why DSL will eventually succeed cable as the most popular form of broadband.

Conclusion

This has certainly been a long post. Each type of broadband will have its niche. The best way to play the broadband revolution in my very unhumble opinion is to buy AOL. The merged AOL/TWX will have dominance in the cable world with its cable assets, DSL agreements with the Baby Bells, a major stake in General Motors Hughes (GMH) for satellite and a deal with DoCoMo for wireless. AOL's interactive television strategy shall rise to power in a few years as a powerful phenomenon. AOL/TWX is a safe bet that has a lot of potential. Stay long on it!


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