DSL Does Data and Other Services, Too:

As data's share of network traffic increases, DSL can offer numerous benefits for carriers-which may need multiple DSL flavors to suit business and residential markets

As telephone technology enters its second full century, the business model for local exchange carriers is changing quickly from one based on providing circuit-switched voice services to one based on providing differentiated packet- switched voice and data services.

With this change, LECs and other network access providers are being forced to reassess their service offerings and the technology used to deliver them. They are seeking cost-effective high-bandwidth solutions that can transmit data for high-speed Internet as well as for corporate intranet applications. They increasingly are looking at a promising new technology that is beginning to be deployed in central offices throughout North America-digital subscriber line (DSL).

Access providers are already seeing their voice-dominated business models shift. In the past five years, telephone companies in North America have seen the majority of their growth come not from voice but from data traffic, which has become the main engine of business expansion-a trend that undoubtedly will continue and accelerate as the new century nears.

By some estimates, data traffic will surpass voice traffic in as few as two years, and by 2005, voice will represent only 10% of overall traffic. In some geographic regions, such as California's Silicon Valley, the cross-over already occurred in 1995.

There are two main reasons for data traffic growth. First, the Internet and on-line communications are becoming important vehicles to access and distribute information for both business and residential consumers.

Secondly, more people are working from their homes-whether through sponsored telecommuting or because they own a home-based business. These non-traditional workers rely upon dependable data and multimedia transmission to operate their businesses (Figure 1).

For the most part, telcos and other access providers should applaud these changes, which should translate into more business for access providers and greater profits. However, these changes also are causing tremendous challenges.

To sustain the demand for connectivity, telcos are forced to upgrade their voice switches to provide the same level of service availability to regular analog voice users. But the cost is very high compared to the incremental revenue generated.

Access providers will have to find ways to deliver far more bandwidth, provide greater services and ensure that the data-induced demands on their networks do not lead to traffic congestion.

DSL is a solution that can meet critical requirements for providing high-speed data services. With DSL, access providers can carry numerous high-bandwidth services across copper wire. It ensures the unfettered flow of both voice and data traffic by providing high-quality, differentiated services at a reasonable cost to both the provider and consumer.

Cost justification DSL technology is compelling because it provides a competitive response-at a reasonable cost-to the increased demand for high-bandwidth data transmission. This technology comes with both benefits and costs.

For the network access provider, the principal benefit of DSL is its ability to permit the rapid flow of information while using the existing copper wire foundation. Therefore, access providers do not need to install more copper or lay down miles of expensive fiber, as they would for other potential solutions.

DSL also eliminates providers' need to constantly upgrade their pricey Class 5 switch installations. If providers were to continue to provide data and voice services over the same network, they would have to buy more switches to ensure a congestion-free network.

As widely reported, a typical voice call lasts about five minutes, compared to an average 30 minutes for an Internet call. This means that for every new Internet customer, the carrier would need to provision six additional lines to guarantee the previous level of service availability to POTS users.

DSL bypasses the Class 5 switch for data-only calls, so access providers can accept more traffic without investing in a huge switch upgrade. With DSL, voice and data paths are separated, which means that providers can meet the burgeoning need for high-speed data services without breaking their budgets. Furthermore, by keeping costs low, service providers can make money off the traditionally low-margin business of providing Internet access.

To build the data network, access providers will have to make an additional capital investment. The total cost, however, should be far less than they would need to spend to run all traffic through a single network.

Generally, access providers will need two pieces of hardware to effect DSL solutions that include both voice and data elements-solutions that should have great appeal to the mass consumer market.

First, providers will need to install a DSL access multiplexer (DSLAM) in their CO, which will house multiple DSL transmission units. At the remote customer site, another DSL transmission unit, a DSL modem, will be installed. These DSL transmission units will engage in physical layer negotiations between the remote location and the CO.

Secondly, access providers will need to install a POTS splitter, which will enable analog voice services to be carried simultaneously on the same line as digital data services. A POTS splitter is a low pass filter that separates analog voice from DSL frequencies. It allows the voice signal to be routed to the existing voice switch, while the data signal travels directly toward the corporate or Internet service provider data network. The DSLAM and the POTS splitter are not expensive.

Besides the DSL hardware, access providers may have to invest in additional high-performance network devices, such as asynchronous transfer mode switches. However, this should not be regarded as a DSL-specific expense.

Switch capacity will have to increase to support new data services, no matter what method is used for network access. Likewise, some management-related costs may increase because of growing demand for new services.

User benefits DSL offers customers access to a range of information services they previously could not receive through Internet communication. Users can experience high-speed Web browsing and can send and receive large documents.

Another benefit is to use DSL's always-on capability to receive information-such as news, video clips and stock quotes-that is pushed toward the user at the time it is generated, according to a personalized profile, without the need for the user to dial-up.

Always-on capability will help turn the PC into an appliance, making it easier for the mass consumer market to use. People will be able to walk to a PC and send e-mail, check for the latest airfare promotion or download a promotional clip for a new movie-and they will be charged on a usage basis, not a connect-time basis.

Consumers also may benefit by receiving all of their telephone-related services through a single provider. Customers are buried under a monthly pile of bills from utility service companies. By being able to receive voice and data services from one source-and paying for them through a single bill-consumers will gain significant added value from their service provider. This one-stop shopping will give providers an important means of differentiating their services from those of competitors such as cable companies.

Consumers also will have additional costs. First, they will have to purchase DSL modems, which should be competitive with the cost of analog 56 kb/s modems today. Also, they will have to pay an additional monthly fee for the DSL data service. However, this service likely will be priced even more competitively than ISDN services.

According to test data, the average home consumer is willing to pay an extra $50 to $60 a month for the service. At this price, the DSL market in the United States should reach 1.5 million to 2 million modems by 2002, officials at Cisco Systems estimate.

For the business customer, DSL represents a very compelling investment for several key reasons.

First, DSL provides a cost-effective way for telecommuters and branch offices to access the corporate network, provisioned via secure virtual private network services.

Additionally, a DSL-based approach can improve the quality and reduce the cost of communications among employees via videoconferencing. It also can improve productivity by making intranet applications available to the distributed work force and by creating a cost-effective communications channel with the corporation's partners via extranets. Finally, DSL can displace the costs associated with separate voice, data and video networks.

To the business, though, a faster pipe does not represent a significant advantage if the service provider cannot guarantee bandwidth on that pipe. The availability of different classes of services and quality of service, provisioned at different prices, are essential requirements for the business. The granularity of these service classes also will help the carrier market its services to multiple tiers of customers, helping to accelerate the return on its overall investment.

DSL flavors DSL is actually several different technologies built around the same framework. These technologies vary in support for distance and speed (Table 1).

Some of the aforementioned DSL varieties support both data and voice. Others support only data services. Below is a breakdown of the various types of DSL.

Asymmetrical DSL (ADSL) is a promising type of DSL for the mass consumer market. A telco-inspired service, ADSL offers high-speed digital service and analog voice service over a local loop.

ADSL will transfer data as far as 18,000 feet over copper wire at a rate of 7 Mb/s on the downlink and 1 Mb/s on the uplink. And because an ADSL line is for the exclusive use of each customer, there is no contention for bandwidth on that loop.

Very high bit-rate DSL (VDSL) is the faster cousin of ADSL. Like ADSL, VDSL provides for the transmission over copper of both digital data and analog voice. However, it does so at speeds as high as 52 Mb/s.

VDSL, though, does have some shortcomings compared to ADSL. First, it operates over much shorter distances, achieving top speed over only 1000 feet of copper wire. Secondly, standardization is not imminent.

Data-only DSL services such as ISDN DSL, symmetrical DSL and high bit-rate DSL feature full-duplex data support and appeal to the corporate market.

The main differences between the technologies are speed and distance allocations. For instance, at a top transfer rate of 144 kb/s, IDSL is not much faster than ISDN. However, IDSL can transmit data as far as 18,000 feet. SDSL and HDSL, which have much faster transfer rates-as fast as 2 Mb/s-cannot match IDSL for distance support.

One of the advantages of IDSL is that it can leverage existing ISDN equipment, such as routers and terminal adapters. SDSL and HDSL require the purchase of new customer premises equipment. Another advantage of IDSL is that the overall solution at the CO is very cost-effective.

In the end, service providers will have to decide which variety of DSL they should offer. In all likelihood, many will decide to offer several different types of services-some geared for the home market and others for the corporate market.

With the promise of offering support for high-bandwidth applications at a reasonable cost for the provider and the consumer, DSL certainly will spread quickly as the next century nears.

Besides digital subscriber line, carriers have several options as they try to meet the growing need for bandwidth and provide a congestion-free voice and data network.

One option is for carriers to build out their copper-based infrastructures, thereby providing more lines for transmission. Using current technology, however, this solution does not adequately address the bandwidth issue and would be cost-prohibitive for most carriers.

Secondly, carriers can install fiber-based infrastructures, providing large enough pipes for the most bandwidth-hungry applications. The weakness of this solution also is the overwhelming installation cost.

A third option is for access providers to market existing high-bandwidth options-such as T-1 (1.5 Mb/s) or ISDN lines-more aggressively. However, T-1 technology simply may be too expensive for most home-based consumers, while ISDN has been technically difficult to provision and has not been sufficiently scalable.

In addition, ISDN, like regular dial service, relies upon the central office switch to pass traffic. Because ISDN calls typically are long data sessions, the CO switch will become increasingly overloaded if a great number of users decide to install ISDN.

The fourth option-DSL-can overcome the limits of competing technologies. With DSL, carriers can offer high-speed data and multimedia services by capitalizing on the existing, embedded base of telephone wire, therefore permitting greatly enhanced service at minimal additional cost to the company or the consumer.

But it is not only because of consumer demand for higher bandwidth Internet connections that access providers should look at DSL technology. Interest also should arise because of pressure on the business side.

Incumbent local exchange carriers are finding their business models are being threatened by emerging competitors that claim they can move traffic faster or provide better service at less cost than the traditional carriers. At this point, incumbent LECs appear to have the most to fear from two non-traditional sources of competition.

First, competitive LECs now have access to the incumbent's installed base of copper wire, which they can lease at prices that are close to cost. That means these CLECs can offer cut-rate data services, typically targeted at the telecommuter and small- to medium-sized business segments. The traditional LECs will have no choice but to offer a broader range of services-including broadband data and video-in order to remain competitive.

Cable operators provide a second source of competition for the access providers. Television cables have the ability to move data very quickly, and some companies already are trying to exploit that capability by offering high-speed data services. In particular, @Home has been aggressive in promoting not only its home-based data services, but also its @Work service, which is designed to bring high-bandwidth Internet access to corporate users.