Heavy Bandwidths Can Strain xDSL Backbone Costs

Fujitsu's Business Case Analysis Stakes Out Optimized Access Speeds

RICHARDSON, Texas, December 1, 1997 - Rushing to implement multimegabit-speed digital subscriber line technology for residential services could overwhelm carriers with excessive backbone costs, warns a Fujitsu Network Communications, Inc. (FNC) executive. He says the best residential DSL service delivery strategy today is to scale down the access bandwidth to enable a competitively priced service offering.

David Self, director of corporate business development for FNC, says an emphasis on delivering 8 Mbps of throughput to residential subscribers over the installed twisted-pair copper infrastructure ignores the economics of backbone networks and could burden carriers with unneeded costs.

"Giving 8 Mbps to each residential user, which is far more than they can pull off the Internet anyway, will create a tremendous need to build up the backbone network," Self says. "The beauty of DSL technologies is that they remove the bandwidth bottleneck in the local loop. But trying to deliver too much capacity to residential users could push costs beyond what customers are willing to pay."

Bandwidth above 768 kbps is excessive for residential users, in Self's view, and 384 kbps is probably ideal. "Given the limitations of today's Internet servers, users will not see a peak greater than 400 kbps. So why add costs by constructing a network with overly huge pipes?"

The 8 Mbps bandwidth of asymmetric digital subscriber line (ADSL) technology makes sense for business subscribers, Self says, but not for the residential market, where a more practical strategy is to concentrate on lower throughput rates. For instance, 384 kbps provides 7 to 14 times the bandwidth of a 28.8 or 56 kbps modem, allowing providers to offer customers a significant boost in performance, at the same time minimizing the "ripple effect" on access and backbone costs.

"Service providers could concentrate their 384 kbps service offering into a DS1 circuit at a ratio of 100 to one," Self points out. "To do the same thing with an 8 Mbps service offering would require a DS3 and tie up existing broadband capacity or require providers to add to their infrastructure - with the higher cost passed on to subscribers."

FNC has developed a comprehensive business case for delivery of 384 kbps SDSL (symmetric digital subscriber line) and ADSL services to residential users with its SPEEDPORT(tm) DSL solution. For commercial users, FNC can deliver 8 Mbps downstream and 768 kbps upstream ADSL with the same SPEEDPORT product. The SPEEDPORT strategy mixes SDSL and ADSL to provide the best throughput at the lowest cost to the carrier.

The FNC business case proves that carriers can charge a customer-friendly price of $50 to $60 a month for 384 kbps DSL service, a price that includes the Internet service provider (ISP) charge. That means residential subscribers can get significantly faster Internet access or remote LAN connectivity for a mere $15 to $20 more a month than the cost of today's second line plus ISP charge.

"Although the SPEEDPORT solution is one of the fastest, and lowest-cost DSLAM (digital subscriber line access multiplexer) platforms available today, it is unrealistic to believe that you can offer 8 Mbps services to residential customers at attractive monthly rates," Self insists.

"Backbone costs dominate the financial models and are prohibitive. But a 7- to 14-fold increase in Internet access speeds is an enormous step for the residential user. Providers can see, with our business case, that they can offer this service profitably today." For residential users, the FNC business case focuses on SDSL to cover a radius of 12,000 feet from the serving central office and ADSL at 384 kbps for the 12,000- to 18,000-foot range. For commercial customers, the business case calls for SPEEDPORT ADSL at up to 8 Mbps throughout the carrier's service area.

The SPEEDPORT product, announced earlier this year, is the first product to result from a partnership between Fujitsu Network Communications and Orckit Communications (NASDAQ: ORCTF). It is now available in a central office-designed 23-inch chassis and features a POTS (plain old telephone service) splitter so that customers can get voice service over the same circuit that provides their DSL service. That feature further enables carriers to provide an attractive service to Internet bandwidth-hungry customers while keeping down the "incremental cost" of that service relative to their existing monthly phone bill.

Fujitsu Network Communications, Inc., designs and manufactures fiber-optic transmission and broadband switching platforms and develops software that allows customers to perform in-service management and monitoring of the telephone network. Its customers include local exchange carriers, interexchange carriers, competitive access providers and cable TV operators, as well as large private networks in North America.

Fujitsu Network Communications is part of Fujitsu Limited, a $36 billion global technology leader in computers, communications and microelectronics. Its World Wide Web site is at http://www.fnc.fujitsu.com.

Orckit Communications develops, manufactures and markets a wide range of high-speed local loop communications systems, including HDSL, ADSL, SDSL and VDSL. Orckit is an active participant in many standards bodies concerning ADSL. Orckit is a strategic partner of Fujitsu Network Communications, Inc., in North America. For more information about Orckit or its xDSL technologies, visit the company's World Wide Web site at http://www.orckit.com.

SPEEDPORT(tm) is a trademark of Fujitsu Network Communications, Inc.