Paradox of the Worse Network: AT&T: 15 Mbps Internet connections "irrelevant"

[David Farber <dave () farber net>]

Begin forwarded message:

From: "Robert J. Berger" <rberger () ibd com>
Date: April 1, 2006 12:36:26 AM EST
To: Dave Farber <dave () farber net>, Dewayne Hendricks  
<dewayne () warpspeed com>
Subject: Paradox of the Worse Network: AT&T: 15 Mbps Internet  
connections "irrelevant"

AT&T: 15 Mbps Internet connections "irrelevant"
3/31/2006 10:07:50 AM, by Nate Anderson
http://arstechnica.com/news.ars/post/20060331-6498.html

At this week's Media, Entertainment and Telecommunications conference,
AT&T COO Randall Stephenson told his listeners that increased
bandwidth was no longer of great importance to consumers.

    "In the foreseeable future, having a 15 Mbps Internet capability
    is irrelevant because the backbone doesn't transport at those
    speeds," he told the conference attendees. Stephenson said that
    AT&T's field tests have shown "no discernable difference" between
    AT&T's 1.5 Mbps service and Comcast's 6 Mbps because the problem
    is not in the last mile but in the backbone.

Certainly this is true for general web browsing, which rarely taxes
the speed of even a slow DSL connection, but it seems like bandwidth
would be crucial for next-generation applications such as IPTV that
the telcos soon hope to provide. Right? Not according to Stephenson,
who points out that bandwidth is of less importance to IPTV setups
because of the switched nature of the system. Generally, only a couple
of channels are transmitted at one time, and this does not change no
matter how many total channels are offered to the consumer (see our
overview of IPTV for more information on how this works).


    In terms of Lightspeed's ability to push through hundreds of video
    channels, including high-def video, "we're not constrained by
    bandwidth. You're not constrained by the size of the pipe
    anymore," Stephenson said, referring to the switched-video
    capacity of the network which delivers only one service to a
    single customer at a time.

This is a direct response to the criticism that AT&T has suffered for
deploying a fiber optic network that reaches only to the local node,
not directly into a customer's home—which means that the "last mile"
connection is still copper wire. Verizon, by contrast, is deploying
fiber directly into the home, making for much higher speeds. AT&T
argues that its model is cheaper, faster to deploy, and just as
capable as Verizon's, which currently uses much of its massive
bandwidth to distribute RF TV channels.

Pressures on satellite

In related television news, it looks like the squeeze play is underway
against the satellite industry. The telcos, such as AT&T, have
generally partnered with a satellite company in order to offer
television service. Now that they're getting into the game themselves,
these partnerships are dying. Pressure is also coming from the cable
companies, which are getting onboard with Cablevision's plan to move
the DVR into the headend. This will cut costs for the cable companies,
who no longer have to send out trucks to install, troubleshoot, and
repair DVRs in homes, but it's a move that satellite operators can't
match.

    He [Comcast COO Stephen Burke] said a network recording service
    would help cable companies compete against satellite TV operators
    such as DirecTV and EchoStar, which cannot cut the cost of the DVR
    box out of their pricing structure.

This kind of pressure from the cable companies, combined with the
price war which could ensue between cable operators and the telcos,
will certainly make it harder for satellite to compete over the next
few years. Whether they can carve out a niche and remain a viable
proposition remains to be seen, though it should be noted that
satellite is not sitting still waiting for the axe to fall. DirecTV,
for instance, has been pondering plans to roll out broadband services
of its own, and satellite can still claim to offer a higher-quality
picture than cable (in most cases). IPTV, though it could spark a
price war with both services, won't be coming to most cities for some
time, so satellite should have a few years of breathing room before
the squeeze is on in earnest.

––––––––––––––––––––––––––––––
Robert J. Berger - Internet Bandwidth Development, LLC.
Voice: 408-882-4755 eFax: +1-408-490-2868
http://www.ibd.com





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