Welcome to the Summer 1999 issue of the HELLERSTEIN TELECOM & TECHNOLOGY REVIEW, a monthlyfree newsletter covering significant industry and regulatory developments in the telecommunications andtechnology industries. The newsletter is published by Hellerstein & Associates, a telecommunications andtechnology research group that provides its clients with a competitive edge through market research, competitiveintelligence, and regulatory analysis of broadband access and competition policy issues.

NOTE: The Hellerstein & Associates Website is located at www.jhellerstein.com. Please keep the suggestionscoming and send all comments or suggestions to Judith Hellerstein at Judith@jhellerstein.com.

This month's issue will focus on some of the insight gained at the recently completed xDSL ComForum heldoutside of Chicago from July 19-21, 1999. Although the conference focussed on the future of DSL, it covered allaspects of broadband access. Some of the most interesting sessions were those that focussed on new and emergingbroadband access technologies, such as voice over DSL and broadband wireless technologies offered by ISPs.Other interesting presentations were those focussed on the multi-tenant or multi dwelling unit environment and thestrategies carriers used to target these residents/tenants. Other presentations dealt with service level guarantees,provisioning, service management and selection, scalability requirments and technical issues, customer serviceissues, regulatory issues, and effective strategies used by operators for creating smart buildings.

Today, most small business users and SOHOs do not have access to broadband. This is even more true forconsumers than it is for businesses. The presentations at the conference illustrated all the various work that is beingdone both, in bringing broadband access to the public, and also in meeting the security concerns and quality ofservice guarantees that businesses small and large require.

ISPs spoke about the growing popularity of their wireless broadband access platforms. ISPs continue to create newand innovative ways for consumers to obtain broadband access, even if these seem to siphon revenue from theirother broadband services. Wireless Internet access continues to grow as Small businesses, telecommuters, andSOHO's use these broadband technologies when they are unable to obtain DSL.

WIRELESS BROADBAND ACCESS

Concentric's broadband wireless service, offered in partnership with Wavepath, is a privately licensed serviceusing MMDS spectrum in the 2.1-2.6 Ghz spectrum that can transmit a high speeds both upstream anddownstream. Concentric offer both asymmetric and symmetric service at speeds from 384K to 1.5mb. However,other ISP partners of Wavepath offer other variations, some as high as 6mb. Concentric worked with Wavepath topioneer the use of MMDS for two way wireless broadband access. According to Jim Southworth, Director ofConcentric's Advances Network Services and Technology, it was the success of the work of Concentric andWavepath under their experimental license that convinced the FCC that two way wireless broadband access couldbe successfully deployed and used, leading to its FCC's October 1998 Order opening up MMDS service to twoway broadband service.

Concentric chose to partner with Wavepath and use a private wireless system for its broadband access needsprecisely because it wanted to be able to offer a service level guarantee to its users and it felt that this could not bedone using unlicensed wireless spectrum. Additionally, it wanted to bundle this offering with its other VPN andhigh speed Internet and Web offerings that offer service level guarantess. It is these valued added services thatdifferentiate Concentric from all other ISPs and are also its largest selling point. Concentric uses wireless both as afill-in for consumers who are not able to get DSL, and also as a technology of its own. Although Concentric'sservice is only available in the San Francisco area, it will soon be expanded and rolled out in other areas.

Concentric's wireless technology is installed in thousands of houses and has plans to expand out of the SanFrancisco area. So as to directly attack the RBOCs and cable modem operators. Concentric claims that its wirelessbroadband offering is able to cover more range than either an RBOC or an PC company. Concentric has beensuccessful in deploying broadband access, because it is not afraid to offer different methods for obtainingbroadband access, from DSL to wireless.

In contrast, PSINet ,who was not at the conference, uses the unlicensed spectrum in the 2.4 GHZ bandwidth forits wireless broadband service. PSINet, in partnership with the German Company Airdata, has deployedbroadband wireless access in several states throughout the US. According to PSINet, it has been delivering 81channels to consumers for several months. Moreover, it will shortly be moving to a 512Kbps speed from 128kbps.However, one of the dangers inherent in using public, unlicensed spectrum is that it might be interference freetoday, but not tomorrow.

Hellerstein & Associates strognly advocates as rapid a deployment of broadband access regardless of thetechnology used. Securing broadband access is of critical importance both to businesses and to residentialconsuemrs because broadband is the future of the Internet. It does not matter what technology is used to obtainbroadband access, just that the technology is in the marketplace so that consumers can make the choice. Thus anytechnology that can be used to provide consumers, small businesses, and SOHOs with that access should bedeployed. It is the small businesses and SOHOs who are responsible for 55% of all innovations and newtechnologies, 50% of the private gross domestic product and 47% of all sales in the country. Today only a smallfraction of all Americans have access to broadband.

MDU/MTU MARKETPLACE

Several sessions in the ComForum dealt with differing vendor and carriers strategies at attacking the MDU/MTUmarketplace. According to most recent numbers from the Census Bureau, some 27% of all households live inMDUs. When this figure is added to the about 750,000 commercial buildings that make up the MTU market, it isno wonder why this marketplace has become the newest battleground between incumbent players and competitiveproviders. While incumbent carriers have de facto control over most buildings and apartment complexes, this ischanging. Several presentations on the MTU market were made during the ComForum, in particular, the sessionon MDU Business Opportunities and Technical Challenges discussed some of the strategies that competitivecarriers use to enter this marketplace. One company Onsite Access rather than waiting for federal regulators orlegislators to create firmer rules and national guidelines, began signing up commercial buildings in NewYork City for high speed access. Brandon Knicely of Onsite Access stated that he found incredibly strong demandfor high speed access among tenants in MTUs and was able to achieve 100% penetration in his first building withinthe first year. Demand for affordable broadband access has continued to be strong with penetration rates for newbuilding averaging about 40% within the first three months after service is first offered. More remarkable is thattenants who subscribe to high speed access almost never drop their service; Knicely reported churn rates that werebelow 1%.

Onsite Access is strictly a wired operator who uses switched ethernet to connect various offices in the building totheir point of presence located in the basement. Since the POP is located within the building, offices can beconnected through cheaper Ethernet connections rather than a DSL or T-1 connection. Knicely stated that becauseof the inability to gain access to a buildings risers and cable necessary at reasonable rates, he often must rewireevery building with fiber.

Carriers like Onsite Access as well as fixed wireless operators like Teligent and Winstar would be helpedconsiderably by gaining nondiscriminatory access to facilities controlled by building owners, unbundled access toriser cable and wiring. In June 1999, the FCC initiated a proceeding on the best ways of promoting thedevelopment of competitive broadband networks and access to these networks for people living and working inmulti-dwelling or multi-tenant units. In this NPRM, the FCC will be looking at these issues, how Section 224 ofthe Act, which grants carriers non-discriminatory access to riser conduit can be implemented and also whetherexclusionary contracts can be offered and if so, under what circumstances.

Regulators have been hesitant to act because they fear they lack clear statutory authority to impose building accessrules and just compensation standards on building owners. Only two states, Connecticut and Texas, have statutesthat require landlords to grant non-discriminatory access to telecom carriers that tenants choose. Many morecarriers, such as Onsite Access, would be able to enter the marketplace and provide the necessary broadband accessthat tenants are demanding if access to a buildings' infrastructure were made easier, quicker, and offered atreasonable prices. Building owners claim that control over a buildings' infrastructure is vital for them because theyneed to balance access to their resources with those of competing needs of building safety and quality of service,thus they cannot let all carriers into the building. Moreover, building owners state that access could get complicatedif they have to address each tenant's choice of service provider. However, this particular access issue is more of anissue for MDUs rather than MTUs. Tenants in a business setting tend to stay far longer than residents as they havemore sunk costs, as opposed to residents in apartment buildings where the turnover rate is often as high as 40% ayear.

The lack of movement by building owners on offering non discriminatory access to their buildings' infrastructure iswhy a national policy governing building access is so essential. Hellerstein & Associates agrees with ChairmanKenard that broadband access is the future of the Internet and that the way to get there is by letting a competitivemarketplace thrive. However unless there is national policy with clear and transparent laws, regarding access, thedevelopment of competitive networks, both in MDUs and in MTUs, will be slow in coming. Currently, there is nosuch policy and that is why it is so essential for the FCC to act and not to delay. Today, most small business usersand SOHOs do not have access to broadband. This is even more true for consumers than it is for businesses.

Hellerstein & Associates is interested in learning what its readers think of these issues. Please send all commentsdirectly to Judith Hellerstein at Judith@jhellerstein.com. If you would like more information on this topic please e-mailJudith Hellerstein at Judith@jhellerstein.com.
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Hellerstein & Associates is a telecommunications and technology research group that provides its clients with acompetitive edge through market research, competitive intelligence, and regulatory analysis on broadband accessand competition policy 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 theirinterest to the work of Hellerstein & Associates. Please send all comments or suggestions to Judith Hellerstein at Judith@jhellerstein.com.

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