Dwindling DSL services give rise to new options

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1 Charter Business : White paper Dwindling DSL services give rise to new options WHITE PAPER There is no question a company s high-speed data connection has become a business lifeline in the Internet age, providing the communications and information underpinnings for employees and customers alike. But how companies obtain that vital connection is now undergoing an evolution, as older, slower digital subscriber line-based services give way to faster, IP-centric cable data and Ethernet options. Indeed, some telephone companies have started to de-emphasize or discontinue DSL service altogether; meanwhile, advancements and wider availability of cable-based technologies offer businesses higher data rates. More recently, Ethernet-based connection services also have evolved sufficiently to offer yet another alternative to companies in need of symmetric broadband connection services. For business customers, understanding these current broadband market trends can help in making decisions about broadband services to power their own businesses into the 21 st Century. DSL: on the downslide The DSL service market has faced increasing challenges in recent years as inherent technology limitations make it less and less competitive. Central Office DSLAM To start with, DSL service is a distancelimited technology. The farther away customers are from the DSL Access Multiplexer (DSLAM) network node, the lower the connection speed. That s because this last-mile connection is copper, and the metal absorbs some of the signal; the longer the copper loop, the more the signal is eroded. Fiber Optic Link DSLAM

2 2 For most DSL networks, the maximum loop distance to support DSL service is about 18,000 feet, or about 3.5 miles from the DSLAM. Past that point, the signal degrades too much to support reliable data transfer. Even if a customer is within 18,000 feet of a telco DSLAM, the actual speed varies dramatically. Depending on the quality of the copper line, standard DSL can deliver a maximum of about 15 Mbps within a few feet of the DSLAM, but that falls to about 8 Mbps at about 8,200 feet. At 10,000 feet the speed drops to about 6 Mbps, and at 15,000 feet it comes in Mbps. Cable data s longer reach In contrast, cable competitors broadband services based on its Cable over Data Service Interface Specification (DOCSIS) technology and coax connections aren t vulnerable to such speed limitations. That s primarily a function of the transmission and the coax cabling, ensuring that all customers served by a local cable modem termination unit (CMTS) see the same line speeds if they are on the same service tiers. DOCSIS technology allows for data transmission on twin 6 Megahertz channels, with one channel providing the downstream path from the network to the user and the other the upstream path from the user back to the network. Cable data services often provide higher data rates than competing DSL services. For example, Charter Business Internet service offers speeds ranging from Essentials20 s 20 Mbps downstream, 3 Mbps upstream up to Pro100, which offers 100 Mbps downstream and 5 Mbps upstream. Essentials20 s 20 Mbps downstream, 3 Mbps upstream up to Pro100, which offers 100 Mbps downstream and 5 Mbps upstream. That drives significant differences in performance. For example, Charter Business Pro100 service is able to send 200 Megabytes of data to a remote backup server in 5.33 minutes, while the Essentials20 service accomplishes the task in 8.88 minutes. Contrast that to a 3 Mbps DSL service, which will send that same payload in minutes. Another advantage cable data has is a more generous upstream capacity, allowing users to send data at faster rates. Charter Business Essentials and Pro tiers offer between 3 Mbps and 5 Mbps upstream, while most providers including AT&T and Verizon offer DSL upstream speeds of 1 Mbps at most. That means that a 30 MB presentation sent to a client will take between 48 and 80 seconds with Charter Business Internet service, while a DSL service with about 500 kilobits per second (or 0.5 Mbps) will take about 16 minutes to deliver the file. Higher upstream speeds are increasingly important to small businesses as they layer on communications applications such as videoconferencing and data backup, the latter requiring transfer large transfers to offsite storage servers. Cable data customers tied to the same CMTS unit do share the aggregate downstream and upstream capacity on these channels, so as the number of simultaneous users rises, the bandwidth allocated to each customer drops. To manage this, cable operators carefully design their networks, limiting the number of users attached to a CMTS to produce targets speeds during high-traffic periods. They also have the option to subdivide a node, adding a second CMTS unit to split the base of local customers, thereby boosting the available bandwidth to each customer. As a result, cable data services often provide higher data rates than competing DSL services. For example, Charter Business Internet service offers speeds ranging from DSL upgrades If it seems as though cable data services have an advantage in the data speed arms race, they do. So, in response, DSL providers have implemented recent technology upgrades to boost their broadband speeds, the two most prevalent are ADSL2+ and VDSL. But, while they can offer higher speeds at longer copper line loop lengths, they also are distance limited. ADSL2+ can pump out up to 25 Mbps data, but only up to about 1,000 feet from the DSLAM. At 9,000 feet the maximum speed drop to about 7 Mbps. VDSL can offer up to 52 Mbps within about 1,000 feet of the DSLAM, but at 4,500

3 CHARTER BUSINESS WHITE PAPER: HITECH 3 feet which is the maximum this technology can sustain the maximum data speed is in the Mbps range. Nevertheless, DSL providers including AT&T Inc. are turning to these upgrades to boost their speed tiers. AT&T has rolled out its IP -based U-verse DSL service (which uses either VDSL or ADSL2+ depending on geography) to between 60 65% of its service territory, but as yet the maximum speed that service can offer is 24 Mbps. Going forward AT&T is testing other tweaks to DSL technology, and in some lab trials the data speeds have reached close to 100 Mbps These improvements all depend heavily on the quality of the copper line and require new interface cards installed at the local DSLAM. As a result, in many areas the local copper lines won t be good enough, and if there aren t enough potential business customers it may be too prohibitive to make the upgrades. The DSL Technology Family TECHNOLOGY MAX. DOWNSTREAM MAX. UPSTREAM ADSL 8 Mbps 800 kbps ADSL2 8 Mbps 1 Mbps ADSL2+ 24 Mbps 1 Mbps VDSL 55 Mbps 15 Mbps VDSL2 100 Mbps 100 Mbps The DOCSIS Technology Family TECHNOLOGY MAX. DOWNSTREAM MAX. UPSTREAM DOCSIS Mbps 27 Mbps DOCSIS 3.0 (4 downstream channels) 160 Mbps 120 Mbps DOCSIS 3.0 (8 downstream channels) 320 Mbps 120 Mbps Even with these upgrades, there are signs that DSL is slowly losing the battle to other broadband options including cable data and fiber optic services. AT&T is testing other tweaks to DSL technology, and in some lab trials the data speeds have reached close to 100 Mbps These improvements all depend heavily on the quality of the copper line and require new interface cards installed at the local DSLAM. According to the National Broadband Map created by the National Telecommunications and Information Administration (NTIA) DSL availability reached 88% of all U.S. households as of June 2011, while cable modem technology reached about 83.3%. These availability rates also apply to many small businesses located in neighborhoods and secondary markets. But the nationwide numbers are somewhat deceptive, in that the actual availability rate varies by provider. For example, Charter Business offers cable modem data service with a minimum speed of 20 Mbps downstream, 3 Mbps upstream to about 97% of its service footprint. And while DSL may have a slight edge in overall availability, that disappears when one considers actual speed availability. According to the Federal Communications Commission s most recent Internet Access report for the first half of 2011, there are a little more than 8.9 million ADSL and symmetric DSL (SDSL) connections of at least 3 Mbps downstream/768 kbps upstream in the United States as of mid In contrast, there are more than 34.1 million cable modems in use offering speeds of 3 Mbps or greater. The DSL providers are seeing the impacts of this speed inequity. Most telephone companies don t report business broadband customer counts, but looking at the residential trends gives some indication as to the overall market. In a March 2012 report, Leichtman Research Group found that the top U.S. cable companies claimed 75% of the net new broadband subscriber additions in 2011, adding 2.3 million new customers. The nation s top telephone companies added just 750,000 net broadband customers (including a mix of DSL and fiber-to-the-premise services) during that period. In all, cable companies claim more than 44.3 million broadband subscribers while telephone companies still hold 34.3 million subscribers, according to the report.

4 4 BROADBAND INTERNET PROVIDER SUBSCRIBERS AT END OF 4Q 2011 NET ADDS IN 2011 Total Top Cable 44,339,082 2,290,180 Total Top Telephone Companies 34,312, ,023 Total Broadband 78,651,817 3,040,203 Source: Leichtman Research There also are signs some telephone companies are moving away from DSL altogether, replacing it with direct fiber or even wireless connections. That is the case for Verizon Communications, the nation s secondlargest telephone company. In several recent analyst conferences, Verizon CEO Lowell McAdam said that the telco will discontinue copper-based DSL service in areas where it offers its direct fiber FiOS service. Outside of that territory, the plan is to replace DSL with wireless Long Term Evolution (LTE) broadband service offered through Verizon Wireless, which can provide downlink throughputs between 5 12 Mbps. Elsewhere, incumbent telcos including CenturyLink Inc. as well as competitive providers such as Megapath and Integra Telecom are responding to the DSL limitations by a new alternative: Ethernet over Copper (EoC). As the name suggests, EoC establishes an Ethernet connection using the existing copper phone line and in practice can produce symmetric connections of 100 Mbps or greater. But, as with DSL technology, EoC is also distance limited; customers typically must be within about 10,000 feet of a central office, and at that distance throughputs will be lower. Also, to achieve higher data rates EoC requires multiple pairs of copper line, something that is not available in some access loops. In many smaller markets and rural locations, EoC is not available at all. The cable modem option As DSL technology faces challenges, cable data services have been on the rise in recent years as operators expand their service beyond residential to include business customers as well. According to Moody s Investors Service, cable operators will increase business services revenue from $5.2 billion in 2011 to $9 billion by A lion s share of In Charter Business territory, DOCSIS 3.0- based service now fully overlays its cable data network, offering service to 97% of its footprint. this revenue comes from data services, including cable modem service offered to small business. One driver for this growth is that cable operators also have been able to outpace DSL providers in terms of increased data speeds. Charter Business DOCSIS 3.0 upgrade offers speeds up to 100 Mbps downstream, and with future technology upgrades that speed may increase to as much as 320 Mbps. Similar bandwidth increases can be implemented in the future for the upstream channel as well. In Charter Business territory, DOCSIS 3.0-based service now fully overlays its cable data network, offering service to 97% of its footprint. On top of that, Charter Business Internet service also offers a range of features, including up to 10 accounts. It also offers storage ranging from 100 to 250 MB, web hosting and website building tools, desktop security, and round-the-clock technical support and network monitoring. Charter Business also offers three dynamic IP addresses for its Essentials tiers and one static IP license for its Pro speed tiers. New fiber access services available At the same time, Charter Business fiber-optic-based services are increasingly becoming available to business customers, offering bandwidth at speeds ranging from 2 Mbps up to 1 Gbps, with the ability for customers to increase speeds at increments as small as 1 Mbps. Charter Business coax-based and fiber Internet services are geared for business customers that need a reliable broadband connection with a high service uptime. They are backed by a network operations center located in Louisville, Ky., where connections are monitored around the clock by

5 5 trained technicians who can respond quickly should there be a service issue. Cable and fiber Internet services also are advantageous because they are IP-based, where as DSL service is a switched Time Division Multiplex (TDM) technology. Therefore, cable and Internet services can offer a more straightforward path for integrating IP-based business services and applications that are in high demand now. Conclusion Looking at the larger market trends and direction, the future is not bright for DSL services. While it will remain a viable option for business customers in some areas, recent service provider moves to de-emphasize or shut down DSL access networks makes it likely it will not grow substantially and may shrink in the coming years. Upgrades including VDSL and ADSL2+ and Ethernet over Copper options will offer higher speeds, but as with standard DSL service they will be distance-limited, with throughputs dramatically affected by the length of the local copper access loop. The history of telecommunications is marked by such cycles; as one technology declines, others arise. While DSL may be the latest casualty, new options for higher-bandwidth, more flexible communications from cable operators including Charter Business The history of telecommunications is marked by such cycles; as one technology declines, others arise. This is a positive process, in that it has given rise to higher-speed, more flexible communications from services providers including Charter Business to help businesses do better business in the 21st Century. Perhaps more importantly, there are now options including cable data and fiber Internet services that offer higher bandwidths even as their geographic footprints also expand. These technologies are more flexible and nimble and have the potential with future upgrades to produce even higher data rates Charter Communications. Trademarks belong to their respective owners. All services not available in all areas. Restrictions may apply. Charter Business is a unit of Charter Communications, Inc., one of the nation s leading broadband communications companies. Leveraging the national reach of our parent company s existing network, we provide business customers with reliable, secure, costeffective communications solutions for their phone, Internet and TV. Charter Business provides fiber services for clients who work in small to large school districts and universities, city and state governments, financial institutions, healthcare facilities and hospitals, manufacturing businesses, and many others.

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