ADVANCED CARRIER STRATEGIES

DSL Market Still Hot: DSLAMs and VoDSL to Drive Growth

SCOTTSDALE, Ariz., February 14, 2001 - DSLAM (Digital Subscriber Line Access Multiplexer) design will play a key role in the evolution of the DSL market according to Cahners In-Stat Group (www.instat.com), a high-tech market research firm. "When DSL first came onto the scene, DSLAMs were little more than a simple box, routing traffic as it came through." says Ernie Bergstrom, Senior Analyst with In-Stat's Advanced Carrier Strategies Service. "As service providers begin to refine their product offering, the DSLAM has changed, allowing for various types of DSL in one unit, and even providing for a variety of value-added services to be delivered." However, even with advances in the DSLAM, several challenges still face manufacturers. Bergstrom states, "The ability to keep up with innovations in the market, as well as response to consumer demand, will keep DSL relevant in the minds of the end user and it will be incumbent upon DSLAM manufacturers to continue to respond quickly to the requirements of the service provider."

In-Stat has also found that packetizing voice over DSL has the potential to become a "killer application" for DSL. However, in order for manufacturers to fuel this market, several technical issues must be resolved. Equipment interoperability is one of the most bothersome. VoDSL service hinges on several components including integrated access devices, DSLAMs, and voice gateways working seamlessly. In addition, VoDSL service must match the quality of service available from traditional voice service.

In order for that to occur, the equipment must differentiate and prioritize the types of traffic passing through the line. E-mail, for instance, is not highly time-sensitive whereas voice is extremely sensitive to latency and delays. "Users will not tolerate noticeable delays in voice transmission. Unfortunately, VoDSL quality of service hasn't yet reached traditional voice service levels, though by mid-year significant progress may be made." says Bergstrom. If these hurdles are overcome, VoDSL will begin to grow significantly in the third quarter of 2001, resulting in over 10 million active VoDSL lines in the US by 2004.

In-Stat has also found that:

• The market for ADSL DSLAMs is dominated by Alcatel, leading the pack with a 53.2 percent share. The next closest competitor is Cisco, accounting for 13.1 percent share of the total market in Q3, 2000.
• VoDSL gives service providers the wherewithal to offer bundled high-speed data and voice services that can supply multiple lines to customers. This strategy can help to retain and attract subscribers by giving them price breaks and one bill for multiple services. It's a tactic that will likely resonate with the public. An In-Stat survey found that 60% of respondents would prefer to have all of their communications services bundled and sold by one provider.
• The market for DSLAM units will grow considerably in the next five years, but not as briskly as subscribers as a good amount of infrastructure is already in place and service providers have called upon manufacturers of DSLAMs to increase density on their units. Port density is thus expected to increase, resulting in more subscribers per box.

The report, Voice Over DSL: A Service Opportunity (#TX0102SP), examines the issues facing the industry, why they will be overcome and the strategic imperatives that are necessary for VoDSL to ultimately become successful. DSLAM Market Analysis (#TX0101IN), looks at the major manufacturers of DSLAMs, the challenges they face, and their key products. In addition, the report provides five-year forecasts for the worldwide DSL market and the DSLAM market.

To purchase the reports, or for more information, please contact Matthew Woods at 617.630.2139; mwoods@instat.com. Each report is priced at $2,495 USD.

Cahners In-Stat Group (www.instat.com) covers the full spectrum of digital communications research from vendor to end-user, providing the analysis and perspective that allows technology vendors and service providers worldwide to make more informed business decisions.

Cahners Business Information (www.cahners.com) is a leading provider of critical information and marketing solutions to business professionals. A member of the Reed Elsevier plc group (NYSE: RUK and ENL) - a world-leading publisher and information provider with principal operations in North America and Europe - Cahners' market-leading properties include Variety, EDN, Interior Design and more than 135 other B2B publications, over 125 Webzines, and Web portals that include www.e-inSITE.net in the electronics industry and www.TVinsite.com in the television industry. Cahners also offers online services, custom publishing, directories, research and direct-marketing lists.

For more information, contact:

Ernie Bergstrom, Senior Analyst - Advanced Carrier Strategies
Phone: 480.609.4504
Email: ebergstrom@instat.com

Kirsten Skedd, Marketing Manager
Phone: 480.609.4534
Email: kskedd@instat.com