Welcome to the May 2000 issue of the HELLERSTEIN TELECOM & TECHNOLOGY REVIEW, a free semi-monthly newsletter covering significant industry, marketing, and regulatory developments in the telecommunications and technology industries. The newsletter is published by Hellerstein & Associates, www.jhellerstein.com, a telecommunications and technology research group that provides its clients with a competitive edge through market research, competitive intelligence, and regulatory analysis of broadband access, competition policy, and wireless issues.
Subscriptions are free so if you know anyone who would like a subscription, forward this newsletter and encourage them to sign up via the online subscription form on the Hellerstein & Associates website, www.jhellerstein.com. Please send all comments or suggestions to Judith Hellerstein at Judith@jhellerstein.com.
This months issue will focus on some of the insight gained at last Wednesday's FCC forum on digital loop carriers and remote terminals. The FCC convened the forum to assist it in determining whether vendors are developing and carriers are deploying new technologies to speed the deployment of advanced services, ie, broadband. The equipment in a remote terminal (RT) converts analog signals from copper loops that terminate at the RT into digital signals, multiplexes these signals and other signals from terminating copper loops, and then transports them over a shared medium to the Central Office. DSL technology allows service providers to offer high speed access over existing copper wires in the local loop. DSL, however, requires clean copper wires that run continuously from the customer to the DSLAM in the Central Office. The electronics used to provide broadband access, the DSLAM, must be deployed at the RT. Today, customers connected through a digital loop carrier (DLC) can only receive IDSL, which does not met the FCC's definition of broadband. The older remote terminals were designed for POTS access and had little if any space for CLECs to collocate in the RTs. The Next Generation DLCs that are being deployed today have the capability of passing through DSL.
Participants at the forum discussed four solutions to the problems of ensuring that any consumer connected to a remote terminal can receive broadband access. Solutions included: the resale of ILEC provided broadband services through a platform; the purchase of unbundled network elements (UNEs) and the collocation of competitive LEC equipment in ILEC RTs; adjacent collocation and interconnection to the ILEC's RT, or to its serving area interface; and whether the FCC should create an equipment compatibility standards for all RTs/ DLCs. One of the objectives of the forum was to explore the technical and operational aspects of these four solutions, the feasibility of allowing CLECs to install their own line cards into an ILEC RT, the power and heat limitations associated with any collocation of CLEC equipment in the RT, and any network capacity and efficiency concerns associated with these proposed solutions. The most contentious of these issues were the space available for collocation of CLEC equipment in the RT, the fear of monopolization of the RT by one vendor and the resulting impact on competition, the necessity to maintain the existing copper in the plant even as the ILECs upgrade the loops to fiber, and the problems with any type of adjacent collocation or interconnection solutions.
DLCs, and the inability of customers receiving their POTs service through a DLC to receive DSL, remains a serious problem for the industry, since about 35-40 % of all US consumers obtain their phone service through a digital loop carrier. Of all the participants's at the forum, Bell Atlantic has the smallest percentage of customers served through a DLC, 18%, while Bell South had the highest.
Participants in the forum included three of the four RBOCs, SBC, Bell South, and Bell Atlantic. US West's absence from the forum was very noticeable, especially since US West has the largest DSL deployment of all the BOCs. Vendors and Manufacturers included, Alcatel, Catena Networks, Copper Mountain, Lucent Technologies, Nortel Networks, and Paradyne. Service providers included all three of the national data CLECs, Covad, Northpoint, and Rhythms. As is usual in these forums, some of the questions proposed by the FCC sparked heated debate among the participants resulting in time running out before all questions on the FCC's agenda were discussed.
The use of RTs in the network is growing substantially, SBC plans on adding and additional 35,000 DLCs to its network as part of its $6 billion Project Pronto. Once completed, practically every SBC customer will be served through a DLC/RT. SBC's goal is to have every consumer to be between 9,000-12,000 from any DLC. In business areas, some consumers will be even closer than 9,000 feet. As a result, it is even more important than ever to ensure that all carriers, ILECs and CLECs, have some kind of access to customers who are only served through a DLC. One of the genesis of this forum was SBC's offer, which can be found in its waiver petition filed with the FCC in accordance with its merger agreement with Ameritech, to make the line cards in the new DLCs it is building a new network element. SBC refers to this as a "Broadband UNE". SBC's suggestion garnered an enormous amount of industry criticism because of SBC's decision to use Alcatel to build most, if not all, of its RTs. Moreover, according to SBC's filing, only Alcatel designed and produced line cards can be used to connect the fiber to the copper in the RT. Another problem with these RTs is that the line cards used will only support ADSL technology, and not any other technology.
The FCC began the forum by surveying the ILECs on how widespread the deployment of DLCs and RTs is throughout the network and whether the deployment was primarily, Huts, Controlled Environmental Vaults (CEV) or Cabinets. Although past deployment of RTs had been in CEVs and Huts, rather than Cabinets, future deployment of RTs will use cabinets. The issues of available collocation space and the problems in allowing ILECs to require that all service providers who want to collocate at an RT use a particular vendors line card were the most contentious.
SPACE AVAILABILITY
The subject of the availability of space in the RT/DLCs was a hotly debated subject during the entire forum, with participants constantly bringing up this issue throughout the entire forum. All of the ILEC participants noted that space for collocation equipment is limited to none. Moreover, ILECs do not expect this situation to change after the upgrades, rebuilding, and construction of cabinets are completed. About 50% of all CEVs and Huts have some space that could be used for collocation, but in others there is no space whatsoever. Moreover, in the cabinets, both in the old and in newer cabinets, there is no space available for collocation. The ILEC participants described that when the cabinets, CEV's and Huts were conceived, they were only designed to carry POTs services, thus all equipment was designed exclusively for POTs. Moreover, any extra space in these RTs are reserved for POTs expansion and growth, and should not be used by CLECs to collocate. ILEC participants also informed the FCC that the RTs could not accommodate additional equipment because of problems of heat dissipation and power requirements. Moreover, adding new equipment to the RT would require special engineering issues to be resolved.
Besides the engineering issues, adding extra space to all new cabinets would likely necessitate that the ILEC gain new approval from the communities as the space required for these new cabinets would be above the space that ILECs had agreed to use in their applications and commitments to the municipalities which granted their ROW approvals. At SBC and at other ILECs a fear remains that if SBC, or any other ILEC, asks for permission to expand the Hut/CEV/Cabinet, the community will refuse to grant approval or ask for significant changes before granting its approval. Besides the increased costs in going back a second time to the municipality for approval, there is also the delay factor. One ILEC participant stated that he thought that adding one additional rack would add an additional $10,000 tot he cost of the RT.
The newer cabinets that are being constructed have even less space than the older ones. Additionally most of the new cabinets include an integrated access device (IAD) produced by Alcatel. The Alcatel IAD takes up the entire space of the RT so much so that participants described the Alcatel IAD as a shrink wrapped RT. It is not just the size of the Alcatel equipment in relation to the RT that participants are concerned about, but it is also the type of services and capabilities on that piece of equipment. Many participants claimed that the Alcatel IAD, used by the RBOCs, lacked some services and capabilities that were found on other Alcatel products. The ILEC participants stated that they added only the capabilities that were essential to running the RT, since other items would result either in a larger piece of equipment (sizewise) or one that would give off too much heat.
The Rhythms Attorney likened the RTs of today and tomorrow to Central Offices. Just as the FCC mandated that ILECs must allow CLECs to collocate in COs, CLECs should be given the right to collocate in all RTs. Rhthyms was adamant on this point and stated that it was extremely important that competitors be allowed access to the RTs. This is especially true if these RTs are going to be the network of the future as in SBC's network, that CLECs be given access to these RTs. Rhythms was resolute about this and stated that even if changing the RT would delay the roll out of next generation RTs to accommodate more room for CLECs, the buildout and deployment of these RTs should be delayed, even if this meant that a DSL roll out to customers served by these RTs would be further delayed. The ILECs argued that there was no comparison between COs and DLC cabinets. In COs there is space but there is absolutely no space in cabinets, nor should there be since a larger cabinet would be inefficient. Hellerstein & Associates believes that the FCC should insist that space be made available for collocation and that CLECs should not be made to use a specific type of line card, but should have the option of using any vendor's approved line card in the Alcatel equipment.
The ILEC participants stated that even if they agreed to enlarge the cabinets to include some collocation space or to use a different type of IAD in the cabinet, the cabinets have already been designed. The time for changes was months ago and not now. Changing designs by adding additional space would result in a delay in upgrading and in building new RTs. Additionally, the price of each of the RTs will be much higher than before. CLEC participants criticized the ILECs for never asking them if they had any changes that needed to be made to the RTs while they were still in the design phase. While both parties have valid concerns, the question remains will the public benefit more by having access to broadband sooner, even if this results in the creation of a monopoly vendor. Or will the public be better served by insisting that ILECs create collocation space in the RTs, even if it means delaying the upgrades and buildouts of the next generation of RTs. Will any delay resulting from this action benefit more people than it hurts, that is would it provide more benefits to consumers by offering them more choices, more competition and increased innovation in return for an additional time period without access to broadband. Hellerstein & Associates believes that it is better to ensure that CLECs can collocate and that competition can flourish even if it means a delay in the rollout of broadband access. We believe that it is never a good idea to create a monopoly, and that is exactly what will happen if the FCC approves the one vendor solution proposed by the ILECs.
CLECs argued that any cabinets that are deployed, should be deployed in larger sizes that would accommodate physical collocation for competitors. Several service providers argued that at least one rack should be made available in the cabinets for collocation. The ILECs stated that because of the cabinets size and the problems in obtaining rights of way and community approval of the cabinet, it could not provide for any additional space in the cabinet. There was heated discussion about why an additional rack in each cabinet would cause problems, both in the size and in gaining approval of the municipalities. ILECs argued and were supported by some vendors, that adding a rack to a cabinet would not just increase the size of the cabinet by the size of the rack, but much more.
Suggestions on how to free up more space in the RT included replacing the current POTs equipment with newer, smaller equipment. ILECs stated that besides the extra rack, space must be added for all the necessary equipment that would then be needed, such as improved power supply, air conditioning, and a new management system to communicate between the different pieces of equipment in the RT. This extra equipment is critical for each component and was not needed before since it was bundled in with the IAD.
The beauty of an integrated device is that all the items that are needed are on one piece of equipment and thus ILECs can treat the RT as one unit making it much easier to manage. However, if one adds additional equipment to RT, such as line cards, separate power, air conditioning the RT can no longer be treated as one unit as had been done previously. As a result, a new management system would now be required. Alcatel's IADs were singled out not because of any of failings with the product, but simply because Alcatel's are used in SBC's and other ILECs RTs.
IS A SINGLE VENDOR SOLUTION A VIABLE OPTION?
The other hotly debated issue was involved the use by the ILECs of a single vendor solution for their RTs. The participants were concerned that if the FCC adopts what some are calling a "broadband UNE" the adoption of a platform would limit the use of certain technologies. CLECs want to be able to use whatever technology or service is appropriate and called for by their customers, even if that technology or service is not used or offered by that particular RBOC. Many of the participants voiced concerns that the Alcatel equipment used by the RBOCs did not include all the features and capabilities that were available, or supported by Alcatel. In response, one of the ILEC participants stated that the RTs would support any Alcatel supported product and that all services and capabilities would be offered. Even if the Alcatel integrated device is not a watered down version, but one that supports all Alcatel supported services and capabilities, there was still great concern about the effect on competition when only one vendor is allowed in the RT.
The establishment of a UNE on a single vendor product in effect it means that the FCC favors one equipment manufacturer or one technology over all others. Hellerstein & Associates believes that this action goes against the goals of the Telecom Act, which calls for the FCC to endorse a technology neutral policy. A technology neutral policy does not allow for the choice of only one vendor and that vendor alone to have a monopoly over the deployment of DSL through DLCs. This is especially critical in SBC's area since SBC stated that under Project Pronto, all consumers will be serviced through a DLC. As a result, one vendor, in this case Alcatel, will have a stranglehold over the DSL technologies to be used in SBC's area. Relying only on one vendor forecloses competition in that area by making it impossible for other vendors and manufacturers to compete. Moreover, favoring one vendor over others hinders the development of a competitive market by closing off any avenues for innovation and creativity. Many of the vendors, as well as all the CLECs, at the forum voiced concern over the approval of a single vendor solution. Hellerstein & Associates agrees with the remarks of Paradyne's Philip Kyees "Relying on one vendor as the only source of new innovations and new technologies, pretty much ensures that these technologies will never come to market."
The success of the US economy in recent times as well as the growth of the PC industry is the result of innovations and the support by the marketplace of new ideas and new technology. Approving the use of a single vendor solution in SBC's RTs makes it that much harder for new companies and new technologies to be created and brought to market. In the past few years, Wall Street has funded hundreds of new companies precisely because they had an idea or a new technology or service which was superior than anything that was currently being offered and used. Approving a single vendor solution erases all chance of startups focused on the DSL area from executing on their plans, since many areas will now be closed to competition.
Hellerstein & Associates strongly believes that the road to widespread DSL deployment is not through establishing a single vendor approach or by allowing another monopoly to be created; it is gained by offering consumers choices, by allowing the market to work, and by working to ensure that all obstacles are removed from the market. Not allowing competitors to collocate in the RTs/ DLCs sends the wrong message. Hellerstein & Associates strongly advocates as rapid a deployment of broadband access regardless of the technology used. Securing broadband access is of critical importance both to businesses and to residential consumers because broadband is the future of the Internet. It does not matter what technology is used to obtain broadband access, just that the technology is in the marketplace so that consumers can make the choice. Thus any technology that can be used to provide consumers, small businesses, and SOHOs with that access should be deployed. Relying on one vendor for deployment creates a monopoly at the very time when the government is working very hard to free industries from the control and power of monopolies. Hellerstein and Associates believes that competition, and competition alone, is the most effective means of bringing consumers more services, better quality, and lower prices. Thus, we believe that the FCC needs to do everything it can to persuade the ILECs to allow competitive access to the RTs/DLCs. Restricting this access to a single vendor is an anti-competitive action.
While the forum tackled many more issues than these, these were the most contentious and consumed the most time. We recommend that anyone who is interested in learning more about the forum to download a copy of the transcript of the forum, which will be available by May 24, 2000, 10 business days after the event, on the FCC's website, www.fcc.gov .
Hellerstein & Associates is interested in learning what its readers think of these issues. Please send all comments directly to Judith Hellerstein at Judith@jhellerstein.com. If you would like more information on this topic please e-mail Judith Hellerstein at Judith@jhellerstein.com.
__________________________________________________________________________________________________________________
To subscribe to, or unsubscribe from, the HELLERSTEIN TELECOM & TECHNOLOGY REVIEW, please e-mail Judith Hellerstein at Judith@jhellerstein.com or sign up via the Hellerstein & Associates website's newsletter subscription form at www.jhellerstein.com. For past editions of the HELLERSTEIN TELECOM & TECHNOLOGY REVIEW please visit the Hellerstein & Associates website at www.jhellerstein.com.
Hellerstein & Associates is a telecommunications and technology research group that provides its clients with a competitive edge through market research, competitive intelligence, and regulatory analysis on broadband access, competition policy, and wireless issues. We look forward to hearing from you and will strive to meet all topic requests. Redistribution of this newsletter is encouraged provided it includes this paragraph.
Topics covered in the HELLERSTEIN TELECOM & TECHNOLOGY REVIEW were chosen because of their interest to the work of Hellerstein & Associates . Please send all comments or suggestions to Judith Hellerstein at Judith@jhellerstein.com.