RE: The DSL business model

From: Steve Sobol [mailto:sjsobol@NorthShoreTechnologies.net]
Sent: Monday, May 14, 2001 2:18 PM

[I don't know that I agree that this is off-topic...]

I'm with you here.

Steve Schaefer wrote:

> 1) ISP's who deploy DSL are on a very slim margin. They
can't afford to
> be "full service." That doesn't mean that the best DSL ISP's don't
> provide better service than the mediocre or poor DS-1
ISP's, but don't
> expect $500/month support for your $150/month line.

I disagree with this characterization. Quite a few of those businesses would
gladly pay a few shekels more, for a decent SLA and some service. The
problem is in how you stratify the market. There are also market aggregation
issues (crossed with excessive greed).

> 2) Data CLEC's who provide most of the lines for
independent ISP's have a
> challenging business model. Northpoint went down hard.
That doesn't mean
> that the others will go down hard, too, but they have the
same kind of
> risks. They needed lots of capital and got most of it through debt
> financing.

Debt financing is okay, as long as you don't overstate your sales
projections. Homes/business' passed isn't [the same as] homes/business'
online. Getting them online is the actual gross revenue (minus
delinquencies) and you have to have your payment terms fall under some
reasonable percentage of that. What many of them did was ass-u-me a larger
percentage of plant utilization (ie x plant generates y sales, over z
months). The sales didn't ramp up, or the delinquency rate went out of
sight, and predictable results followed. It's no different with public
offerings. Not making your dividend payments is about the equivalent of not
making your loan payments. It's all credit.

Well, wasn't the big problem that the DLECs were having
trouble turning
around orders, and as a result ended up not getting paid by the ISPs?

Maybe. Looking at the Covad v. DSLnetworks case, Covad let DSLnetworks get
about 18 months in arrears. It certainly smells like bad management of
receiveables. How many of you guys would let arrearages age more than 90
days, regardless of the reason. At worst, you convert it to a prommisory
note, or some other debt instrument, with re-payment terms spelled out in
their BoD's blood.

> 3) ILEC's don't have a clue. Some of them are well-intentioned

to say about both Verizon and Ameritech. Ameritech was
fair-to-middling
until being bought by SBC, and they rolled downhill rapidly

Having witnessed SBC takover of PacBell, from the inside (PacBell ACN/CBS),
it was most amusing to watch San Ramone meeting San Antone. I absolutely
knew that the HFC system was going to get cut, at the minimum. SBC
track-record isn't real good and they're not all that nice to work for.

Here in Cleveland, Ameritech offers only ADSL. I am not sure they even
know what SDSL is. :slight_smile: They will, however, be happy to sell
you 1.5x256 ADSL for $175 a month!

PacBell does NOT offer SDSL, which is pretty much a requirement for most
business usage. ADSL is only good as a [barely] competitive offering against
residential cable.

BTW, other than DSLnetworks failure, my DSL line has been rock solid for
over 2 years. Every problem I've had was an upstream failure. You can't
fault xDSL technology, only the business' behind it.

The technology that can be faulted, and I sincerely apologize for not being
clear enough on this, is that which prevents adequate redundancy at the
end-nodes. The fact that 100,000 businesses can get lopped off by a single
provider business failure is pretty sad. I've tried, for over a year, to get
redundant uplinks to an alternate provider (ISDN backup to xDSL). CIDR,
prefix filtering, and cluelessness nail that effort every time. It doesn't
seem to matter that I am more than willing to pay for it. It simply isn't
available. But, it should be (I don't mean tinker-toy methods either).
Before CIDR, it was. The past few quarters has shown how necessary it is.
Guys, this is a huge market gap, why isn't anyone filling it?

Not to mention that if you're looking to do BGP, most providers won't
think of letting you run BGP over anything that's not at least a T1. When
I was at Intermedia, we didn't even let customer do BGP over frame relay -
they had to have a fractional T1 service at minimum.

-C

I disagree with this characterization. Quite a few of those
businesses would gladly pay a few shekels more, for a decent SLA and
some service.

And they can, today (assuming for a moment that SLA's are useful for
accomplishing what you want, which is likely untrue).

I've tried, for over a year, to get redundant uplinks to an
alternate provider (ISDN backup to xDSL). CIDR, prefix filtering,
and cluelessness nail that effort every time. It doesn't seem to
matter that I am more than willing to pay for it. It simply isn't
available. But, it should be (I don't mean tinker-toy methods
either).

You've been presented with countless options with varying degrees of
effectiveness. If you choose not to implement them, that's your
decision; just don't come whining to us the next time you suffer from
irrecoverable business damage the next time your mission-critical DSL
pipe goes down. There are forums for such off-topic discussion
(inet-access and the isp-* lists come to mind), and NANOG is not one
of them.

If you're still lost, please refer to
<http://www.nanog.org/endsystem.html&gt;\. Thanks!

There is a simple solution for redundancy - buy redundant T-1 lines, run
BGP, route a large enough block of space to be globally routable. This is
like complaining that you can only get a Yugo for $8K instead of a Porche.
You want the Porche, pay the cash. You want to spend $50 a month for DSL,
live with the limitations of the technology and the product offering.
Providers can't afford to provide DSL for the current $$$, with the present
services.

T-1's are cheap these days, compared to a few years back.

- Daniel Golding

Who's going to give a small business a large enough block to be
globally routable?

Small business, so up to 500 employees?

  ip per user plus the IS/servers related to infrastructure,
subnetting, you can easily justify some real address space.

  - jared

Should we start listing firms with hundreds of millions or more in
market capitalization, that have less than 200 pieces of equipment
with an IP address, but a significant business need for uninterrupted
high speed data access to their corporate offices?

Or will you just acccept that they exist, without needing to actually
give you a tour of one?