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The June 17, 2003 Issue Provided by System Dynamics Inc.
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In This Issue

Heard on the Net

"Wireless Is Magic" -
Our Evaluation of 802.11g Wi-Fi

The Quest for ARPU
Alcatel's "Lead With Speed"

Banda Ancha
Broadband in Spain

SCTE Cable-Tec Expo
Two Tidbits

Broadband Home Labs
More on "Smart Displays"

Website Changes


Heard on the Net

News about People and Companies Influencing The Broadband Home

Editors' Note: We had a request from one reader of the text version of this report to move the "Heard on the Net" section to the end of the newsletter, moving featured articles up front. We'd appreciate hearing whether or not you agree. Thanks!


People News

Scott Anderson has been named to head Motorola's Semiconductor Products Sector (SPS), effective July 1. ( www.motorola.com )

John Borg, II was appointed CEO at WiFiLand. He was previously with Starpoint Solutions ( www.WiFiLand.net )

Dario Wonjin Choi has been appointed Sales Director for North East Asia at Tandberg Television. Dario was previously with SkyStream Networks. ( www.tandbergtv.com )

Don Davis was appointed VP of Engineering at coaXmedia. Previously he was with Bandwidth9. ( www.coaxmedia.com )

Antonio Dominguez was named VP, National Accounts for Broadband Services. He was previously with Neptec Optical Solutions, Inc. ( www.broadbandsvc.com )

Jack Fijolek has been named Director of Business Development for UTStarcom. Jack was previously with CommWorks which was purchased from 3Com by UTStarcom. ( www.utstar.com )


Company News

--Acquisitions

Andersen Group has boosted its ownership share of Moscow Telecommunications cable TV provider, known as Comcor-TV from 50 to 100% in exchange for a 49% share in Andersen Group. They are currently wiring Moscow to provide last mile broadband services. ( www.andersengrp.com ) ( www.comcor.ru/english )

D&M Holdings purchased the assets of OpenGlobe, Inc. and Escient Convergence Corp., subsidiaries of Escient Technologies, LLC. Terms were not disclosed. This acquisition, along with their previous purchase of the ReplayTV and Rio business units of SONICblue, supports their goal of providing access to entertainment anytime and anywhere throughout the home. [Editors Note: We somehow missed this happening back at the end of April.] ( www.dm-holdings.com ) ( www.escient.com )

Lucent Technologies sold its Excel division to an investor group. Excel will now act as a stand-alone entity. Terms of the deal were not disclosed. ( www.lucent.com ) ( www.xl.com )

--Funding

Barix AG, a provider of networked audio, communications and security solutions, secured $2.5 million in funding. ( www.barix.com )

Broadbus announced that it has received an investment from Infineon Ventures. Broadbus is using Infineon's latest memory technology. ( www.broadbus.com )

Digital Path Networks, a provider of high-speed internet access, has received startup venture capital funding. ( www.digitalpath.net )

Landmark Networks a startup developing network equipment to quickly deploy large Wi-Fi networks, has received $3.2 million in Series A round financing. ( www.landmarknetworks.com )

Minerva Networks, a provider of IP TV infrastructure, has secured a new round of equity financing. The transaction was led by CIR Ventures. ( www.minervanetworks.com ) ( www.cirventures.com )

Tropos Networks Inc., supplier of systems used to build metro-scale Wi-Fi networks, received an investment of undisclosed amount from Intel Communications Fund. ( www.troposnetworks.com )

--Other News

8x8, Inc. announced the availability of their Session Initiation Protocol (SIP) videophone. It works in conjunction with the company's Packet8 voice and video service. The unit costs $599, has an integrated camera and LCD display, and can be used by plugging it into an Ethernet jack. ( www.8x8.com )

British Telecommunications and Yahoo announced that BT will rebrand their OpenWorld service as BT Yahoo Broadband. BT will offer Yahoo's Internet content and security services, as well as parental controls. The deal continues Yahoo's thrust toward bundling its content and services with broadband access. ( www.bt.com ) ( www.yahoo.com )

CableLabs announced that Microsoft signed an agreement with them in which Microsoft agreed to contribute pertinent intellectual property rights to the OpenCable project. Microsoft and CableLabs also agreed to work together to explore adding .NET common language infrastructure (CLI) to a future version of OCAP. ( www.cablelabs.com ) ( www.microsoft.com )

Cirpack, a developer of next generation switches for the European market, made several new announcements including an agreement to promote joint solutions with BayPackets, Inc.; CPE interoperability with Mediatrix access devices and Cirpack Class-5 SoftSwitches; and completion of interoperability testing with Intertex for their SIP telephony solution. ( www.cirpack.com ) ( www.baypackets.com ) ( www.mediatrix.com ) ( www.intertexdata.com )

The DSL Forum announced the launch of its DSLHome initiative. DSLHome has two components: one is technical innovation and support, the other is market awareness and promotion. As part of this program, the DSL Forum has initiated new technical work to address some key areas. ( www.dslforum.org )

The Home Phoneline Networking Alliance announced HPNA 3.0. The newest version of their home networking standard for telephone lines will move data at 128 Mbps. The alliance is promoting its inherent QoS, and with the higher speed says HPNA 3.0 will be well-suited to networking digital audio and video applications. The alliance indicates that HomePNA 3.0 silicon products supporting adapters and bridges are expected to be available later this year. ( www.homepna.org )

ICTV announced a partnership with One Economy Corporation, a US non-profit, to deliver content to help elevate standards of living for low-income households. The agreement combines ICTV’s platform with content created for One Economy’s information resource, to deliver instruction on such issues as money, health, jobs, school and family via any digital cable TV set-top box. Separately, ICTV announced product improvements which advance MSO deployment of VOD and high-definition TV services. ( www.ictv.com ) ( www.one-economy.com )

Infineon Technologies and Metalink announced they are each developing VDSLPlus, which uses a new frequency band above the current 12 MHz limit in standard VDSL. VDSLPlus is said to enable service providers to offer scalable DSL services ranging from short-range applications at data rates up to 150 Mbps, to long-reach applications that allow for more than 4Mbps rates over distances of 4km (13,200 ft), using the same line-card and Customer Premise Equipment (CPE) designs. ( www.infineon.com ) ( www.metalinkdsl.com )

Joltid Ltd., a start-up comprised of a number of Kazaa founders, has launched two new products. They claim that PeerCache helps ISP's and Network operators reduce or eliminate redundant peer-to-peer traffic in their networks and that PeerEnabler enables bandwidth usage reduction for publishers while enhancing end user experience. ( www.joltid.com )

Microsoft unveiled their new digital TV software solution for cable operators, called TV Foundation, at the NCTA cable show. ( www.microsoft.com/tv )

Pace Micro Technology Americas announced plans for their sub-$100 Digital Cable Adapter (DCA) for North American cable operators; the DCA converts digital video signals for viewing on analog television sets. At the same time, Motorola announced its DCT700 digital-only settop, providing cable operators with several low-cost alternatives for digital-only systems. ( www.pacemicro.com ) ( www.motorola.com/broadband )

Passave Technologies unveiled a new chip for deployment in Gigabit Ethernet passive optical network (EPON) fiber-to-the-home and fiber-to-the- business optical network units (ONUs). ( www.passave.com )

PCTEL announced several products for wireless LANs. The Segue SAM is a "Soft Access point Module" for Wi-Fi networks; it adds access point and router functionality to a Wi-Fi enabled notebook or desktop PC. Segue WiFinder is a handheld test tool hosted on a Pocket PC platform. PCTEL also provides the Segue Wi-Fi Roaming Client, a downloadable software package to manage access to both Wi-Fi and cellular data wireless networks; it claims to provide seamless roaming between networks, and is available for both notebook PCs and PocketPC systems. ( www.pctel.com )

SBC Communications Inc. continued the drop in US consumer DSL prices, by offering a $29.95 per month rate if customers sign a one-year contract. ( www.sbc.com )

RealNetworks and Comcast announced that Comcast High-Speed Internet customers will be offered a premium game experience via a special section of Comcast.net. It is powered by the RealOne™ Arcade software. ( www.realnetworks.com ) ( www.comcast.com )

ReplayTV, a Digital Networks North America (DNNA) company, introduced their new ReplayTV 5500 series which includes home network recording, the ability to skip reruns and eliminate programming conflicts plus a Pause and Resume feature which lets users pause a movie in one room and finish watching it in another. They have tried to address the concerns of content copyright holders by removing the Send Show and Automatic Commercial Advance features, but have kept the QuickSkip™ and high-speed fast forward buttons. ( www.replay.com )

Tandberg Television has been demonstrating its broadband ITTV delivery platform for delivering video over IP via commercial xDSL and FTTH (fiber to the home) deployments. [Editors Note: This is part of what we see as an increasing vendor focus on solutions for video delivery over DSL and fiber.] ( www.tandbergtv.com )

Texas Instruments announced the availability of a pair of chips implementing the new IEEE 1394b standard. 1394b extends 1394--also known as FireWire--to 100 meters over Cat5 or optical fiber cabling, and is expected to be widely adopted in PCs, digital TVs and many other consumer electronics devices. ( www.ti.com )

Thomson's digital video software solutions business, Canal+ Technologies, signed a contract allowing DIRECTV to provide Canal+'s middleware platform to new DIRECTV digital set-top boxes. ( www.thomson.net ) ( www.DIRECTV.com )

TiVo announced new audience measurement tools based upon the viewing patterns of its DVR customers. The company will begin offering subscriptions to a quarterly report on viewing patterns within primetime programs to advertisers and programmers. ( www.tivo.com )

US RBOCs Verizon Communications Inc., SBC Communications Inc. and BellSouth Corp. have adopted a set of common technical requirements based on established industry standards and specifications for a technology known as fiber to the premises (FTTP). The three service providers issued a letter to telecom equipment manufacturers, alerting them that the providers will soon be seeking proposals for equipment based on the common requirements. ( www.verizon.com ) ( www.sbc.com ) ( www.bellsouth.com )

Vonage DigitalVoice has signed resale agreements with Armstrong Cable and Advanced Cable Communications. ( www.vonage.com ) ( www.armstrongonewire.com ) ( www.advancedcable.net/ )

Wave7 Optics introduced new versions of two products in their “Last Mile Link” product family, for “fiber-to-the-home” networks constructed by cable operators, telephone companies, utilities and municipalities. The Last Mile Link is currently being deployed in 18 networks which will ultimately serve more than 80,000 customers across the United States and internationally. ( www.wave7optics.com )

The Wi-Fi Alliance announced the availability of ZONE Finder - a search tool and database designed to help travelers find Wi-Fi ZONE wireless public Internet access services in over 20 countries. This new component of the Wi-Fi ZONE program is free to both users and service providers. ZONE Finder is available at http://www.wi-fizone.org. ( www.wi-fi.org )


Briefly Noted

"Energy conservation is in."-- A recent article at http://www.electricenergyonline.com/mail_industry_news.asp?ID=7520 echoes the theme sounded by Mark Francisco in last month's guest article "Energy Management - 'Broadband Without Internet'". Nevada Power and Invensys are offering the "GoodWatts" program "to 50 households in the Las Vegas area", using an "always on" Internet connection to remotely monitor and control energy intensive devices. Homeowners can see their energy usage and shift their consumption to reduce costs and shift the peak load.

Countries

US - The FCC released data showing that, despite the economic downturn in the US, broadband is experiencing double digit growth rates. High-speed Internet connections increased 23% during the second half of 2002 and totaled 19.9 Million Lines in Service. For the full year, high-speed lines for residential and small business subscribers increased by 58%. The statistics also include state-by-state, population density, and household income information, ranked by zip codes. ( www.fcc.gov/wcb/stats )

Standards

802.11g - In an important milestone, the standards board of the IEEE has ratified 802.11g, the wireless standard that pushes throughput higher than the earlier .11b version. See the article below reporting on our initial testing of 11g products. ( grouper.ieee.org/groups/802/11/index.html )

VDSL - In an important move for the DSL industry, there has been an agreement that a single line code is to be selected for VDSL. We first became sensitized to this as announcements started arriving from groups like the VDSL Alliance, which is backing discrete multi-tone (DMT); this group includes Alcatel, Broadcom, Ericsson, Intel, TI and Thomson Multimedia among others. Another group, the VDSL Coalition, is backing QAM. While we have not followed or tried to dissect all the technical and political arguments, this is an important event for the industry, which is due to occur shortly. Even Dave Burstein, who follows DSL full-time, is still trying to unravel the issues. ( www.vdslalliance.com ) ( vdslcoalition.net ) ( www.dslprime.com )

The WiMAX forum, an industry consortium devoted to promoting the 802.16a wireless broadband standard, has added 18 new members, more than doubling the group's previous size. The 802.16a standard is intended for non-line-of-sight operations at frequencies in the 2-11 Ghz range. Expected applications include backhauling groups of Wi-Fi access points and last-mile wireless extensions to wired broadband links. ( wimaxforum.org )


"Wireless Is Magic" -- Our Evaluation of 802.11g Wi-Fi

We have been conducting an extensive evaluation of current Wi-Fi wireless networking equipment based on the IEEE 802.11 standards. We wanted to see how well Wi-Fi worked in our home, how it compared with HomePlug powerline networking, and to what extent the faster versions of Wi-Fi would be suitable for "whole home" networking including video.

While we have been testing all three "flavors" of Wi-Fi, we decided to focus our first round of tests on 802.11g, the newest version. The 802.11g standard was approved last week, and we expect Wi-Fi certification will come next, followed by a flood of products. We were especially interested in how well 11g devices interoperated with 11b devices, since a key goal of the 11g standard was to provide much faster data rates in products that would be back-compatible and interoperable with 802.11b products.

This article summarizes our completed tests of 802.11g access points with both 802.11g and 802.11b notebook adaptors. Next month, we will report on 802.11b and 802.11a access points and notebook adaptors, and on mixed-mode networks with both 11g and 11b devices. This article attempts to provide the answers while sparing readers the extensive details. For those we refer readers to our Broadband Home Labs Website.

As we started to measure the range and speed of devices based on each "flavor" of Wi-Fi, we kept getting inconsistent results. When we talked with a good friend who holds an FCC First Class license, he said "Wireless is magic!" and helped us understand the variables which can affect performance. Arthur C. Clarke said: “Any sufficiently advanced technology is indistinguishable from magic.” We now know this is particularly true of wireless networking!

Although some of the magic still remains, wireless networking has made tremendous progress and we've been able to explain some of the science behind the magic. We have been using first-generation wireless LAN products for several years and had been disappointed to find that they didn't work at many of the places we most wanted to use them--especially those places where we hadn't installed Ethernet outlets. In our current tests, we saw excellent 802.11b performance at all test locations, with reduced performance only at a few locations with substantial path loss. We were also pleased to see that 11b notebook adapters worked very well with 11g access points.

We found that current 802.11g products fall short of advertising claiming "five times faster than 11b". While it was gratifying to see that 11g worked at every test location, the average data rate was little better than two times faster across all locations in our house. From our measurements, we concluded that 11g products in their current form are probably not well suited for wireless video networking.

However, it is very early in the product iteration cycle, and we expect to see rapid improvements in speed and consistency. Product announcements from Broadcom and others this week suggest that the refinement process is already well under way.

We look forward to repeating our tests on successive generations of 802.11g products. The tests reported here will serve as a "baseline" to quantify the improvement from one generation to the next.

Our testing procedure, results and conclusions are reported in depth in the Wi-Fi Evaluation pages of our website.


Summary of our test results

We measured the network speed while transferring large files between PCs at nineteen locations around the house. Fourteen locations were used in our earlier HomePlug evaluation, and we added two more inside the house and three outside. One location was close to the access point, while the others were separated by one or several walls, a floor, and/or ducting. We think this is fairly typical of North American houses.

Buffalo WBR-G54 broadband router/access point --> Click for larger pictureLinksys 54g card --> Click for larger pictureWe tested 802.11g access points and notebook adapters from Linksys and Buffalo Technology plus a Linksys 802.11b notebook adapter, in six "test combinations" of an access point and a notebook adapter. We used AirMagnet, a test tool, for signal level measurements, and our own diagnostic to measure file transfer speed.

Although the 802.11g standard has been approved in final form (on June 12, 2003), all tested 11g equipment was based on the Broadcom "54g" chip set with an early implementation of draft standards. 11g products based on the approved standard with Wi-Fi certification will likely provide different--probably better--results.

We did these tests in only one house, with one sample of each product and with one particular test tool. We have no way of knowing how well other samples and other products in other homes will perform.

Here's a summary of what we found:

  • Both 802.11g and 802.11b worked with all test combinations at all nineteen locations we tested, most of them obstructed by walls, floors and ducts, and one quite far from the access point and through a wall. This is substantially improved from our first-generation 802.11b equipment, which did not work at all at half of the locations.
  • We tested 802.11b with two test combinations. The measured file transfer speed averaged 4.34 Mbps across all nineteen locations, varying from an average maximum of about 5 Mbps at many locations down to about 3 Mbps at a few, with a low of about 0.6 Mbps at location 4 (Dave's conference table) with one combination.
  • We tested 802.11g with four test combinations. The measured file transfer speed averaged 9.07 Mbps across all nineteen locations, varying from an average maximum of about 17 Mbps (with the notebook adapter in the same room as the access point) down to about 5 Mbps at three locations, with a low of about 2 Mbps at location 16 (Dave's desk) with one combination.
  • Measured 802.11g speeds varied considerably more than those with 802.11b. The average 802.11b speed (4.34 Mbps) was about 85% of the maximum of 5.14, while the average 802.11g speed (9.07 Mbps) was only about 50% of the maximum (18.09).
  • The 802.11g measurements were quite inconsistent. Since all tested 11g equipment is based on the same Broadcom "54g" chip set, we expected roughly similar results from each combination. Instead, we saw significant speed variations at many locations, with some varying by more than 2:1.

Please see the Wi-Fi Test Results page on our website for the detailed measurements at each location.


New Product Announcements

Hot on the heels of 802.11g approval last week, Broadcom and SiGe Semiconductor issued related product announcements that encourage us to believe the product iteration process will move quickly in this highly-competitive market.

By enabling 802.11g product shipments in advance of standards approval, Broadcom's "54g" products won early market leadership. Broadcom reports the 54g is in 93% of all 802.11g products sold through U.S. retail distribution, and in 100% of the notebook PCs shipped to date.

Broadcom's first announcement following standards approval said that it was providing its partners with software to upgrade existing 54g products to the standard, and that it expected many of those partners to offer the upgrade as a software download for existing 54g products.

Broadcom's second announcement was that it is shipping standards-based technology to enhance the performance of all 802.11 based products. The new technology, which it calls Xpress, is based on WME, a key element of the forthcoming 802.11e standard. With Xpress, wireless devices can send longer packets, reducing the overhead associated with multiple packets and increasing the throughput. Broadcom says this can provide a 27% improvement in g-only networks and up to 74% in mixed b and g networks.

Finally, SiGe Semiconductor announced a new RF front-end solution for 802.11b/g. They claim their new chip will improve transmission range and speed for WLAN-enabled devices.

( www.linksys.com ) ( www.buffalotech.com/wireless ) ( www.airmagnet.com ) ( www.broadcom.com ) ( www.sige.com )


The Quest for ARPU: Alcatel's "Lead With Speed"

What do you learn when you bring together 125 executives from 75 telcos based in 40 countries? We had a chance to find out when we spoke at Alcatel's "Lead With Speed" customer conference in Madrid last month. The speakers were drawn from innovative Alcatel customers, major industry participants like Microsoft, Disney, Sony and Philips, a few consultants/analysts and a sprinkling of senior Alcatel executives. The theme of the conference was broadband, its status and prospects.

Tim Johnson of Point Topic framed some of the discussion by sharing recent DSL penetration figures, worldwide and by country. Worldwide, DSL is the dominant form of broadband being used by residential customers. Tim's message was that DSL is the KEY growth market within telcos' fixed line communication business.

Broadband is also the growth engine for Alcatel. Although broadband is virtually synonymous with DSL for the telco community, Mike Quigley, (Alcatel President, North America) said he expects to see the acceleration of fiber to the home (FTTH), as well as increased DSL penetration in North America.

Brad Fisher, Bell Canada --> Click for larger picture In the North American broadband market--distinct from much of the rest of the world--cable serves a significantly higher proportion of broadband customers than DSL. Brad Fisher, GM Product Development of Bell Canada, indicated that 58% of Canadian broadband users have chosen cable and 42% have DSL. He observed that DSL in Canada has been closing that gap. It will be interesting to see if this also happens in the U.S, where the RBOCs seem to be approaching DSL promotion with increased vigor, lower prices and higher speeds.

With DSL such a major telco thrust, they (and broadband providers more generally) are grappling with a problem. They have had to make large investments to deploy broadband, but are unclear where -- other than faster Web surfing -- the incremental revenues will come from to maximize the return on this investment. By example, one European Alcatel customer said they had increased their Internet and broadband investment from 13% in 2000 to 45% in 2002, but broadband revenues were still less than 10% of their total.

The big challenge, and the focus of many of the talks, is how to increase average revenue per user (ARPU). This is made even more urgent due to the increasing traffic (and network demands) coming from peer-to-peer (P2P) applications. One speaker indicated he expected his traffic to increase 25% in terms of Kb per user in 2003.

Security, music and games have been popular choices as value-added applications for a number of broadband providers. Fisher of Bell Canada indicated they are doing "forensic market pilots" to test consumer interest and willingness to pay for applications, prior to doing a mass launch. So far one application that has been a big hit is security as a value-added service. MusicMatch and Gamesmania have also been successful in increasing revenues. They are now adding parental controls and expect it will also be popular. However, Fisher warned that new applications do not take off overnight and companies must incorporate that understanding in their business plans. They understand that video is a passionate consumer choice and so are now looking at ways to increase video options they can offer their customers.

Van Gogh and broadband --> Click for larger pictureOur talk at the conference -- see http://www.broadbandhomecentral.com/presentations.html#lws03 -- focused largely on new networked consumer electronics devices--PVRs, digital cameras and camcorders and networked audio players--and how they are creating compelling media applications for consumers. We showed a new "home video" of how we use such devices in our everyday life. In our view, the increasing digitization and number of home devices is driving growth in the "home bandwidth budget".

Many applications need more information flowing out of the home (like sending your relatives a video of baby's first steps). This means that unlike Web surfing--which is highly asymmetric (much more information flows to the home than from it)--future applications will need technologies that support more symmetry. One of the challenges we noted for the audience was how they will address customer applications requiring greater bandwidth and symmetry, starting from today's ADSL solutions. Places like North America, where cable is a major competitive force and the triple play--voice, data and video--is increasingly viewed as mandatory, seem to require new solutions like VDSL and fiber.

Hye Seon Yu, Hanaro --> Click for larger pictureHy Seon Yu of Hanaro Telecom provided a unique view into the Korean market. While most media coverage focuses on Korea's world-leading broadband penetration and the advantages it has brought to that country, Hy Seon reminded us that the story is not without some downsides. From the perspective of service providers, the very rapid introduction, expansion and upgrades to faster speeds have resulted in significant profitability issues. She also observed that there have been digital and generational-divide social issues which are less widely discussed.

We resonated with the talk by Julia Langley, VP at Philips, since what she called "a portfolio of connected devices" sounded much like the applications we showed in our video. From her talk we gathered that Philips has a serious business push into consumer electronics devices that will connect to the broadband pipe and home network. Julia talked about the evolution of these CE devices in terms of adding storage in the consumer device, increasing the portability of both the devices and the content and increasing the ease of use. The business proposition to the end user will be bundled broadband services and connected devices, with entertainment going directly to the CE, not just to the PC.

Nainan Shah, VP Business Development at Sony Computer Entertainment Europe had a message about the role of game consoles in the broadband market. In his view, linking the Playstation and broadband result in a perfect marriage, not just for games but also as a vehicle for music, information and entertainment. In Japan over 300,000 people have their PS2s connected to broadband. Game consoles will be a great driver for broadband services and increasing ARPU, especially in countries where game consoles are more popular than PCs.

In the quest for ARPU, most speakers came to the conclusion that it's futile to search for the "killer app". Instead, they believe that a "cocktail" or "palette" of services will be discovered and adopted, and will over time be integrated into consumers' lives and taken for granted. We're making progress but are still in the discovery stage for what the recipe will be.

Clowning with Charles --> Click for larger pictureHmmm, maybe that's why we and the other guests were sampling all those cocktails during the evenings!

( www.alcatel.com ) ( www.point-topic.com ) ( www.bell.ca ) ( www.hanaro.com/eng ) ( www.philips.com ) ( www.scee.com )


Banda Ancha - Broadband in Spain

We couldn't visit Spain without learning more about residential broadband there. Thanks to some of our obliging readers who invited us to meet with them after the Alcatel conference in Madrid, we got an inside peek into how "banda ancha" (broadband) is developing there.

Spending time away from your own country is always interesting and this trip served to remind us once again how the word "broadband" has significantly different connotations, depending on where you live--we've dubbed this the Broadband Rorschach Test. To us in the US, broadband connotes "high speed access with a PC". Everyone sees ads that promise "50 times faster than dial-up!".

In Spain and some other European countries, local dial-up telephone services are charged by the minute, and Internet use has been slowed by fear of how much a user will be spending to connect. The big selling point for broadband is having a flat-rate service to connect to the Internet. Services typically start at just 128 kbps and are marketed as "flat rate" rather than "high speed".

We were especially interested in the emergence of a competitive market and took the opportunity to meet with both the incumbent carrier and companies representing varied types of competitive thrusts.


Telefónica - A Forward Looking Incumbent

We have many readers at Telefónica, the largest company in Spain, and the world's sixth largest telecoms company by market cap. From its roots as Spain's incumbent fixed-line telephone carrier, Telefónica now has operations in almost 50 countries and derives less than 40% of its operating revenue and profit from its traditional business. Dave (with Prodigy at the time) first visited with Telefónica in 1992, when they were already interested in online services; Dave discussed with them how Prodigy could be launched in Spain with ADSL.

On this visit, we were shown their "Hogar Digital", several rooms of a digital home, complete with automated appliances, home networking, and advanced applications. Our hosts came from several different groups and included Jesús F. Lobo and Salvador Pérez from technology strategy, Ana Altadill Arregi from digital home services, Gracia Morales Godoy from TV services and Carlos Gavilanes from corporate strategy. From our conversations, it was clear that Telefónica is a competent incumbent that is investing in R&D and watches competitive markets closely as they develop their strategies.

We were interested to note how committed they are to the idea of an OSGi gateway as the mechanism for providing services to users. Their view of a user residence includes a user equipment housing which includes the DSL modem, gateway, telephone, TV and control terminations.

Health Care interface --> Click for larger pictureOne service of particular interest was their home health care system, which is in trial use with four patients today. We hope to run a future guest article about experience and learnings from using it. The system capabilities and interface include videoconferencing with medical staff, dietary information and much more. It includes reminder capabilities like a light that comes on to remind patients that it's time to take their medicine. Doctors can enter patient information at the patient's home or in the hospital. The system also interfaces with patient monitoring equipment to enable remote care-givers to assess progress. Another application thrust is distance education which they are cooperating on with Universidad Nacional de Educacion a Distancia. Health care monitoring --> Click for larger picture

TV user interface --> Click for larger pictureEntertainment is also a part of their digital home. Using multicast IP and ADSL with an IP set top box, they are providing the Imagenio service to 400 homes in Alicante, giving 22 channels, their program guide and VOD. These users are getting telephone, high speed Internet and TV services from Telefónica. The service we saw would probably not be competitive in the US, but may meet the needs of the Spanish market.


Broadband Competition

European public policy is strongly in favor of a competitive broadband market. The European Commission has been promoting competition as an important factor in accelerating the availability and use of broadband networks. Its earlier "eEurope 2002" plan resulted in regulatory changes; its new "eEurope 2005" plan, to be presented to the European Council later this week, is intended to enable "widespread availability of broadband services at competitive prices".

Although competition to the incumbent, Telefónica, is not a big factor in Spain's residential broadband market today, the glimmerings of new competitive thrusts are beginning to emerge. Since the incumbent passes virtually all households and has received all the revenues for telephone service, it is difficult to compete with them. Unlike in North America, where cable passes most homes, TV service over cable is more scattered in Spain, and most users get pay TV by satellite. Terrestrial TV is also viewed as pretty satisfactory by many.

The liberalization of the fixed-line telecommunications service market in Spain was completed in 1998. In addition to Telefónica, other players include Retevision, owned by Auna, and Uni 2, owned by France Telecom. Part of what we learned during our visits was that potential broadband competition may be coming from a variety of different companies and technologies. The following sections highlight some companies we visited; they are only a sampling of what's developing in Spanish broadband competition.


Euskaltel - Serving the Basque Country

Founded in 1995, Euskaltel has been building its own network to serve homes and businesses in Basque Country. Its shareholders include leading financial, telecomm and utility companies, including Endesa and Auna. The company's goal is to offer services over its own infrastructure and it has been aggressively increasing its network buildout. They offer the complete gamut of services including fixed and mobile telephony, Internet access and cable TV. Their network consists of extensive fiber infrastructure, while their last-mile connections include both twisted pair for telephony and coax for television. Their intent is to continue deploying both twisted pair and coax for residential wired connections.

The Basques consider their culture distinct from other Spanish regions and speak a language (called Euskara) which differs from other European language groups. Even the name for their area -- the Basque Autonomous Community -- emphasizes their uniqueness. It has historically been one of the richest areas in Spain and houses heavy industry, wealthy banks and large fishing ports. The region has about 2.1 million inhabitants, comprised of 700,000 households. We sensed that one of the reasons for Euskaltel's success has been the enthusiasm of the Basque people to adopt a Basque-provided service. This is not to detract from the accomplishments of the company, which in a relatively short time has increased their own network from 189,000 homes passed in 2001 to 296,000 in 2002, provides more than 50% of the Internet services used in its region, and turned EBITDA positive in 2001 despite the extensive network deployment expenditures.

Euskaltel hot zone --> Click for larger pictureAt Euskaltel, we met with Fernando Andreu Cabezón (Head of the Technology Department), and with Inés Castiñeira and Izaskun Alonso who are working on wireless broadband projects. We heard about their Wi-Fi/WISP service which was launched at the end of April. They are structuring the deployments so that Euskaltel provides the access control--authorization, service selection, and other back-end functions, and other companies provide the hardware and do the system integration. In phase 1 they are supporting deployment of public hot spots and corporations for private WLANs and in phase 2 will be expanding to SOHO and home services for remote and rural areas.

Because Euskaltel is a full service provider with fiber, twisted pair and HFC, they are in the interesting position of deploying both ADSL and cable modem service: they use ADSL for business customers and cable modems for residential customers. Their residential offer for telephone, data at 128 kb down and 64 kb up and basic TV channels costs 30 euros/month, although charges for telephone usage are additional. They have a variety of higher speed, higher cost data options, and additional digital TV options.

We were particularly interested in their Celeria pilot project, which is aimed at serving areas where they have not deployed HFC. These include both smaller towns and historical areas where it is impossible to deploy cable. Their wired infrastructure covers about 90 of 250 towns, representing more than 80% of the population. The solution they are trialing for the small towns is based on substituting LMDS-based broadband wireless for the connection from the node to served buildings in the town, using 112 MHz of bandwidth to provide wireless TV, data and VoIP over a range of about 1 1/2 km. Within the town, they use one antenna for each building and have deployed an all-digital cable box for TV reception. They operate DOCSIS over the wireless link, and are using VoIP rather than circuit-switched telephony. This project is currently deployed in Meicende and Derio. We have invited Euskaltel to write a guest article for a future issue of this report.


Afitel - Wi-Fi in Zamora

Ignacio at Afitel --> Click for larger pictureSeveral months ago, an article in Intel's Business Computing Newsletter caught our eye. It was titled "Case Study: Zamora" and the headline "Spain scores world first with public wireless Internet" got our attention. We were intrigued and decided that when we went to Spain to speak at the Alcatel conference, we should personally visit the project. Fast forward to May and we were in Madrid, sitting in the office of Ignacio Ozcariz, CEO of Wireless & Satellite Networks S.A. (WSN), which owns Afitel, the provider of Zamora's service.

WSN started business in 2000 using satellite to provide services to professionals in rural areas. Finding that satellite economics and latency were not acceptable, they switched to Wi-Fi as the delivery mechanism and launched in Zamora, an old city about 250 kilometers northwest of Madrid near the border with Portugal. Their service is intended to provide broadband access covering an entire town--rather than being limited to Wi-Fi hot spots.

Afitel promotion in Zamora --> Click for larger pictureThe current service in Zamora is geared to personal, not business, users. It is free now, and is scheduled to cost 9.9 euros per month. There are now 1250 homes connected and supports 400 simultaneous users with 300 access points. Depending on what happens with future financing, they plan to start providing services to areas of Madrid and Barcelona after the summer.

Ignacio described the network architecture, which has 3 wireless layers from the server and fiber connection to the individual home. Getting the service running involved some false starts as they moved the access points from street level to the light poles and finally to rooftops.

Ignacio does not think the current Zamora service represents the best that can be done with broadband wireless--he characterizes it as "our Windows 1.0" and is considering the technology evolution that will allow them to provide quality of service and higher bandwidth. As these plans are put into action, he says they will move to their "Windows 3.1" and later to "XP". During this evolution, each access point will move from having 4.5 Mbps capacity to 1.5 Gbps. The company currently has 18 employees and is working with two Spanish Universities.

Ignacio believes that flat rates and IP are givens in the future. His focus on Wi-Fi at the end device is based upon the high volume, mass-market availability of Wi-Fi cards. He is willing to trade off more network complexity to keep that end-user simplicity and low cost. His business model is based upon four agents who (1) build the network, (2) own the network, (3) operate the network, and (4) exploit the network by building services on top of it. Potential partners may be utilities, which in Spain have ownership positions in telecommunications companies.

Antenna outside pharmacy --> Click for larger pictureAfter hearing the descriptions of the Zamora network, we were eager to travel to Zamora to see and use it ourselves. We were surprised that our meeting point with the Zamora team was a pharmacy near the center of town. The second floor of the drug store is also the local Afitel office--José Manuel Reglero, who hosted the visit, is involved in both. As we got acquainted with the local team over coffee at the café around the corner from the pharmacy, Dave turned on our notebook PC and used the AirMagnet test tool to find 13 Afitel access points. Wi-Fi in Zamora --> Click for larger picture

Our hosts took us on a wonderful tour of the town. We visited each portion of the network architecture Ignacio had described, starting with the Afitel server and fiber connection next to the railroad station. José was sure we were the first to use Afitel's service to download our email from the grounds of the church of San Pedro and San Ildefonso, at the top of a very scenic lookout point Checking Wi-Fi access --> Click for larger picture.

We were surprised to see access points using more closely-spaced Wi-Fi channels than we expected. In the United States--where 11 Wi-Fi channels are available--the standard practice is to locate access points on channels 1, 6 and 11 to avoid overlap. Europe has 13 available Wi-Fi channels and we expected to see four widely-separated channels in use; instead, we recall seeing more closely-spaced channels.

As we concluded our visit, having a wonderful lunch in a small restaurant with our Afitel hosts, we mused on the connectedness of a world where we could read an email from Intel about Wi-Fi in Zamora--and several months later be in Zamora using the service and meeting the people who made it happen!


Tecnocom - Reconsidering PLC Access

Thankfully, our Tecnocom hosts were kind enough to wait for us after we missed a turn and got lost on our drive to their offices, about 30 minutes outside Madrid. Our GSM phone was a godsend as our hosts helped us navigate around the many roundabouts.

Tecnocom has two major businesses--a telecommunications group and an industrial motors group--and operates in nine countries. With annual revenues of $100 million in telecom, they are a systems integrator whose customers include service providers and electrical companies.

Our host Antonio Gómez, Managing Director of the Networking Solutions Division, reads our reports and had seen our article expressing doubts about the future of PLC access (see http://www.broadbandhomecentral.com/report/backissues/Report0304_3.html ). He said that Tecnocom is very bullish on PLC as a broadband access mechanism to the home. They are working with the utility Endesa (the largest in Spain and South America) to provide voice and data over PLC to 2500 homes in Zaragoza, with an average bandwidth of 2 Mbps. Another site has been running in Portugal for six months with Oni/EDP (Electricidad of Portugal) providing voice, data and video. He said these projects would move to full deployment this year, and that companies are also poised to activate PLC access systems in Latin America and China.

One of the reasons for Tecnocom's enthusiasm about PLC is a new chip technology from DS2, a chip company in Valencia, Spain. We heard favorable reports about DS2 in other meetings during our trip. Although we were not able to meet with DS2, we were told that their technology supports much higher transmission speeds than others on the market, and it working well. Endesa is one of DS2's shareholders.

We hope to have a guest article from Tecnocom in the future, containing more detail on the PLC deployments underway. The combination of higher bandwidth capabilities and opportunities in markets outside the US, in locations where DSL and cable are not deployed, might make us reconsider our views about the future of PLC access.


Aggaros - Community Broadband

Although geographic separation is still a fact of life, it sometimes surprises us how similar our experiences and ideas are to those of people in other countries. That was certainly the case in our meeting with Jaume Salvat and Pere Alemany of Aggaros. Our common experience with HFC networks and IP services, which they brought from their prior positions at Auna Cable, may be part of the reason.

In looking at the deployment of broadband in Spain, they see that there are still many municipalities which are unserved but want broadband. Many of these villages have only 1000-2000 inhabitants, but don't want to be left behind. Until recently municipalities have not taken an active role in fixing the problem, but this picture is starting to change. Regulators are loosening their positions which used to require operators to offer services over wider areas. The emerging view may be supportive of municipalities becoming "micro-operators" for their own areas. Jaume and Pere are actively working with some municipalities to pull together the expertise and support that will be required for such a process to succeed.

There are many questions about how a working model will evolve, including how the various key roles--building the broadband transport infrastructure, operating this infrastructure, and offering services built on it--should be divided between the municipalities and private companies. We noted that these same questions for municipal broadband are being addressed in locations as diverse as the Utopia project in Utah, some work in the Netherlands and in Spain.

Aggaros is technology agnostic and much will depend upon the budgets and requirements of specific areas. They are exploring the potential of PLC. However, technologies like those from Wave7 Optics (see the SCTE article later in this issue) suggest that the economics for fiber may finally be approaching the right range.

There's nothing specific to report yet on municipal projects in Spain, but our antennas are tuned to the fact that this path is being explored in parallel in many different locations. Jaume and Pere promised to keep us informed as the situation develops.


"Broadband Tapas"

We'll use the expression "broadband tapas" -- referring to the little plates that accompany visits to Spanish bars--to cover several other visits we'll mention briefly. One was with reader Fernando Gonzalez of Altran SDB, the Spanish high-tech division of a large French consulting company that owns 130 companies of various sizes, including Arthur D. Little in the US. Fernando has a long background in exploring the smart home. He introduced us to Javier Jiménez Leube, who is setting up a university-based multidisciplinary R&D center to look at the intersection of telecommunications and architecture. The group will combine telecommunications professors, architects, industrial engineers and informatics specialists and will work with businesses interested in implementing their ideas.

We also talked about the combination of broadband and architecture with another reader, Stefan Junestrand, CEO of Casadomo Soluciones S.L. Stefan holds a doctorate from the Royal Institute of Technology in Stockholm, and his studies crossed between architecture and technology. As we met Stefan for lunch in Madrid, we discovered that, like us, he is a fan of Christopher Alexander's book "A Pattern Language" and has written a paper on its application to future technologically-enabled homes.

Muchas gracias to all of our readers in Spain who took the time to meet with us and share their interests and learning about broadband!

( www.telefonica.es ) ( www.euskaltel.es ) ( www.afitel.com ) ( www.tecnocom.biz ) ( www.endesa.es ) ( www.portugaloffer.com/oni/ ) ( www.ds2.es ) ( www.aggaros.com ) ( www.altransdb.com ) ( www.casadomo.com )


SCTE Cable-Tec Expo: Two Tidbits

Since SCTE's Cable-Tec Expo took place just before we left for Spain, it has received plenty of coverage in other places. What we'd like to share is a few of the meetings we had there which introduced us to interesting technologies and capabilities we'll be following up on.

Wave7 Optics Architecture --> Click for larger pictureFirst was a meeting with Wave7Optics, which has a last mile optical access system that address residential, business and multi-tenant customers. The company has an impressive team (many from Antec) that includes experience in cable TV, optical transmission, IP communications, telecom and signal processing. We met with Emmanuel Vella, Chief Marketing Officer to review the technology and associated deployment costs, and also talked with Jim Farmer, CTO, the co-author of "the book" on cable systems.

Their system is designed to deliver both Gigabit Ethernet and standard analog video over the same passive optical fiber infrastructure. It is architecturally very similar to the traditional cable HFC structure, and is designed as a "drop-in" replacement for HFC with identical interfaces at the cable headend and customer home. Costs for FTTH are dropping rapidly and Wave7Optics's system appears to be approaching cost parity with HFC.

Chris Breceda of Toshiba --> Click for larger pictureWe've written previously about Jungo and their CableHome-based residential gateway software, so were intrigued to find it incorporated into Toshiba's new PCX4500 Wireless Cable Modem Router. We had the opportunity to meet with Fred Berry, VP/GM of Toshiba's Network Products Division, Chris Breceda, Director of Sales and Shimizu Yasuyuki, VP of Engineering to review their current and future product plans. We are looking forward to a future Broadband Home Labs test of the PCX4500, so we can try out the integrated Jungo software and built-in wireless router in our own home.

( www.wave7optics.com ) ( www.jungo.com ) ( www.tais.toshiba.com )


Broadband Home Labs - More on "Smart Displays"

In last month's issue, we wrote our initial impressions of the ViewSonic airPanel V110 - one of the new wireless networking devices based on Microsoft's "Windows-powered Smart Display" technology. The V110 has a 10" LCD screen with a resolution of 800x600 and works through our Wi-Fi network as to extend the screens of Windows XP Pro PCs.

At Cable-Tec Expo (see above) we met with Ramzi Ammari of Universal Electronics and learned about their Nevo for Smart Displays product, which turns a Smart Display into a universal remote control for consumer electronics devices. After some discussion, Ramzi agreed to let us play with Nevo, which is scheduled for release in July.

V150 15" smart display --> Click for larger pictureUniversal has just shipped us a second Smart Display with Nevo installed. This is the larger version of the ViewSonic airPanel, a V150 with a 15" touchscreen and 1024x768 resolution. We're now testing both units and the Nevo software and will provide a full report next month.

( www.viewsonic.com ) ( www.microsoft.com ) ( www.uei.com ) ( www.myNevo.com )


Website Changes

We made many changes to the Broadband Home Labs section:

  • We created a new version of the "About Our Home" page, with details on our home networking and computers.
  • We updated the "Wi-Fi" section with detailed results of our Wi-Fi tests summarized in this issue.
  • We added a "test locations page" with diagrams of our house showing all the locations where we have tested HomePlug and Wi-Fi equipment.
  • We updated the "HomePlug" section to link to the test locations page.

We revised the report home page, and added pages with our publication schedule and information for guest authors.


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