Posted: 04/1999
Voice Brings New Perspective to DSL
Peering Into the $46 Billion Small-Business Opportunity
By Ken Kolderup
To date, publicity and adoption of digital subscriber line (DSL) technology has centered around data communications applications such as continuous high-speed Internet access and remote local area network (LAN) connectivity. As a data transport service, DSL is well positioned between slow, inexpensive analog dial-up service and high-speed expensive dedicated T1 service. The transmission speeds it provides, the continuous nature of its connection and the price at which it can be delivered make DSL service an ideal data solution for many small and mid-sized businesses. As a result, many competitive local exchange carriers (CLECs), baby Bells and long distance providers such as MCI WorldCom Inc. recently have announced plans for large-scale deployments of DSL-based access networks to serve the increasing demands for high-speed data services among business and residential subscribers.
However, with the recent availability of voice over DSL (VoDSL) solutions, CLECs are taking a step back and looking at DSL access networks from a somewhat broader perspective. By enabling up to 16 telephone lines and high-speed Internet access to be delivered over a single DSL connection, these new VoDSL systems allow CLECs to apply DSL access networks to one of the biggest challenges they face today--finding a cost-effective method for delivering local voice services to smaller-line-size customers.
"Integrating voice- and data-service delivery over packet-based broadband access networks makes for a compelling business case for CLECs that have been struggling with infrastructure challenges," says Beth Gage, director at TeleChoice Inc., Verona, N.J., a telecommunications consulting firm. "Previously, available access network technology has not allowed CLECs to profitably provide services to subscribers with 12 or fewer telephone lines."
To deliver their services, initially many facilities-based CLECs chose fiber optic broadband access networks, a strategy often referred to as fiber-to-the-building, or FTTB. An FTTB access network enables very high-bandwidth connections to be established between a CLEC's regional switching center and subscriber buildings over which a broad array of voice and data services can be delivered. However, the cost makes it impractical for serving all but the largest of a CLEC's target subscribers. The cost to install a fiber optic network with sufficiently broad geographic coverage to serve all subscribers in a market would be prohibitively expensive. In addition, the equipment and installation costs to connect a subscriber to a fiber network are substantial. Since large businesses tend to be centrally located and generate significant monthly revenue, they are the only customer group for which an FTTB access network is practical.
However, since large businesses represent just 12 percent of the total access line market in the United States, many CLECs aggressively are looking for alternative access networks to cost-effectively deliver services to smaller subscribers.
Last-Mile Hurdles
The primary challenge for CLECs in constructing access networks to serve smaller businesses is in establishing the "last-mile" connection to subscriber buildings. Most CLECs can justify running or leasing fiber facilities from their regional switching centers (RSCs) out to a central location within a community, but cannot justify running their own facilities (whether fiber, copper or coax) from that location to each subscriber. The only alternative is for CLECs to deliver services over the last-mile facilities of another provider that already has a connection established to target subscribers.
At this point, it is clear that the most practical last-mile option available to CLECs is the incumbent LECs' (ILECs') copper network. While ILECs are obligated to provide CLECs access to their copper network, such access is expensive and competitively confining. The recurring cost for a CLEC to lease copper pairs on a per-line basis from the ILEC can have a significant impact on the CLEC's profitability, and makes a CLEC dependent upon its chief competitor to access its subscribers. Because of this dependency, it is imperative that CLECs find methods to minimize their need for copper pairs.
One solution is to realize greater potential from each copper pair. CLECs need a technology that allows them to implement a broadband access network that leverages the ILECs' last-mile copper network. DSL technology meets that need.
Using available DSL technology, a CLEC can construct a broadband access network capable of establishing high-bandwidth connections from its central facility out to subscriber buildings. In fact, many CLECs already are in the process of constructing such DSL-based access networks. However, to date, CLECs have been limited to delivering data services to small and mid-sized businesses over these access networks since the equipment necessary for delivering multiline local telephone service has not been available.
Fortunately, VoDSL access solutions that solve the CLECs' last-mile challenge recently have hit the market. In general, VoDSL systems function as an overlay solution to a DSL-based access network, enabling a CLEC to extend multiline local telephone service from its existing centralized Class 5 voice switches.
A VoDSL solution typically consists of two new components (see diagram, "VoDSL Access Solution," below). The first component is a carrier-class voice gateway that resides in the CLEC's RSC and serves as a bridge between the circuit-based voice switch and the packet-based DSL access network. The second component, an integrated access device (IAD), resides at each subscriber premises and connects to a DSL circuit. The IAD also serves as a circuit/packet gateway and provides the subscriber with standard telephone service via up to 16 analog plain old telephone service (POTS) ports and Internet service via an Ethernet connection.
Voice over Digital Subscriber Line Access Solution
Thanks to VoDSL access solutions, DSL broadband access networks now have the coverage, capacity and cost attributes to enable CLECs to deliver local telephone services as well as data services to the small and mid-sized business markets.
"We are very excited about the potential efficencies to be gained by utilizing a voice over DSL access methodology," says William J. Hoffman, chief operating officer at Logix Communications Enterprises, Oklahoma City. "This application of DSL technology will provide another access option for Logix as we continue to focus on service delivery to our small to mid-size customers."
The Right Capacity
According to IDC Link, a subsidiary of IDC Consulting Inc., East Amherst, N.Y., U.S. small businesses spend more than $46 billion annually on voice and data communications services. In addition, 95 percent of those small businesses use 12 or fewer telephone lines. Since some VoDSL solutions are capable of delivering up to 16 telephone lines in addition to continuous high-speed Internet access over a single DSL circuit, they make an ideal access method for CLECs to reach this large opportunity.
In addition to providing the right capacity for providing local telephone service, DSL broadband access networks are very efficient in the way they deliver service. Time division multiplexing (TDM)-based transport services, such as a T1 line, require the bandwidth of the line to be channelized and portions dedicated to certain services, such as a telephone line. Even if a call is not active on that line, the bandwidth allocated to that line cannot be used for other purposes. DSL access networks are packet-based, allowing VoDSL solutions to use the bandwidth of a DSL connection dynamically. VoDSL solutions only consume bandwidth on a DSL connection when a call is active on a line. If a call is not active, then that bandwidth is available for other services, such as Internet access. This dynamic bandwidth usage allows CLECs to maximize the potential of each DSL connection, delivering to subscribers the greatest number of telephone lines and highest possible data speeds.
For example, over a single 768 kilobits-per-second (kbps) symmetric DSL (SDSL) connection, a CLEC could provide eight telephone lines serving a key telephone system with 32 extensions and still deliver data service with an average speed of 550kbps (see graph, "Bandwidth Usage of a 768 Kilobits-Per-Second Symmetric Digital Subscriber Line Circuit," below).
Image: Bandwidth Usage of a 768 Kilobits-Per-Second Symmetric Digital
Subscriber Line Circuit
Cost Savings
The financial benefits of a VoDSL solution are impressive. CLECs can experience a significant reduction in technology payback period due to savings in both recurring and capital costs. In fact, relative to more traditional access methods, such as the use of digital loop carrier (DLC) equipment, VoDSL solutions can provide CLECs with an 80 percent reduction in recurring costs and 20 percent lower capital costs. A CLEC can measure the savings according to several criteria, for which a DSL access network is the superior solution for reaching small and mid-sized businesses.
Copper usage is one. In conjunction with a VoDSL solution, a DSL-based access network requires only a single copper pair per subscriber to serve more than 95 percent of the target market.
A second is ILEC central office (CO) requirements. A DSL access network requires only a DSL access multiplexer (DSLAM) to be collocated in an ILEC's CO. Of all possibilities, a DSLAM is the most flexible solution, is already a cost-effective solution and is riding an extremely fast cost curve. The port densities provided by DSLAM manufacturers are increasing every few months, and correspondingly, the price per port is decreasing at the same rate.
A third is backbone network efficiency. Because they're packet-based, DSL access networks make more efficient use of the fiber optic backbone network. With TDM-based service-delivery methods--whether based on DLCs or T1 IADs--multiple T1 circuits must be provisioned across the backbone network to each ILEC CO. A VoDSL solution requires only a single connection to be provisioned on the backbone network from a CLEC's central facility out to each ILEC CO, over which the voice and data traffic for all subscribers served from that CO is transported, (see graphic, "Time-Division Multiplexing (TDM)-Based vs. Packet-Based Access Networks," below).
Image: TDM-Based vs. Packet-Based Access Networks
A fourth is voice-switch utilization. Some VoDSL solutions connect to the CLEC's voice switch via the industry-standard GR-303 interface, allowing for significant levels of line concentration. The VoDSL solution appears to the host voice switch as a traditional DLC system, enabling very efficient switch utilization.
To date, the revenue stream from high-speed data services alone ($75 to $250 per month per subscriber) has had to justify the cost of purchasing and collocating DSLAMs in ILEC COs. With the availability of VoDSL access solutions, a CLEC now can provide, over that same access network, local telephone services generating an additional $500 to $1,500 per subscriber per month. By addressing subscribers' voice and data requirements with DSL service, a CLEC easily can make a DSL access network a profitable service opportunity.
The economics behind VoDSL solutions enable CLECs to develop service bundles that are more compelling to small businesses than the traditional straight discount off of services. For example, a CLEC profitably could offer a service bundle containing local telephone service at the same price as the ILECs, but include a continuous 128kbps high-speed Internet connection. The CLEC then could upsell the subscriber to higher-speed data connections for additional revenue.
In conjunction with VoDSL solutions, DSL access networks provide CLECs with a means of quickly and profitably delivering the right services at the right price to a large and growing market.
Ken Kolderup is director of marketing at Jetstream Communications Inc., Los Gatos, Calif. He can be reached at (408) 399-1300 and kkolderup@jetstream.com.
