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Study: DSL equipment market is shrinking

The DSL equipment market decreased in the first half of 2001, and it will likely keep shrinking for the foreseeable future, according to research firm RHK.

The DSL equipment market decreased in the first half of 2001, and it will likely keep shrinking for the foreseeable future, according to research firm RHK.

RHK said the North American DSL (digital subscriber line) market decreased 6 percent to $729 million in the first half of this year from $778 million during the same period a year ago.

Alcatel once again captured the top spot with a 49 percent market share in the first half of 2001, up from 47 percent last year, followed by Lucent Technologies' 19 percent share, up from 13 percent. Cisco Systems remained unchanged with a 15 percent stake. First-half DSL equipment sales also dropped 44 percent from the $1.3 billion in sales during the last half of 2000. And RHK believes the drop will continue.

"You're going to see a dramatic slowdown for the rest of the year in (DSL) equipment shipments and for most of 2002," RHK senior analyst Ken Twist said.

With the bankruptcies of start-up DSL providers such as NorthPoint Communications, the playing field for DSL alternatives has shrunk. Baby Bell phone companies are holding the dominant position in the market.

Twist says that two main factors have crimped the DSL market. First, DSL subscriber growth is slowing down. RHK predicts that subscribers will increase 67 percent this year from 2000, but only jump 47 percent in 2002 from 2001 subscriber numbers.

Second, carriers also are dealing with a significant amount of excess capacity. After stocking up and installing truckloads of equipment over the past few months, Twist now believes that carriers have four times as much network capacity than they need to meet the current DSL demand, which translates into a diminished need for equipment down the road.

The DSL market might also take a hit from cable modem access. Cable is often a cheaper alternative to connect to the Internet in terms of monthly charges, a factor that holds more influence over consumers especially since the U.S. economy is experiencing tough times.

Twist also says that more people can get cable Internet access than DSL because cable service is just more widely available.

"Cable will have a leg up over DSL in terms of subscribership at least thru 2005," said Twist.

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