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The last mile access race is heating up

Network World Fusion

April 27, 2000
Web posted at: 10:50 a.m. EDT (1450 GMT)

(IDG) -- The Internet of the future is based on everybody having blazingly fast access. So how do we get that broadband speed over the crucial last mile?

Three technologies - cable modems, digital subscriber line (DSL) and fixed wireless - are contending to supply much of this bandwidth. But none of them has yet emerged as the clear winner.

Handicappers say the two hottest prospects for last-mile technology are cable modems and DSL. Both use networks already in place and that, for all practical purposes, reach nearly all remote business sites and telecommuters between them.

Lagging behind is fixed wireless, still waiting for service providers to build the infrastructure they need to deliver services widely.

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While all three access methods can supply multimegabit speeds, none is perfect:

Cable modems provide up to 10M bit/sec over a shared network. So if you are on a heavily used loop, your bandwidth plummets. Cable modem access costs about $40 per month.

DSL runs over regular phone lines but has distance limitations and is sensitive to copper wire quality. DSL access costs $40 to hundreds of dollars per month, depending on bandwidth and service-level guarantees.

Fixed wireless offers speeds up to 155M bit/sec, but weather can be an obstacle and there must be an unobstructed line of sight between broadcast antennas and customer sites. Some 384K bit/sec services cost about $150, and some providers claim to undercut local wired access by 30%.

Customers can weigh the options and pick their favorite, but chances are they won't have a real choice. Places where DSL, cable and wireless providers compete are still the exception.

"Service providers now are just trying to get customers, not take customers away from each other," says Jamie Mendelson, an analyst with The Strategis Group in Washington, D.C.

If you consider the number of potential broadband customers, service providers have barely scratched the surface. Total sales of cable modem and DSL services at the end of 1999 were less than two million lines - barely a statistical blip in a country with 146 million business and residential phones, according to Insight Research.

Based on that small sampling, cable modems hold a clear lead over DSL and wireless, but DSL looks ready to come on strong. Cable providers have 1.1 million modem customers, according to estimates by The Yankee Group. The same study says 300,000 DSL lines are in service, but other industry estimates are closer to 600,000. IDC, a market research firm in Framingham, Mass., expects DSL to surpass cable modems in 2003, while Cahners-Instat Group says that will happen in 2002.

Wireless is in distant third with more than 40,000 links in 1999 based on service provider reports. That figure outstrips the IDC estimate of just 30,000 links for last year.

While providers have made a modest start, competition seems about to heat up, as services become more widely available. DSL customers will soar to 13.9 million by the end of 2002, Cahners-Instat says. Leaders are the regional Bell operating companies - owners of the phone lines - with more than half the current customers, The Strategis Group says.

Cable modem users will jump from about 1.5 million in 1999 to 8.3 million in 2003, Cahners-Instat says. Excite@Home and RoadRunner are the runaway market leaders with 97% of existing customers between them.

Fixed wireless hasn't gotten as far yet, but it is growing rapidly. Users are expected to spend $828 million this year on fixed wireless, nearly triple what they spent on the technology last year, IDC says. The big names are Teligent and WinStar, with Nextlink, Sprint and MCIWorldCom waiting in the wings with fistfuls of wireless licenses. While this level of growth sounds impressive, some experts say wireless cannot keep up in the long run. "That is absolutely, positively not going to happen," says Tom Nolle, president of CIMI, a technology assessment firm in Voorhees, N.J.

Still, wireless will have its place, bypassing local terrestrial access to long-distance networks at T-1 speeds or slower for less than the price of a T-1, says Jim Lawrence, program director at Stratecast Partners in Mountain View, Calif.

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