Broadband access a pipedream?

Broadband appears to be the new darling of the technology hype machine. A relatively new technology, it has already been charged with the quest to reshape the face of networking as we know it, and at the same time, have significant effect on the way the world perceives network, service and content providers.

But what is it really? Generally speaking, that vague term "broadband" encompasses several components, but of primary importance are a type of Internet access and a depth of service or content which can be provided across that infrastructure through that specific access.

Try and access a broadband content Web site across a typical sunny South African Net connection, and chances are you`ll still be waiting by the time the next big thing comes along.

Edwin Thompson, technical director at UUNet SA, believes the matter is slightly more complicated.

"There are four or five definitions of what broadband is. So right now you could say we have broadband access in SA today - primary rate ISDN is a broadband service by definition and Telkom has been providing that service in SA for a good couple of years.

"The definition around broadband states anything with a transmission rate of more or less 200 kilobits per second providing more than two channels of communication is a broadband solution."

A telephone line was first created to provide one channel of voice. Now you`re trying to compress it to provide multiple mediums.

Stuart Hardy, GM: Access Solutions, Internet Solutions

But Thompson observes that a lot of people consider broadband as ADSL or one of those technologies which Telkom is not currently providing.

Telkom will begin rolling out ADSL in its bid to provide the access that dedicated Internet users are baying for. When it will happen, and how much it will cost, are key issues in determining the success of Telkom`s effort, which to an extent is tied to the fate of Internet service providers (ISPs), and value-added network service providers (VANS), and indeed, all South African Internet users.

Stuart Hardy, GM, Access Solutions of Internet Solutions, says the ISP has aligned itself with Telkom in anticipation of an ADSL roll-out in the near future. As such, IS is participating in a series of tests relating to the usage of ADSL - one of 300 companies around the country involved in Telkom`s ADSL testbeds.

[VIDEO]When Telkom makes the service available, IS intends to be ready to roll it out into its own infrastructure with great despatch. But despite the progress made so far, Hardy believes the local market is prematurely excited by the potential of running DSL services.

"I`ve committed to the same timeframe I`ve been given by Telkom, which is May next year. That date in itself, to be honest, I think is a pipedream in a lot of senses. Irrespective of the new potential telcos that come into the market -- and there`ll only be one that`s going to be regulated with Telkom -- for [Telkom] to start providing services like DSL may mean that they`ll erode their profitability in their market in a massive way. No company in their right mind`s going to do that."

A lot of the providers can`t sustain profitability; the principle is brilliant, but the reality is very different, and there are questions about the value to the provider.

Stuart Hardy, GM: Access Solutions, Internet Solutions

Hardy provides the example of Telkom`s Diginet circuit, a leased-line for which consumers pay R1 500 per 64K. The circuit can be incremented in multiples, for companies with a data-intensive infrastructure requirement. By the time a company is leasing 2MB worth of line, it is paying Telkom roughly R12 000 per month.

"xDSL allows you put two modems on either side of a telephone line and expand the ability of that line to up to 2MB -- for the variable cost of telephone line rental. It doesn`t make sense [for them to give away all that revenue.]"

Hardy believes another unrealistic expectation is that ADSL is applicable to everyone, and can be rolled out anywhere -- it`s got very big restrictions from an infrastructure point of view in regards to distance, and it`s got very big restrictions in regard to quality.

"A telephone line was first created to provide one channel of voice. Now you`re trying to compress it to provide multiple mediums -- voice, data, and many other things -- and the nature of doing that is that you`re just going to corrupt the service; the quality of it is going to degrade as it goes along. Plus the other fact is that DSL degrades in quality substantially past four-and-a-half kilometres."

Several broadband models employed overseas had the operating hitch that poor quality equated to a non-working infrastructure which was expensive to lay down, and difficult to recoup expenses on once service delivery began.

"A lot of the providers can`t sustain profitability -- the principle is brilliant, but the reality is very different -- there are quality issues, and there are questions about the value to the provider," says Hardy.

We`re coming under threat by the nature of things that we cannot do, of what they see as the law, but they don`t apply that law to everyone.

Stuart Hardy, GM: Access Solutions, Internet Solutions

Despite the questionable quality, the speed and relative affordability of ADSL access is what the end-user is after, Hardy claims.

But the reason behind high priced service providers is their reliance on prices provided by Telkom.

"That`s why we`re always going to be expensive -- in fact, three times the price of a European country. Telkom, when taking on the licence, had an obligation to build infrastructure around this country. The problem with us is that we`re not dense enough in our population to have a lot of infrastructure in small regions, which could generate a lot of revenue for a company like Telkom. We`re so spread, and it`s so expensive to do so, that it`s difficult for them. They`ve tried to build a lot, and whether they may be meeting their quotas justifies high prices or not, I`m not really sure."

The market is a thorny one for local ISPs, as UUNet`s Thompson explains: "A lot of VANS and ISPs are asked what are they going to do about ADSL as a product, and the bottom line is that it`s an access technology -- it`s a technology from a subscriber to an exchange, it almost demands co-location, which is a situation which today is a hot topic for Telkom. Telkom doesn`t allow co-location within its exchanges, so it`s quite a difficult area to determine where we will play in it. We can`t really play in it because the regulatory environment stops us from putting a piece of wire from point A to point B.

"I think that Telkom and the SNO [second national operator] going forward - they are the people putting down that wire to the customers` side - they should be spearheading a drive to getting business partners as far as delivery of services goes."

Another possible threat is that of being cut out of the ADSL loop altogether.

"We would be afraid that it`s going to happen -- the initial approach is probably going to be on the basis that if Internet service provision is part of the ADSL product delivered from Telkom, Telkom is going to want that Internet service provision to come off of the Telkom IP backbone, as such.

"I think that`s going to be an issue that probably needs the regulator to intervene and prevent measures that allow technology to effectively undermine the competitive nature of business."

The thing to remember is that ADSL is purely an access technology; the value comes with the content and services that can be provided through that communications channel.

Steven White, executive: new product development, Telkom

But Thompson questions whether ICASA, the telecommunications regulator, has the strength to do this, or indeed, the strength it actually deserves.

Hardy believes another operational obstacle stems from what he calls Telkom`s inconsistency in dealing with service providers that skirt the law to provide cheaper Internet access.

"We`re coming under threat by the nature of things that we cannot do, of what they see as the law, but they don`t apply that law to everyone."

Steven White, executive, new product development, Telkom, believes strongly that ADSL access is only half of the broadband promise.

"The thing to remember is that ADSL is purely an access technology; the value comes with the content and services that can be provided through that communications channel."

White says Telkom`s research and development into ADSL has been ongoing for the past year, and that the operator is hoping to take product to market between the first and second calendar quarters in 2001.

However, White cautions that this intention should not be perceived by the market as a commitment. "Anything could go wrong between now and then."

We do see the need for pricing elasticity; after all, it`s not in our interest to price the product so that it`s not used.

Steven White, executive: new product development, Telkom

White is confident that Telkom`s market research and technology analysis has left it with a good idea of who will use it, and what they`ll need it for.

On the applications side, White foresees the primary use as being for fast Internet access and more efficient telecommuting, especially for remote workers. On the consumer side, White expects a demand for packaged content, and confirms that Telkom is in talks with several media houses to provide a packaged portal solution to broadband users in time to come.

As far as pricing is concerned, White is of the opinion that the market expects ADSL to be everything for everyone, for next to nothing in cost.

"We do see the need for pricing elasticity; after all, it`s not in our interest to price the product so that it`s not used. The trick will be to provide sufficient value to justify the cost of access."

White sees ADSL technology as being complementary to ISDN solutions, and says Telkom believes the marriage of these technologies is a huge move in the right direction to stimulate business.

Despite the anticipated uptake of ADSL, White believes there will always be the need for a committed bit-rate solution such as Telkom`s Diginet offering.

"ADSL is not cheap bandwidth in place of a Diginet connection - it`s merely an access medium."

Regulating the deployment of xDSL technologies is yet another stumbling block that may delay the entire process.

Thompson discusses the complexities involved: "If we have a look at Telkom as the incumbent monopoly organisation, it`s going to be very interesting how they are going to handle the regulatory area. For instance, if they decide they want to provide an Internet service over a broadband ADSL infrastructure to the home user; inherent in the way that I would interpret the law, in the way that I would see regulation going forward is that those services should be available to other providers in the same area.

[VIDEO]"Today, we have a regulatory environment where Internet service provision has been defined as a value-added network service. At the same time, that means that we`re working in an environment which is competitive. Value-added service providers must have access to the same technologies as Telkom`s value-added network service provision part of the organisation has, and with that in mind, it`s going to be very interesting to see how Telkom ties up the ability for a VANS to deliver ADSL solution with them as the background, providing possibly the voice part.

"Right now, Telkom has not even been talking to the VANS as to how they would like to see these products be used in their environments."

If we look at the growth of the Internet in SA, it wouldn`t have been possible for SA to be as connected as it is today, if it wasn`t for private enterprise.

Edwin Thompson, technical director, UUNet SA

Thompson believes that communication is vital in Telkom`s efforts to gain marketshare going forward.

"If we look at the growth of the Internet in SA, it wouldn`t have been possible for SA to be as connected as it is today, if it wasn`t for private enterprise. And surely, with these sorts of technologies coming down the line, it`s probably imperative for companies like Telkom -- because remember next year we will have another provider -- to get the VANS providers, the ISPs, those sort of people in their fold and working with them to deliver unified services."

White is adamant that the value of broadband is brought home with the content or services that can be provided through this type of access.

John Oliveira, product manager at Dimension Data Interactive Media, concurs: "Streaming media has catapulted the way we communicate and do business into a new technological dimension. One of the biggest advantages of streaming media is that is has so much to offer, whether it is streaming video or video conferencing, it has become a compelling application across a broad spectrum of companies.

"Although high bandwidth is still relatively expensive in our country, enterprises are already benefiting from e-learning and corporate communications on campus LANs."

The South African scenario is by necessity different to that experienced in Europe and the US.

"While we wait for xDSL technologies to become available, most businesses use ISDN as a form of dial-up or dedicated digital line, for video conferencing and bandwidth on demand for distributing streams over WANs. ISDN is well suited for carrying data such as compressed video and audio," says Oliveira.

"Streaming media saves time, money, improves communications and makes the world even smaller. In the case of streaming video, one stream of data can be sent to a number of viewers simultaneously. Video conferencing, on the other hand, allows one or more individuals to collaborate globally, ensuring increased effectiveness, improved productivity and the quality and speed of decision-making."

Streaming media saves time, money, improves communications and makes the world even smaller.

John Oliveira, product manager, Dimension Data Interactive Media

However, market expectations need to be realistic. As Thompson explains: "Some solutions -- like video -- require 6 to 8Mbps of transmission rate to make them work. The broadband solutions in the ADSL-type product that will be delivered maybe some time next year, would probably ceiling out at the 2Mb level. This would indicate that those solutions would most likely be used for voice-type applications, a combination of voice-/Internet-type stuff, maybe some form of broadcast multimedia - we don`t quite know what services Telkom will provide."

Despite the uncertainty, Thompson is confident that the South African market will leap into ADSL functionality.

"South Africans have always been technology hungry. In the past where we`ve had a new technology or product come out, South Africans are the nation that will try and bleed every drop out of the stone, so to speak. And with that in mind, I would suggest that South Africans would use everything that is given to them."

Hardy`s estimation is that xDSL infrastructure providers can make a fortune by charging for the content that`s passed over the infrastructure.

"That said, Telkom would lose [out], and while the consumer might think the service is great, I think the same strain is being felt by other companies around the world. Yes, it is a phenomenal service -- it`s great to have this access which can facilitate this multiple different services -- but it`s not sustainable from a cost perspective."

Disruptive technologies such as high-speed wireless and all-optical networks are revolutionising the IT industry and taking virtually every other industry along for the ride.

Stefano Mattiello, MD, Sun Microsystems SA

An Ernst & Young global survey conducted earlier this year among technology, communications and entertainment companies across the world found that various market influences, like the content chaos created from the barrage of new sources of information and applications in business and personal life, is driving demand for an electronic intermediary business model.

The survey, "Business Redefined: Connecting Content, Applications and Customers", was conducted among 128 CEOs across the world, including Telkom`s Sizwe Nxasana. One of the key findings was the niche which application service providers (ASPs) can fill in their role as potential content packagers.

The concept identifies an ideal content packager as acting as an electronic intermediary for content, offering a broad range of content choices, and able to provide deep delivery of that content.

In addition, content packagers will have the ability to develop and expand customer knowledge and leverage that knowledge to continually improve the customer experience -- CRM in action, as it were. To secure end-user confidence in the product, the study predicts that content packagers will have to ensure content quality through intensive screening, and maintain customer privacy.

Stefano Mattiello, MD of Sun Microsystems SA, agrees: "Disruptive technologies such as high-speed wireless and all-optical networks are revolutionising the IT industry and taking virtually every other industry along for the ride.

"The bandwidth revolution is changing the economics of the network, driving innovation and reinvention -- and opening up a whole new world of opportunity. We call it the Net Effect," he says.

"It won`t be long before everything is carried on one digital network -- the Internet. Many radio stations already broadcast on the Internet and Web TV is now a reality as well," says Mattiello.

"The bottom line is, users and companies alike will need high-bandwidth to grab the digital explosion with both hands. In SA, the current scenario is that most companies are using either slower 56k modems at the one end of the scale or more costly ISDN dial-up technology."

Broadband Internet access alone is not enough to exploit the full potential of the Net Effect. The right strategy and rock solid infrastructure is crucial. "The Net Effect will require us to scale performance to previously unimagined heights," says Mattiello.

Content provision also has the potential in this country to help breach the digital divide, with the active involvement of education institutions, says White.

Another key finding of the Business Redefined survey, is that network operators will have to develop new services to avoid value decline.

It won`t be long before everything is carried on one digital network -- the Internet.

Stefano Mattiello, MD, Sun Microsystems SA

The study states that network operators must diversify into value-added services in order to survive. Revenue from data transmissions is growing at 18% per year, but that growth rate is beginning to slow down and the pieces are falling so rapidly that network operators are experiencing declining returns on their network investments. On the other hand, CEOs have noticed that revenue from communications-based services is expected to expand by an average of 68% per year for the next four years.

"The need to grow from providing basic network services such as long distance delivery, to providing new value-added services such as unified messaging, for instance, was the most pressing priority we heard from the CEOs of network operators," says Jeremy Grist, the partner heading up Ernst & Young`s Technology, Communications and Entertainment division in SA.

The study also identified four business models facing network operators as they consider implementing value-added service packages. These four business models include:

Network-only model, which limits services to the existing network;

Portfolio model, in which different business units pursue network and service operations independently but with common goals;

Hybrid-model, or the network-enabled services company, in which telecommunications companies have customer linkages to deliver services through their own network; and

Pure-play model, which would involve building a pure services company completely separate from the network operation.

While SA has yet to experience the widespread deployment of ADSL technology, European countries have already leapfrogged that trend.

US-based operator, Efficient Networks, is targeting Germany, the Netherlands, the UK and Spain as the initial market for its symmetrical high-density digital subscriber line (SHDSL) technology, which promises transmission rates of 2.3Mbps over a single copper pair, as opposed to the 1.5Mbps of conventional DSL lines.

Efficient Networks plans to introduce a SHDSL Business Gateway in Europe later this year, targeted at small and medium-sized businesses and enterprise branch offices. SHDSL is expected to catch on faster in Europe than in the US because of Europe`s relatively slow adoption of other versions of DSL such as SDSL and ADSL.

We believe that in the next few years broadband local access will become more widespread throughout the world`s developed nationals, for both businesses and consumers.

Ernst & Young`s Business Redefined survey

Other companies across the world are also embracing the broadband medium, with most also testing the waters of satellite, wireless and fibre optic networks. Though the latter are all represented to a degree in the local market, the expense of establishing an infrastructure where before there was none is often the most prohibitive factor in seeing advancements in this field.

Most industry observers rest their hopes on deregulation of the telecommunications market. Once that happens, SA will be able to follow in the footsteps of the market pioneers.

As the Ernst & Young Business Redefined survey puts it: "We believe that in the next few years broadband local access will become more widespread throughout the world`s developed nationals, for both businesses and consumers. Businesses will get the first, and biggest pipes, but consumers will follow. At the same time, already ferocious competition will gain even more intensity. And these two primary factors will combine to drive profound change in the business of communications and entertainment, through innovation, experimentation, and old-fashioned cutthroat competition."