Later start in DSL may help Asian carriers

Many providers of DSL, which is designed to offer high-speed internet access and other digital services over standard copper telephone wires, have failed because they did not offer enough attractive value-added content, some industry observers said at the conference. The financial woes of the industry were readily apparent at the show, which on Tuesday drew fewer than 100 attendees.

"The competition isn't really about who provides that piece of wire. The content aggregators and packagers are the real competitors," said Chris Severn, a consultant at Cap Gemini Ernst & Young who gave a keynote address at DSLCon.

Without strong content, DSL providers couldn't command a healthy price premium over the fees they were paying the incumbent carriers for access to phone lines, Severn and others said. Partnerships with companies that create good games, entertainment and applications are critical to making DSL offerings take off. Meanwhile, cable TV providers are making inroads using their long experience in those kinds of partnerships, observers said.

However, DSL may have brighter prospects in Asian markets as the region's governments deregulate telecommunication and networks are built out in a more cautious atmosphere. Some Asian markets also are better equipped for deployment of DSL, said James Southworth, a consultant at East by North in Centreville, Virginia, and a board member of the DSL Forum.

In most countries in Asia, investors are not flooding new DSL carriers with the excessive credit that trapped providers in other countries, Southworth said. In addition, the new carriers in Asia are coming into markets where there are only a handful of competitive carriers going up against the incumbent, whereas in countries such as Germany, the UK and the US, there are dozens of competitors.

DSL providers in this region also face a more attractive environment than in the US for building a network: Densely populated cities mean most potential customers are within a short distance of network facilities, which allows for high-performance transmission.

Growth in DSL deployments in Asia over the next several years is expected to be led by South Korea, where incumbent carrier Korea Telecom alone has more than 3.5 million DSL subscribers today, building from just 1500 in 1999, Southworth said. Competitive carrier Hanaro Telecom also is rapidly deploying DSL. Southworth said the Korean carriers did a few critical things well. Perhaps most importantly, they built a network infrastructure that let customers smoothly set up service on their own and worked out billing and service systems ahead of time. Because the South Korean government deregulated telecommunication later than did the US, carriers there were able to benefit from deployment lessons learned elsewhere.

South Korea has deregulated its telecommunication markets gradually, beginning with mobile phones and then opening up the fixed-line local loop to competition in 1997, said Jae-Ho Byun, principal member of the Fair Competition Research Team at the government's Electronics and Telecommunications Research Institute. Deregulation is not even finished yet: The government still approves carriers' prices in both industries, to prevent one carrier from severely undercutting the market, Byun said.

Although Koreans were skeptical about DSL when carriers began offering it, the carriers now are expected to turn profitable soon because of the huge volume of customers signing up, Byun said. The keys to the popularity of DSL in South Korea are applications, especially games, online banking and stock trading, he said.

Elsewhere in Asia, DSL is getting an even later start. Howin Technologies, which now offers services in Taipei and two other cities in Taiwan, has had to build its own network all the way through the "last mile" to customers' homes and offices, because it has not been able to gain access to incumbent Chunghwa Telecom's lines, said Kevin Hsu, principal engineer at Howin.

A major challenge has been working through the bureaucracy of city governments to get approval to build a network, he said. After eight months of network construction, the carrier has about 50,000 customers. In Taipei, its network reaches about 60% of the city, Hsu said. Howin has formed partnerships with some content providers but is not yet delivering the value-added services.