Equipment makers are gearing up for the next big DSL play--outfitting office buildings, apartment complexes and hotels with bundled services.
Recent industry estimates paint a very lucrative picture of the market for voice, video and high-speed data bundles to multitenant or multidwelling units (MTU/MDU). According to Cahners In-Stat Group (www.instat.com), the U.S. MTU/MDU space will be a $371 million market this year, growing to $2 billion by 2004. Outside the United States, the potential is even greater because in areas like the Far East, more people reside in apartment complexes than single-family homes.
Savvy DSL equipment makers are well aware of these numbers, and at the September DSLCon Fall conference in Boston, nearly every vendor on the show floor had a product that in some way targeted this DSL niche.
The business case makes sense: For a relatively small investment a telecom provider, or building LEC (BLEC), can outfit a building with DSL gear and make up the cost of the equipment with just a 15 percent subscriber take rate within the first six months.
But signing on subscribers isn't the primary concern--at least not yet. "There's a land grab going on in the MTU space. Providers are building networks first and looking for customers later," says George Marshall, vice president of MTU marketing at Copper Mountain Networks Inc.(www.coppermountain.com). First to market is critical in the MTU/MDU space because few buildings have the space for more than one provider's gear, and the return-on-investment scenario is significantly altered with more than one provider in a building.
In addition, many building owners are unwilling to allow more than one BLEC into their properties and are charging a premium for access to their rooftops, risers and telephone closets. These issues and others have attracted the attention of the FCC (www.fcc.gov), which is considering rules that would require multitenant building owners to allow access to all CLECs that want to serve tenants. As of late September, the FCC was expected to vote on the matter within a few weeks.
Niche Players
The MTU/MDU arena isn't a new frontier for companies like Tut Systems Inc. (www.tutsys.com) RC Networks Inc. (www.rcnets.com) and others, which have always focused on this niche. At the end of second quarter 2000, Tut had more than 200,000 lines deployed in apartment complexes, hotels, shopping centers and commercial buildings, and had shipped more than 17,000 building systems worldwide. Tut's dominance in the MTU/MDU arena has made it a favorite on Wall Street. The company reported second-quarter revenues of $21 million, an increase of 319 percent over the previous year, and for the first time, the company is operating in the black, nearly a quarter ahead of expectations. The company works with real estate investment trusts (REITs), hotel chains such as Hilton and Hyatt, and service providers such as British Telecommunications plc (www.bt.com)and Bell Canada (www.bell.ca). In April, Tut signed a multiyear agreement worth up to $10 million with VelocityHSI Inc. (www.velocityhsi.com) a division of BRE Properties Inc. VelocityHSI offers broadband Internet access to multifamily communities and residents.
According to Tut Systems' vice president of marketing Mark Carpenter, the key to the MTU/MDU space is that it provides a very lucrative opportunity for little upfront cost. "For about $20,000 you can light up a building, and with 50 to 200 users get revenue right away." However, he adds, most building owners will expect to share a piece of that revenue.
Like Tut, RC Networks has always focused its business at the MTU market. The privately held company formed in 1997 offers symmetric DSL (SDSL) solutions. On Sept. 19, the company announced that Atlanta-based Edge Connections Inc. (www.edgeconnections.com) will use RC Networks' RC8000 SDSL access concentrators and RC2000 CPE in its multitenant deployments in commercial office buildings nationwide. RC Networks' RC8000 product family supports many different protocols, and can carry voice, video and data over IP. Edge has outfitted buildings in Atlanta; Boston; New York; and Washington, D.C., and plans to expand into buildings in 24 markets across the country over the next two years.
Company founder, chairman and CTO Seton Kasmir says that with all the big players becoming interested in the MTU space, competition is fierce. However, his company is focused on keeping value in its products by making them smaller, less expensive and more efficient.
Like RC Networks, Netensity Inc. (www.netensity.com) also preaches a low-cost solution for the MTU arena. The company's AdvanEdge product line allows service providers to offer integrated voice and high-speed data to customers. A relative newcomer to the market, Netensity was founded in June 1999, and in December the company raised $5 million of first-round funding from Austin Ventures (www. austinventures.com) and Techxas Ventures (www.techxas.com). The Netensity AdvanEdge 1212 is a 12-port, standards-based DSL CPE appliance for MDU and MTU environments. The company is currently conducting beta tests of its product with a large incumbent carrier.
Heavyweights Streamline Gear for MTU Market
The burgeoning new business potential in the MTU market is drawing lots of interest from DSL equipment heavyweights as well. Companies like AccessLan Communications Inc. (www.accesslan.com), Copper Mountain, Lucent Technologies Inc. (www.lucent.com) and Orckit Communications Ltd. (www.orckit.com) see this area as a lucrative niche and are retrofitting their gear to make it compatible with the space constraints of large office buildings and apartment complexes.
Just one year after the launch of its popular Stinger DSLAM, Lucent introduced the Stinger LS 1, a 19-inch rack mountable DSLAM that scales up to 720 ports per rack, and the Stinger LS 2, a 23-inch product that can support up to 1,008 ports per rack.
According to Bruce Miller, senior product manager for Lucent's InterNetworking Systems, these smaller DSLAMs are targeted to smaller COs for incumbent carriers in Tier 2 and Tier 3 markets and for the MDU/MTU marketplace.
Fixed wireless player Winstar Communications Inc. (www.winstar.com) has already signed on to deploy the Stinger LS and incorporate the technology in its in-building network architecture. The Stinger will deliver high-speed access, and local and long-distance service to Winstar's commercial buildings.
Like Lucent, Israel-based Orckit Communications is moving into the MDU/MTU market with its eDSL inTENcity system, which offers SDSL at rates of 10mbps per tenant. According to Orckit general manager Larry Keith, the company started marketing its MTU products last October after its acquired Israeli startup EDSL Networks and its line of MTU gear. Orckit's MTU-based DSLAMs are being used in China, Korea, Russia and Sweden. In addition, in July, Orckit teamed with Western Multiplex Corp. (www.wmux.com) to offer a bundled eDSL connection and fixed wireless access solutions for BLECs.
Another DSLAM leader that is making great strides in the MTU market is AccessLan. According to Infonetics Research Inc.'s (www.infonetics.com) August 2000 report on service provider core and edge hardware, AccessLan has a 42 percent share of the MTU hardware marketplace. The company's PL-1000 line of i-SLAMs feature 8-port and 12-port stackable modules, as well as soft-port SDSL modules that can be configured for 12 or 24 ports. AccessLan director of BTS marketing Celeste DeMilt says there is a tremendous opportunity in the MTU market, especially among small and medium-sized business parks, many of which only have dial-up access. And unlike the larger downtown buildings, "these real estate guys will let you in," DeMilt says.
Sue Marek is a Denver-based free-lance writer. She can be reached at smarek@earthlink.net.
