DSL Shipments Dip But Growth Is Forecast

The global DSL business has hit a speed bump -- down by two million ports in the second quarter -- but it is poised to recover, according to a report released Tuesday by the Dell'Oro Group.

"DSL is growing more rapidly than cable broadband," said Tam Dell'Oro, CEO and founder of the market research firm. "But the number of DSL port shipments for the second quarter shrank to approximately 12 million."

Both DSL and cable broadband are growing by millions of ports each quarter, Dell'Oro said.

She believes the current dip in DSL port shipments is a correction. "The decline was broad-based, affected most manufacturers, and occurred most notably in Europe, followed by Asia. This correction could last another quarter as there is still more capacity than subscribers."

Dell'Oro noted the idiosyncrasy of the North American broadband market where cable broadband is more widespread than DSL than elsewhere in the world where cable is a non-starter. "Cable is primarily a North American opportunity," she said. "That's because some years ago, cable operators felt threatened by satellite and laid coaxial cable. There's very little cable in Europe or Asia."As for Europe, she said DSL has been spreading "like wildfire" and she attributed much of the boom to the fact that European governments have been promoting the technology. However, the push may have been temporarily too much as DSL inventory has built up in Europe and elsewhere in the world. Dell'Oro said the current quarter is the second sequential quarter in which DSL port shipments have declined and she predicted they would continue the corrective downturn for another quarter before turning up again.

Looking into the more distant future, she said the coming fiber-to-the premises (FTTP) technology with its DSL links to consumers and businesses will likely give DSL ports a significant turbo charge. She pointed to Verizon Communications' deployment of FTTP in nine states as an example of FTTP technology that will eventually bring robust video to subscribers and fuel DSL technology in the future. "Video will be a big sweet spot for DSL," she said.

The report also turned up interesting data on China's DSL deployment, Dell'Oro noted. "China has been something of a mystery," she said. "Most Chinese companies aren't publically traded so it's difficult to get information." However, she observed that some data on Chinese DSL providers can be obtained from the United States' FCC and elsewhere. An indication of a large and rapid buildout of DSL in China can be gleaned from figures that indicate that China Telecom -- China's largest telecommunications provider -- had 350,000 DSL subscribers in 2001; the number of subscribers surged to 5.2 million in 2003, she said.

Asked when the current downturn in DSL port installations is likely to disappear, she said: "I suspect it will turn around in different regions at different times."