YES, Summer Sure is HOT!

By David Shamah The Jerusalem Post August 22, 2006

If you've had trouble figuring out the differences in service and pricing structure between ADSL and cable modems, dial-up and broadband, and HOT vs. YES, well, all I can tell you is to prepare a couple of ibuprofen before you get too involved in reading this – for the inevitable headache that is sure to result.

That's right, folks – they're changing the technology yet again. The current range of download speeds available for both cable and DSL/ADSL modems (Bezeq is currently selling 2.5 Mbps) isn't sufficient for the Next Big Thing, which is video or TV on demand. So, the people in charge of these things – phone and cable companies, international consortia of various shapes and sizes, and, of course, the Marketing Department – went back to the drawing board and came up with a bunch of new technological candidates that will provide a faster, easier, and smoother access to all things digital, including video, data and voice systems. The new converged systems will replace the current un-converged digital technologies, as well as require the hapless citizenry to learn a whole new bunch of acronyms.

One big advantage that cable companies have had until now was their ability to offer high speed Internet service along with their TV broadcasts, using a single cable TV/modem connection line, whereas phone companies relying on their current plain old telephone analog wiring systems have had to rely on separate technological/marketing schemes to survive long enough to make their own digital plays – hence the local marketing alliance between YES Satellite TV and Bezeq. Now, I don't have any “in” with Bezeq technology chiefs and I haven't spoken to any of them on the record, but you have to figure that they are working day and night to come up with a cost effective system that will let them deliver a converged digital package featuring voice (phone calls) and media (TV, radio), and high-speed Internet connections by themselves, without having to split the profits with YES or worry that they are going to be squeezed out of the phone business by up and coming cable providers getting into the local phone market as a result of deregulation (http://tinyurl.com/qc454). And if the head honchos at Bezeq aren't working hard to achieve that goal – well, all I can say is that there are going to be a lot of very angry stockholders at next year's annual meeting!

In truth, it's not the technology that counts per se; companies forced to upgrade their systems will do what they have to, but try to spend as little as possible on the project. Bezeq, which has had its share of recent financial woes, is no different. Luckily for them, options do exist for companies like Bezeq – and phone companies in a number of countries, like the U.S. and Japan, are already upgrading their local phone networks in order to allow users at home to enjoy a faster “triple play” experience, as the convergence of voice, data and video is known (http://tinyurl.com/97reo) – while keeping all the money for themselves! In fact, the worldwide trend in this direction is being led by U.S. phone service provider Verizon, which has embarked on an ambitious program to provide very fast digital service to all their subscribers using a technology called FTTP - Fiber to the Premises (also known as FTTH, Fiber to the Home; see http://www.ftthcouncil.org/) – which promises to wire customers' homes with a fast fiber optic cable, allowing high speed “triple play” digitally converged action (I could be writing their marketing material, no?). Certainly, the big news here is the ability of Verizon to deliver TV broadcasts and video on demand to customers via its phone infrastructure, while retaining the ability to connect to the traditional POTS system (http://tinyurl.com/hfbhn).

Once again (of course!) Israel leads the way in development of this leading edge technology. In March of this year, California based PMC-Sierra bought out Israeli company Passave, which has been at the forefront of FTTH development (http://www.passave.com) for about $300 million. Passave is well known in Japan for its Ethernet PON chips and deals with large Japanese telecommunication companies involved in FTTH. Interestingly, Bezeq, which invested in Passave, got a chunk of that money, according to press reports – perhaps an indication that Bezeq will be making an FTTH move of its own one day. Also active in the FTTH field are Orca (http://www.orcainteractive.com/) and Iamba (http://www.iamba.com/), both producing much of their technology locally.

FTTH might prove a tad too expensive for a company like Bezeq (Verizon has reportedly earmarked as much as $20 billion for its upgrade campaign). Instead, it might use a less-intensive - and less expensive - but still effective version of home fiber optic technology, called FTTC (Fiber to the Curb) or FTTN (Fiber to the Neighborhood), which would alleviate the need and expense of upgrading the wiring in customers' homes.

As the names imply, FTTC and FTTN entail rewiring main phone lines with fiber, replacing existing copper transmission networks with new cables capable of high speed digital transmission. How does the high speed stuff get to customers' homes? Well, both technologies will require customers to upgrade their modems to VDSL (Very High Rate DSL) capable devices. VDSL will work on existing copper wire systems, providing download/upload rates as high as 52/16 Mbp – nearly seven times faster than ADSL.

However, VDSL will only operate over copper for short distances – not more than 1,200 meters. So, similar to the system used for ADSL, the phone company can install VDSL gateways outside an apartment block or along a street, and provide customers with a VDSL transceiver in order to allow customers to access the high speed connections in their homes. The transceiver also allows the conversion of copper-transmitted analog phone signals to fiber-optic digital signals, ferrying phone conversations via the central routing station to its destination. Using FTTC/FTTN, there's no need to knock out existing infrastructure inside customers' homes – and if you love your old yellow circa 1975 dial phone, you can continue to use it as well! Note that there are other DSL technologies out there, but VDSL is the fastest – and probably provides the easiest upgrade route for phone companies interested in not only keeping up with the cable competition technologically, but keeping an eye on the bottom line as well (see http://bitpipe.com/tlist/FTTC.html and http://tinyurl.com/hyl84).

Sounds like it might be a good time to buy stock in Bezeq or other “old fashioned” phone companies, doesn't it? As a matter of fact, an internal report by industry research company CableLabs released last month and published by the Wall Street Journal indicated that if cable companies are hoping to survive the next great technology leap forward, they are going to have to pony up major money to keep up with things like FTTH/FTTC/FTTN (http://tinyurl.com/k8ovw).

Naturally, not all agree – especially those in the cable industry, which has some tricks up its own sleeve. First of all, fiber optics as a wiring system is not necessarily limited to use by phone companies – there's no reason cable companies can't benefit from it too, as has ComCast in the U.S. (http://tinyurl.com/lvock). In fact, fierce competition for the fastest (not necessarily cheapest) gun in town has transpired in areas served by both. But cable companies have other methods they can employ as well – as we shall see next time.

Ds@newzgeek.com