The fleet-footed bearer of DSL

Small and medium-sized companies are looking for bandwidth. Their options are limited and leave a gaping hole in the bandwidth market. Dial-up services are inadequate and can't handle their continual Internet and data requirements; leasing T-1 lines often is too expensive. Increasingly, companies will look to technologies such as DSL to meet their needs.

But if DSL is the answer, the question is, who can provide it for small and medium-sized companies?

In addition to deregulation, several factors have contributed to new market opportunities for innovative telecom providers: the emergence of IP networks, voice and data convergence and packet-based networks. Data-telecom providers now can partner, rather than compete, with local exchange carriers (LECs) to enhance the phone network with advanced data network capabilities and to create new revenue streams from value-added services.

Today's businesses seek reliable broadband networking services in order to meet their needs, which include:

- A range of access speeds, from 56 kb/s to multimegabit service

- Variable pricing based on these gradations of service

- New types of broadband services as new technologies make them possible and affordable

- The ability to work with a service provider that can support their initial moves into the electronic world and stay ahead as their e-commerce operations grow.

Small and medium-sized businesses are looking for service providers to offer them the quality and reliability consistent with the telephone company and the WAN infrastructure of a large enterprise network. To compete in the new e-world, these companies not only need a constant Internet data tone, but they need it at a much more affordable price - a factor less important to large corporations.

The way today's markets and vendors currently are structured, neither incumbent LECs (ILECs) nor ISPs are positioned to serve the small and medium-sized business markets for broadband data services. A business must ask itself if a telecom carrier really can be expected to be an expert in packet-based data network technologies and if an ISP can be relied upon for telecom-like, business-class voice service. A market opportunity exists for a new kind of carrier to partner with and enhance ILEC and ISP offerings with high-speed data services for the small and medium-sized business communities.

DSL vs. ISDN

High-speed broadband access is a major requirement if companies want to stay competitive in the new economy. For small and medium-sized businesses, affordability becomes a greater part of the equation.

Dial-up Internet services no longer cut it. The circuit switched-based public network was designed for voice transfer, not data. DSL technologies can fill the bandwidth gap for small and medium-sized companies. Unlike dial-up services, DSL services are high-speed, always-on, dedicated connections. For e-commerce, companies need networks that can carry both voice and data signals at the same time. DSL fits that bill.

The flexibility of DSL makes it a promising technology for the future. The Yankee Group expects that the number of business DSL subscribers between 1998 and 2002 will increase at a compound annual growth rate of 115%, reaching almost 1.5 million in 2002.

DSL offers high-speed Internet access at affordable prices and maximizes telecommuter access to corporate networks. Symmetrical DSL (SDSL), in particular, enables customers to access the Internet or retrieve e-mail while talking on the phone or sending a fax. Using digital coding techniques, SDSL increases an existing phone line's capacity without affecting standard phone services.

The principal benefits of SDSL include:

- Simultaneous Internet and voice and fax capabilities over a single access line

- Very high-speed, uninterrupted, always-on Internet access

- Significantly lower price per bit when compared with DS-0 or DS-1 technologies.

SDSL provides significant cost savings while offering an alternative to the 128 kb/s of traditional ISDN and high-end leased T-1 services at 1.5 Mb/s. Because ISDN is a circuit-switched technology, its use contributes to congestion on the public voice network. SDSL is especially efficient for a small or medium-sized business' Internet needs. Like ISDN and T-1 links, SDSL supports simultaneous high-speed voice, data and video transfers in both directions, and it does so over a single standard phone line. Although asymmetrical DSL solutions have generated much interest, businesses need symmetrical - not asymmetrical - solutions.

When comparing speed, DSL outperforms ISDN. SDSL can provide symmetrical bandwidth in excess of 2 Mb/s, and new technology will increase capacity even more. The maximum speed of ISDN, on the other hand, is 128 kb/s.

Price is another advantage of DSL. Dial-up ISDN service is billed by the minute. Fees range from 1 cent to 2 cents a minute depending on the number of channels used in addition to monthly base rates. ISDN can be extremely expensive for a rather small performance improvement because its service is metered and added on top of both telco and Internet bills. DSL charges are based on one fixed monthly rate for unlimited use. A full-service DSL account does not incur any other local telco or ISP costs.

In terms of availability, DSL is a dedicated, or always-on, connection. With ISDN, users are forced to employ dial-up services through an ISP - often using a telco's long-distance lines - each time they want to access the Internet.

The sticking point for DSL is distance. ISDN has a farther reach than DSL's 18,000-foot limit. However, DSL technology is continuing to be reduced in its size and footprint to make it more accessible via huts or pole-mounted applications. This will increase reach for DSL customers.

Birth of the PLEC

Until now, the data competitive LEC (CLEC) was built around traditional telco services, connecting private data networks using expensive leased lines and the public network. These services are geared toward larger businesses and often are too expensive for small and medium-sized companies. Or, they are impractical because these providers cannot assist customers with their e-commerce and application needs. Consumer ISP services for dial-up Internet connectivity, meanwhile, are lacking in performance guarantees for e-commerce applications.

Small companies can turn to few places for complete, turnkey solutions that enable them to participate in the brave new e-world. This is especially true when one considers the need for service providers to assist their small or medium-sized business customers down to the application level.

Because one of the Internet's main advantages for small businesses is that it puts them on equal footing with large companies, their e-commerce needs can be as robust and grow as rapidly as those of larger businesses. That's why they need value-added, application-oriented services - and not just fatter, cheaper pipes.

To properly serve the local small and medium-sized sized markets, the new data CLEC needs to look at incumbents as partners rather than competitors. This new-wave, e-world data CLEC is known as a "packet-based LEC," or PLEC (see sidebar on page 44). A PLEC replaces the dial-up, narrowband, circuit-switched access and the traditional data CLEC's time division multiplexed, point-to-point facilities with always-on connectivity. It does this by constructing a facilities-based, packet-switched network adjacent to these older systems.

Where it fits in

The PLEC does not compete with ISPs or sell dial-up Internet access, but rather, it partners with ILECs and ISPs by helping them wean their dial-up customers off telephone lines (Figure 1). PLECs offer Internet data tone services, which are high-speed, always-on, dedicated connections. ILECs and ISPs can team with PLECs to create new revenue streams generated by enhanced data networking services that allow their clients to better compete in a networked e-world economy. PLECs focus on partnering with ILECs to deliver solutions to business customers for Internet access, remote LAN interconnection and telecommuting.

Although they both are competitive providers, PLECs differ from their data CLEC brethren in several ways. Data CLECs purchase and receive conditioned unbundled copper loops - free of load coils and bridge taps - from incumbents. They then co-locate their DSL equipment in the ILEC central office and backhaul traffic through leased DS-3 lines, but depend on the ILECs for the last-mile connection. These data CLECs are merely providing basic point-to-point links. Their "wholesale DSL" approach amounts to re-labeling traditional telco services and falls far short of meeting the full-service requirements of the small and medium-sized business markets.

PLECs, on the other hand, go further than data CLECs and build their own backbones, deploying broadband networks all the way to the consumer by deploying ATM and IP fast packet-switching technologies. PLEC networks generally provide significantly more performance, capacity and fault tolerance throughout their coverage area. The small and medium-sized business markets need PLECs that can offer a full-service approach, addressing not only the flexible, cost-effective range of services but also e-commerce and application needs. PLECs' services also must combine proven, enterprise-class networking technology with the high-quality, reliable service standards of traditional telephone carriers.

It is inevitable that LECs will become largely packet-based in their network infrastructure, as today's voice and data networks converge over time. ILECs will need to partner with PLECs to rapidly gain the skills necessary to meet the growing demands for carrier-class IP broadband services at the local level. The LECs that become the dominant vendors in data will be the ones that can deliver the highest value to businesses by offering the easiest, most reliable and most affordable broadband services while achieving the kind of reliability that these businesses expect from their current phone service.

Full-service packet-based local exchange carriers supply small and medium-sized businesses with the network infrastructure to allow them to enter the new e-world. They give companies the means for advanced applications such as e-commerce, always-on Internet access, interactive multimedia programs, telecommuting, groupware, collaboration and distance learning. A facilities-based PLEC provides high-speed wide area data networks, Internet services and in-building network outsourcing services through resellers, affiliated ISPs and incumbent LECs.

For high-speed data transfer and Internet access, PLECs supply packet-based data network services. Packet-based switching is an efficient method of transferring data. PLECs deploy an ATM backbone, which is capable of integrating LAN/WAN data, voice and video communications into a single solution. Conventional networks carry data in a synchronous manner, which leaves some slots empty, thus wasting valuable capacity. ATM broadband networks automatically adjust the network capacity to meet the system needs and can handle the Internet, data, voice, video, multimedia and television signals. For Internet access, the PLEC offers advanced DSL technologies.