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VDSL Group Stares Down Costs, Need for Standards

9/17/2000 8:00 PM Eastern

As a founder of the Full-Service VDSL (FS-VDSL) Committee, the recent decision by Qwest Communications International Inc. to rethink the wisdom of widespread VDSL (very high-speed digital-subscriber-line) rollouts raised some red flags, and sent a message to equipment manufacturers and fellow service providers.

The message is: Tackle such issues as distance limitations and lower technology costs, or face a VDSL shutdown.

The FS-VDSL committee was formed in August to advance the delivery of fully digital-video-programming, high-speed-data and voice services over traditional phone lines and to help define a set of international standards for VDSL within six months.

Its formidable lineup of equipment and service providers includes Alcatel Alsthom, Cisco Systems Inc., Deutsche Telekom, France Telecom, Lucent Technologies, Next Level Communications Inc., Nortel Networks, Motorola Inc., Verizon Communications and Qwest. They would appear to have the depth and expertise to push for quality VDSL standards and lower equipment and deployment costs.

VDSL's appeal has grown as cable migrates into traditional telco-business lines. The telcos want a way to protect their core telephone and data markets and an opportunity to compete in cable's video backyard.

"The standards committee is consensus-driven, so we've been frustrated with the progress of standards. The DOCSIS [Data Over Cable Service Interface Specification] standards have been very successful for the cable industry, so we're learning from that," said Paul Whitehead, general manager of video architecture and technology for Qwest.

The committee considers lowering the cost of VDSL deployment-now as high as $3,400 per subscriber-and dropping the cost of related VDSL equipment by as much as 40 percent to be crucial steps for the advancement of VDSL.

"Everything that goes on with the committee that would go toward reducing costs will help, and we will continue our leadership role with the committee to leverage vendors to drop costs and push for the 'Plan 998' standard," Whitehead said. "It's now a competitive necessity."

The FS-VDSL committee is a subgroup of the larger Full Service Access Network and an extension of the DSL Forum. Plan 998 determines how spectrum is shared on the telephone wire, how it mixes with different services and how spectrum is allocated for data transmission from subscribers to central offices.

Equipment manufacturers, which are being pressed to reduce costs, are well aware of the pricing and standards issues and their impact on VDSL deployment, which, in turn, could have a meaningful impact on their bottom lines.

"There are many things we can offer to reduce costs by 30 percent to 40 percent-like higher-capacity interfaces, more efficient use of fiber and reducing the cost of residential gateways-and we're doing those. We'll get close to the $1,600 VDSL-deployment cost Qwest is looking for," Next Level senior vice president and chief strategic officer Bill Weeks said.

Next Level, which is banking on Qwest's VDSL success, is scheduled to partner with Qwest in its launch of the service in select Denver suburbs, Weeks said.

"We're going into that market as planned to ensure the cost reductions. Qwest's operational costs are expected to be reduced, as well, to meet the 30 percent to 40 percent cost-reduction target," he added.

Defining VDSL standards and reducing costs are now the two key issues facing FS-VDSL, yet logistical issues remain, and equipment manufacturers are addressing those, as well.

"Setting standards is one objective, but how do you actually deploy VDSL? There are billing, service-provisioning, truck-roll and installation issues, along with the cost of equipment. We're looking at a 40 percent cost reduction per sub to get VDSL in a cost-efficient business model, and we're in that space," said Aidan O'Rourke, marketing director for DSL products at chip-set provider Broadcom Corp.

Yet it's the residential-gateway providers that are taking up most of that space, and costs, O'Rourke insisted.

"There isn't one killer cost, but certainly, one significant cost component is the residential gateway," he said. "In the context of VDSL, that means three set-top boxes rolled into one. That's where the reduction must start."

Cable, O'Rourke pointed out, has seen continued cost reduction for digital set-top boxes-a model he believes VDSL should follow. "They're two generations ahead with cost reduction and economies of scale, but there's no reason why VDSL can't achieve scalability like cable," he added.

VDSL scalability may not be achievable, though. Equipment providers such as Lucent readily admit that VDSL, although important in short-distance markets, is probably destined to be a narrower service, and not the impact player some telecommunications companies hope it will be.

"It will be a niche product compared to DSL, but it could be extremely important where high bandwidth and short distances are involved. We look at VDSL as an interesting technology, and very interesting when bundled with other services like IP [Internet protocol] video," Lucent senior DSL-product manager Chris Poer said.

The standards are crucial to Lucent's VDSL strategy, Poer admitted. "They can't be underscored enough. We can't put out a reliable product without the best standards. Once we're comfortable with them, we'll be very competitive in the VDSL market."

VDSL standards should be completed this year, and they will address another nagging issue: limited distance.

"There are only so many bits on a wire, then it runs out of steam. But the fact is that wires don't just die-they just fade out. So advanced electronics can compensate for the distance limitation, and VDSL is probably the end of the line for copper wires," explained Ron McConnell, member of the technical staff at Bell Laboratories' advanced technical section.

Despite VDSL's technical imperfections and the cost and standards issues, most companies participating in FS-VDSL are confident that the technology will eventually take its rightful place among a host of other services.

"Modems, satellites and levels of VDSL each have a niche, and we expect the standards to come out as a beefed-up version of DSL standards. But much work needs to be done," McConnell admitted.

Part of that work may be damage control following Qwest's announcement that it will revisit its VDSL strategy. "It's not a good thing for operators to second-guess a product, and we don't like to see that happen. It was a surprise, and it sent a rumble through the VDSL category," said Walt Davis, VDSL-product manager for Marconi plc, a network-system provider and member of FS-VDSL.

Whitehead said Qwest is aware of the rumbling, but it still plans to continue its work with FS-VDSL and its service in Phoenix (formerly a U S West market), albeit with some trepidation.

"Clearly, we will remain in Phoenix, but there are lots of questions about our VDSL service there and lots of interest among the FS-VDSL members," he said. "We'll also continue helping the committee to advance VDSL standards, which is a hot button. We must be sure we have a tight standard."

How quickly the standard is set, along with acceptable cost reductions and deployment issues, is likely to dictate just how successful VDSL will be. And speed to market, most experts agree, is becoming a vital concern.

"Cable isn't sitting still, and it is rolling out telephony," O'Rourke said. "Eventually, this will be a competitive market environment, so the telcos will have to respond quickly. They have to ask themselves, 'What's my service package?' And it must be done on a very short time scale."

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