December 2002

High Stakes For High-Speed Access

BY JOHN COSGROVE & STEVE SEIER

During a recent conference call, we listened to a colleague from a distribution company comment on the challenges associated with using the Web or e-mail to distribute marketing materials and sales support tools to her remote dealers. For some time, she has been unable to easily reach a number of them that have either dial-up access or no Internet at all. Does this frustrating scenario sound familiar?

On average, current studies show that less than half of all small businesses with 50 employees or fewer have broadband Internet, which has been defined by the FCC as possessing transmission speeds exceeding 200 kilobits per second in one direction. For the sake of this discussion, broadband includes digital subscriber lines (DSL), cable, leased lines, wireless, fiber, satellite, and power line technologies. Furthermore, a significant percentage of those small companies without broadband reside in urban and suburban areas still waiting for service, as well as parts of rural America that don�t have access.

We understand that some people live away from the city center specifically to be out of reach from civilization, and larger companies usually have a way to access leased lines and other fat pipes to support their business communications. But this leaves us with two categories of small enterprises that fear broadband will never become a reality: those that want broadband and cannot get it through cable or DSL, and those who are not aware of the potential business benefits associated with broadband access.

Does this mean there is nowhere for end users to turn if they want broadband? Not necessarily. There are solutions out there that are becoming increasingly economical for consumers to buy, as well as for vendors to sell. The federal government has also acknowledged the need for incentives to invest in underserved markets with talks of tax breaks and federal grants, in addition to setting up the universal service fee found on your phone bill for local infrastructure investment. A customer�s geographic location now governs the high-speed solutions they can tap, as networks are not yet built out from the nation�s population centers.

LEASED LINES
Although an option usually reserved for larger businesses, leased lines through a T-1 channel are becoming increasingly cost effective -- now for as little as a few hundred dollars a month for service -- in addition to offering bandwidth speeds up to 1.5 Mbps. To make this attractive to the small enterprise, carriers often create a bundled package where users can have these �always on� connections for both voice and mission-critical data traffic. Leased lines are one of the more readily available forms of access to high-speed Internet for the customer without access to cable or DSL, and a number of converged communications solutions channel companies including Colorado-based [email protected] and service providers such as Virginia-based PingTone Communications can provide such service. Rick Chambers, vice president of business development for PingTone, adds, �Using a T-1 to deliver bundled voice and data services across converged Internet protocol (IP) networks to the customer in place of analog for separate voice and data circuits at their office effectively gives small and medium businesses the features and functionalities of a large company.� Companies with remote offices also frequently turn to leased lines to meet their needs.

WIRELESS DATA
To date, economic factors have served as the biggest obstacle in getting broadband out to the more remote areas. Unless you�re feeling especially charitable, it doesn�t make good business sense to pay all the costs to build out a network infrastructure for a handful of customers. Therefore, in addition to bundling services, providers have begun to look at wireless solutions with greater ranges than DSL or cable modems that require simple plug-and-play installations and cut upfront costs.

One competitive local exchange carrier (CLEC) in particular, Virginia-based NTELOS Inc., is market testing a wireless solution from Navini Networks that delivers high speeds with longer ranges than DSL, no external antennas, portability, and reasonable pricing. The service is nomadic -- meaning the modems are portable and the service may be picked up and moved at will from one location to another, much like WiFi hot spots, but with far greater range. The system employs �smart antennas� and adaptive beam-forming technologies to reconstruct bounced signals, allowing for true non-line-of-sight (NLOS) operation. One particular advantage to some fixed and nomadic wireless products is that they operate in the less noisy licensed spectrum space held by some carriers.

Noel Munson, an Internet product planner for NTELOS, can look out of his office window and literally see cattle. �To reach some of the rural areas NTELOS serves, we needed a user-installable system, enough of a population density within covered areas to sell broadband service at $50 a month, and lots of range,� Munson says. He adds that the Navini product they are testing so far only requires them to add antennas to existing personal communications services (PCS) towers and give users a portable unit that connects a computer via universal serial bus (USB) or Ethernet port with no other external antenna. �For other products, it takes six months of per user revenue to do the truck roll, install antennas, and set lines. This wireless solution is giving us megabit speeds and an 11-mile range, with costs equivalent to DSL and less latency than satellites.�

SATELLITE
While wireless solutions are not available everywhere -- upwards of 50 percent of the country cannot receive terrestrial wireless service, according to the Satellite Industry Association -- satellite technology can reach the nation�s three million-plus rural business owners. The cost to deploy broadband to rural subscribers is up to five times less for a satellite operator than for a cable provider. With low-cost ground terminals and a special set-top box for the user, download speeds are fast, enabling high-speed data and video applications. As a result, satellite companies are jumping in to offer broadband access, as well as television and phone service.

In addition to small businesses, rural school districts are also prime targets to receive a bundle of services from satellite operators. A combination of educational content via television, Internet access, and information security are all services that make it worthwhile for a provider to defray costs from setting up hardware and sell in areas with sparse populations.

The market for direct-to-home and office satellite television is growing rapidly, and the Telecommunications Industry Association (TIA) predicts 1.8 million subscribers to have broadband access via satellite by 2006.

POWER LINE TECHNOLOGY
Utility companies also recognize the potential to provide a unique array of services to connect rural communities with broadband as well as electrical power. With an infrastructure largely in place and broadband devices easy to deploy and maintain, tests are under way (maybe even in your area) to find the best-performing solutions for internal and external broadband use. A number of companies including Ambient Corporation and Amperion have been working extensively to drive the development of power line communications (PLC) and broadband services over the existing distribution electrical grid and in-home electrical wiring in the United States. For example, Ambient Corporation has worked with utility companies such as Consolidated Edison Co. of New York and utilities in the Southeast. Amperion also recently announced a testing program for PLC technology using the electric distribution system of PPL Electric Utilities in the Allentown, Pennsylvania area. As technical and other issues are resolved, power line companies are committed to working on the technology with a view toward achieving common standards and a hospitable regulatory environment.

OTHER TECHNOLOGIES
Besides cable and DSL, fixed wireless and satellite options may capture the largest market share for the time being. But keep an eye out for other solutions in the coming years as technology develops and becomes more cost effective, including fiber-to-the-home, 3G wireless, and others operating from the WiFi standard to provide interoperability of wireless LAN products from various manufacturers. By 2006, overall spending on these technologies in the broadband market could approach $1 billion, according to TIA analysts.

THE PAYBACK
Unfortunately, we�ve seen plenty of evidence that most carriers and providers are not going to build broadband networks unless they can get some guarantee that enough users will sign up for service. Profitability under current market conditions is key to survival, and bundling services is the only way that providers are able to reach rural customers. To show sufficient demand, small enterprises, school systems, real estate developers, local governments, and residents usually have to band together as a community to request high-speed service in their area.

And while customers don�t want to pay more than $50 a month to get broadband, according to some providers, we do know that the majority of people with high-speed access are satisfied and believe it helps make their business more profitable. Therefore, channel companies must seize this great revenue opportunity to reach the fast growing yet poorly served small business market by exploring some of these alternative broadband options.

John Cosgrove is the vice president of solutions strategy and marketing for [email protected], an active participant in TIA�s Global Enterprise Market Development Council, and a past recipient of the Tom F. Carter Award in recognition for his outstanding service to the field of telecommunications. Steve Seier is the national director of carrier services for [email protected] TIA is a leading trade association serving the communications and information technology industry, with proven strengths in market development, trade shows, domestic and international advocacy, standards development, and enabling e-business. Through its worldwide activities, the association facilitates business development opportunities and a competitive market environment. Visit them online at www.tiaonline.org.
 

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