DSL May Find Opportunity in DTV

The demand for high-speed Internet access is fueling revenues in theDSL market for an increase from $4.8 billion in 2000 to a projected$10.4 billion in 2007, according to Frost & Sullivan.

DSL's advantage over other broadband alternatives is simple. Withmore than 700 million telephone lines worldwide, standard copper wiresare an ever-present asset representing a multibillion-dollaropportunity for xDSL equipment manufacturers. But that doesn't mean DSLwill run away with the broadband market.

"Despite the industry's potential, increased threats from competingtechnologies, rising pressure from suppliers and customers, elevatedinventory levels and fears of overproduction constitute challenges,"said Frost & Sullivan Research Analyst Jean-ChristopheDeverines.

An increasing number of broadband solutions will provide last-milebandwidth. Cable modems are the most significant competition to xDSL,but such alternatives will vary greatly depending on the localconditions, whether they are geographic, technological or businessrelated.

The North American market is no longer the sole engine for growthfor DSL. The continued drive to build network infrastructure in certainregions is fueling market expansion worldwide. Some countries have madethe deployment of DSL, especially ADSL, a national priority. This trendhas been a major factor in the phenomenal market growth in Korea.

Demand is also driven by the feature-rich nature of DSL, whichenables bandwidth-intensive services such as virtual private networks(VPN), home networking, voice over DSL, video on demand and more.

"These features will continue to ignite demand," said Deverines. "Asincreasingly bandwidth intensive applications are developed, serviceproviders will become the gatekeepers of this new currency."

DSL's ability to deliver digital television and video services holda lot of potential. According to a report by Strategy Analytics, 46million homes worldwide will be watching digital TV delivered overtheir phone lines by 2008.

Commercial services that deliver TV to DSL subscribers have beenavailable for some time from operators such as Qwest in the UnitedStates, and Kingston Communications and VideoNetworks in Britain.Strategy Analytics predicts that DSL will account for 11 percent ofworldwide digital TV services by 2008, up from less than 1 percenttoday. Annual sales of DSL DTV set-top boxes will rise to 10.7 millionunits by 2008, a substantial increase from 1 million in 2002.

"DSL can become the fourth DTV platform," said David Mercer, vicepresident of consumer practice at Strategy Analytics. "But it isdoubtful that many of today's telcos will make it. Delivering contentis an alien business for most of them."

Strategy Analytic's report recommends that telcos steer theircommunications-oriented business culture towards dealing with contentproviders, as well as investing for the long term in network upgrades.If they can meet these challenges, then DSL DTV will be a valuableweapon in the fight against continued decline in their traditionalfixed-line voice businesses.

It also recommends that telco players maximize the opportunity tobundle digital television with services such as telephony andmessaging, broadband Internet and home network management. Thisapproach will position telcos for the long-term battle with cable,satellite and other emerging players.