It's a key refrain in the bottleneck blues, and you'll hear it loud and clear when it comes to remote access: "Gimme more bandwidth!" A growing number of people working from home and branch offices need high-speed access to corporate LANs. But 28.8K-bps modems are a joke, ISDN just isn't fast enough and adding another T-1 line often doesn't make economic sense.
It's an open invitation to startups offering next-generation remote access technologies, such as Copper Mountain Networks, of San Diego; NetSpeed, of Austin, Texas; and Diamond Lane, of Petaluma, Calif. All three focus on ADSL, a way to squeeze at least 2M bits of bandwidth out of plain-old copper telephone wires. That market-along with slower alternative digital subscriber line technologies, such as IDSL and HDSL-is expected to grow from $500 million next year to $2.5 billion by 2000, according to Dataquest.
A consumer ADSL market is a good two years away, but the corporate segment is "low-hanging fruit," says Kieran Taylor, a broadband consultant for TeleChoice, of Verona, N.J. "There are higher margins in the business market and a greater demand for bandwidth."
That's sweet music to John McHale, CEO of NetSpeed, a year-old company that's focusing exclusively on the corporate space. It just started shipping ADSL modems in January, but has already lined up more than 60 ISPs, which buy NetSpeed's equipment and sell high-speed Net access. McHale hopes to land two RBOCs and the top 150 of the 3,000 North American ISPs by the end of the year. The ultimate goal: reach $500 million in sales within three years.
That goal is audacious. But it may actually be within reach, based on the initial response from corporate users. "They're killing for it," crows Michael Gorton, CEO of Internet Global Services, a NetSpeed customer. The day IGS launched service, it was approached by several major companies, including a branch office of McGraw-Hill, now using ISDN. The fact that ADSL service deteriorates between connections more than 18,000 feet apart is not a concern for these corporate customers, because IGS is in their immediate area.
Other than the 18,000-foot limit, there's not much wrong with ADSL. It's at least one-third faster than a T-1 line at about one-third the monthly cost. And ISDN? Forget it. For roughly the same cost, ADSL delivers data about 15 times faster and doesn't need a dedicated data line. Cable is faster, but debt-laden cable companies can't upgrade their systems quickly enough to make it widely available. On the other hand, RBOCs have the money and the impetus to make ADSL ubiquitous: They're under pressure to ease congestion on their voice networks.
Still, NetSpeed and other startups don't face an open road. They have to outrun big equipment vendors, such as Westel, which supply RBOCs running ADSL trials. They also face thriving remote access providers, such as Ascend Communications and U.S. Robotics. Hambrecht & Quist analyst Rakesh Sood recalls the ISDN market, "where smaller companies with good technology were eventually taken out by larger players." Ascend doesn't appear to be much of a threat for now, because it's focusing on IDSL. But U.S. Robotics plans to ship $200 ADSL modems in volume by mid-1998. "We're going to commoditize the market," proclaims Asghar Mostafa, general manager of U.S. Robotics' broadband access division.
If startups are going to beat the established players, they'll have to play smarter, like NetSpeed. It offers something no one else has-"dial-up ADSL" software. Typically, an ISP needs one ADSL modem for every user it services. An expensive proposition. NetSpeed helps ISPs save money by pooling a smaller number of modems and routing requests to any available modem.
McHale is confident he can run with the big dogs, like Westel, because those companies work primarily with telcos, not aggressive ISPs and corporate users. As for U.S. Robotics' plan to blow out modems at Crazy Eddie prices, McHale insists the market is more than "just modems." NetSpeed expects the real money to come from other products, such as multiplexers and remote access servers.
Whether NetSpeed and other startups are fast enough to stay in the game is unclear, but one thing is certain: There is pent-up demand for relatively inexpensive broadband access. Quips venture capitalist Neil Weintraut: "Webster's Internet dictionary defines the hunger for bandwidth as insatiable."
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