Marconi Pacific: Consulting Services

Promising Future for VDSL

VDSL (Very-high speed DSL) will eventually emerge as a primary "last-mile" broadband solution for both the home and business. The value proposition for VDSL in both marketplaces is very attractive. VDSL enables Telcos to offer broadband services that provide a quantum leap in terms of access speed and applications available to the end user. VDSL provides Telcos the technology to compete in the residential market for bundled voice, data and video services using copper infrastructure without having to install fiber-to-the-home. Likewise, VDSL will provide a very low cost data transfer technology enabling high-speed data networking, high quality video conferencing and multiple voice lines for businesses over the existing copper infrastructure. Although the capabilities of VDSL are revolutionary, the industry has to overcome distance limitations and standards issues before the technology will be viable as a mass-market solution.

VDSL is one of the most promising technologies to emerge in the current telecommunications market. Like other xDSL technologies (ADSL, SDSL and G.lite), VDSL utilizes a single twisted copper pair to provide high speed access. While other xDSL services are capable of up to 8 Mbps download speed, VDSL facilitates transfer rates of up to 52 Mbps, which is 1,000 times the capacity of today's dial-up lines. VDSL soon will be cost competitive with other xDSL technologies.

VDSL's high transfer speeds enables Telco's to cost-effectively provide many services that cannot be supported by other lower speed DSL solutions. ADSL, SDSL and G.lite are limited to providing data access and a single video channel for the residential market and primarily data access and limited data networking for the small business market. Asymmetrical VDSL allows Telco's to penetrate the residential market with multiple video services, bundled with data access and telephony. Symmetrical VDSL provides bundled data networking, video conferencing and voice service for the business market.

Because VDSL provides more bandwidth than is required for most applications today, its potential value as a broadband solution will not be realized for several years. The growth of VDSL is dependent upon applications that are still in their infancy. Many of these new value-added service offerings for businesses will significantly drive the need for VDSL's increased bandwidth. Voice-over-DSL/IP, Virtual Private Networks, firewalls and other IP-based applications will be attractive to business customers since they replace the functionality of more traditional technologies, but at lower cost and more simple ease of use. Similarly, developments in high-bandwidth video will make videoconferencing and other video applications more accessible for businesses.

One such example that will drive VDSL acceptance is voice-over-DSL/IP, which is already gaining small and medium sized business customers. Instead of purchasing a costly T-1 connection, which includes 24 individual voice channels, businesses can use VDSL to install voice-over-DSL, which will support hundreds of voice lines simultaneously on a single copper pair (compared to 24 for other xDSL offerings) while providing dedicated bandwidth for data services. This type of capacity will be attractive to companies that will expand call centers, set up informal call centers or just reduce corporate telecom costs. Given the high prices for substitute products, such as SDSL and T-1 lines, the potential margins for VDSL in this application could initially be quite large. Voice-over-DSL/IP is expected to gain traction in the market by 2002.

VDSL technology also will provide bandwidth to enable Telcos to leverage the existing copper infrastructure to provide residential video services. As the cable industry moves into bundling telephone and data services with broadcast television, Telcos require a technology to enable them to remain competitive in the residential market. VDSL is the only DSL technology with enough bandwidth to support bundled digital broadcast TV for multiple TVs, data services and POTS on a single copper line to the home. VDSL also can allow Telcos to provide value-added video services over VDSL, including video-on-demand, interactive TV and T-commerce.

For ILECs, VDSL offers the key to competing with cable offerings in the residential market. Cable companies are beginning to focus on bundling video, data and voice services over coaxial, thus completely bypassing the Telco's infrastructure. To maintain a competitive position, ILECs must enter into the video delivery business, countering with video-over-VDSL. VDSL, with its high transmit speeds, is the only DSL technology that allows ILECs to provide video services to multiple televisions, while also offering telephony and data access services. Although the margins on each line are not large (estimated annual revenue per line of roughly $400), the potential market base is immense, with nearly 100 million potential residences. By 2002, Cahner's in-Stat predicts that over 500,000 homes will use video-over-VDSL services growing to over 7 million by 2005.

Despite all the potential VDSL currently exhibits, the technology must overcome three major potential obstacles to adoption: the establishment of standards; "last-mile" distance limitations; and provisioning.

Currently there are two camps within the VDSL industry advocating two different standards, QAM and DMT. Until standards are established, it is unlikely that carriers will invest significantly on large-scale VDSL deployments.
Distance limitation is another major obstacle for VDSL, as the technology is only effective over 4,000 feet of copper wire from the CO (other DSL solutions can function at up to 18,000 feet). Updated infrastructure projects that extend fiber to the neighborhood, curb, or basement of a building, reduce the distances required to deliver VDSL to the end-user. However, it remains to be seen how far carriers are willing to expand expensive fiber networks. VDSL will not be a large-scale commercial solution, especially for the residential market, until fiber is deployed further into the telecommunications infrastructure.
The final obstacle is the most straightforward but most essential to overcome -- provisioning. Current DSL offerings are being hindered by inefficiencies in provisioning and deployment, providing added momentum to competing and substitute technologies such as cable. Provisioning problems are tarnishing the image DSL as a communications solution, similarly to the way provisioning contributed to the failure of ISDN.

VDSL is still in its developmental stages. So far, few carriers in the US have chosen to deploy VDSL. US West has deployed to approximately 50,000 homes in the Phoenix area, and GTE has preformed trials in Tampa. However, both companies have shelved their projects indefinitely due to their respective mergers. Most recently, Bell Canada announced its VDSL deployment to several multi-dwelling units in Canada and overseas, France Telecom and Singapore Telecom recently announced VDSL deployments.

To discuss or for more information regarding this article, please contact Rob Fisher (301-664-7777)