DSL May Find Opportunity in Digital TV

The demand for high-speed Internet access is fueling revenues in the DSL market for an increase from $4.8 billion in 2000 to a projected $10.4 billion in 2007, according to Frost & Sullivan.

DSL’s advantage over other broadband alternatives is simple. With more than 700 million telephone lines worldwide, standard copper wires are an ever-present asset representing a multibillion-dollar opportunity for xDSL equipment manufacturers. But that doesn’t mean DSL will run away with the broadband market.

“Despite the industry’s potential, increased threats from competing technologies, rising pressure from suppliers and customers, elevated inventory levels and fears of overproduction constitute challenges,” said Frost & Sullivan Research Analyst Jean-Christophe Deverines.

An increasing number of broadband solutions will provide last-mile bandwidth. Cable modems are the most significant competition to xDSL, but such alternatives will vary greatly depending on the local conditions, whether they are geographic, technological or business related.

The North American market is no longer the sole engine for growth for DSL. The continued drive to build network infrastructure in certain regions is fueling market expansion worldwide. Some countries have made the deployment of DSL, especially ADSL, a national priority. This trend has been a major factor in the phenomenal market growth in Korea.

Demand is also driven by the feature-rich nature of DSL, which enables bandwidth-intensive services such as virtual private networks (VPN), home networking, voice over DSL, video on demand and more.

“These features will continue to ignite demand,” said Deverines. “As increasingly bandwidth intensive applications are developed, service providers will become the gatekeepers of this new currency.”

DSL’s ability to deliver digital television and video services hold a lot of potential. According to a report by Strategy Analytics, 46 million homes worldwide will be watching digital TV delivered over their phone lines by 2008.

Commercial services that deliver TV to DSL subscribers have been available for some time from operators such as Qwest in the United States, and Kingston Communications and VideoNetworks in Britain. Strategy Analytics predicts that DSL will account for 11 percent of worldwide digital TV services by 2008, up from less than 1 percent today. Annual sales of DSL DTV set-top boxes will rise to 10.7 million units by 2008, a substantial increase from 1 million in 2002.

“DSL can become the fourth DTV platform,” said David Mercer, vice president of consumer practice at Strategy Analytics. “But it is doubtful that many of today’s telcos will make it. Delivering content is an alien business for most of them.”

Strategy Analytic’s report recommends that telcos steer their communications-oriented business culture towards dealing with content providers, as well as investing for the long term in network upgrades. If they can meet these challenges, then DSL DTV will be a valuable weapon in the fight against continued decline in their traditional fixed-line voice businesses.

It also recommends that telco players maximize the opportunity to bundle digital television with services such as telephony and messaging, broadband Internet and home network management. This approach will position telcos for the long-term battle with cable, satellite and other emerging players.

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