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Analytic Issue Number 1El.pub
Analytic Issue Number 1
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There are two ways to look at the situation, what has happened so far, and what is planned in relation to expected demand. Applications that require high bandwidth, such as Web TV, animations and interactive games, are called broadband applications. There is argument over the level of bandwidth that is required for a reasonable quality of experience in using these broadband applications.
Generally it is argued that for TV the user needs about 1.5Mb/s, but some would say lower quality is acceptable and can be achieved with, perhaps, 750Kb/s whilst others argue that interactive applications require 10Mb/s. In the past quality (and particularly response time) has always been an important factor and people believing they can sell inferior products have lost money.
One of the first points to make is that the broadband market is actually very small at present. MSDW put the broadband users (cable and DSL) at around 5 million compared with 38 million dial-up users, but projects this to increase to 44 million against a drop in dial-up to 36 million by 2004. [5] Screen Digest estimates current European broadband at 425,000 (cable and a small amount of DSL), about half of cable users are on the Chello service. [6]
There have been considerable difficulties with the early services. These appear to have been caused by false assumptions about the usage patterns. Cable TV splits its fibre into channels with about 10 -15 Mb/s available in a channel (adequate to provide an analogue TV channel). For traditional page based web access this capacity allows about 500 users per channel at around 56 Kb/s.
However, where users are accessing streamed media at 1.5 Mb/s as few as 10 users can swamp the service. In addition it was thought that users would not require significant up-load capability, whereas the 'always on' characteristic of cable and DSL encouraged some users to set up web servers from home. These problems led @Home and other US operators to alter the contract terms to restrict usage, despite the early stage in the planned development. [7]
Similar problems are appearing in Europe, with the rollout of DSL by the telcos. [8] The proposed 'broadband' speed is being limited to about 500Kb/s and there are severe restrictions on up-loading. [9] In the case of DSL these problems appear to be similar to those encountered with cable. The bandwidth has the capability of offering much higher speeds between the user and the local exchange, but the capacity being implemented to link groups of users from the exchange to the Internet backbone is too low for the usage profiles actually being encountered.
A proposed solution to these problems lies in the introduction of wireless broadband. However, the same problems are likely, as the bandwidth is shared between users in a 'cell' and the assumptions being made in published data seem to suffer from the same under-estimate of broadband demand as demonstrated by the other types of services. Satellite broadband services have not taken off in the US (only 100,000 broadband satellite Internet subscribers by end 1999) despite slow roll out of cable and DSL and availability at 400kb/s since 1996 (DirectPC from Hughes). Part of the problem is that the service is only one-way. Astrolink, Teledesic, Sky and Skybridge which will be two-way are still raising money necessary for launch. [11]
Until recently there was no clear means of making very high bandwidth available on the backbone. The situation has changed with the introduction of DWDM (Dense Wave Division Multiplexing) into the market, which can deliver Tb/s on single fibres, and by the rollout of this type of capacity by new players. [12] The difficulty in predicting the ratio of supply to demand is that demand will be driven more by interconnectivity growth, such as VPN over IP, than by the Web and other applications and that supply is confused by the problem of bottlenecks between the initial access path (such as DSL) and the Internet backbone, as considerable investment in equipment is needed to speed this up for the average user. Whether there will be excess capacity and consequent competition will drive down prices, or not, remains to be seen.
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[5] Morgan Stanley Dean Witter publish a great deal of analytical material and statistics on their web site http://www.msdw.com/ The European Internet Report was published June 1999 and the Global Internet Primer June 2000.
[6] see Ben Keen slides at http://www.tvmeetstheweb.com/may2000/programme.php a recent workshop in Amsterdam.
[7] http://news.cnet.com/news/0-1004-200-2176366.html?tag=st.ne.ni.rnbot.rn.ni Pac-Bel restrictions; http://news.cnet.com/news/0-1004-200-1463562.html?tag=st.ne.ni.rnbot.rn.ni cable slowdowns and DSL; http://news.cnet.com/news/0-1004-200-344209.html?tag=st.ne.ni.rnbot.rn.ni @Home caps.
[8] http://www.adsl-france.org/ is a French web site set up by discontented ADSL users.
[9] Screen Digest February 2000 'The European broadband internet market.'
[10] See for example the assumptions in report 5 of the UMTS Forum available at http://www.umts-forum.org/
[11] Screen Digest March 2000 'Slow start for broadband internet by satellite'
[12] Ovum white paper January 2000 'The Pan-European Carrier Market: the Emergence of a New Model
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