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What the big guys want from DSL

Intel, Microsoft, and Compaq have reportedly agreed to promote DSL technology, but their specific roles are key to advancing high-speed Net access.

Intel (INTC), Microsoft (MSFT), and Compaq (CPQ) have reportedly agreed to promote digital subscriber line (DSL) technology, but the specific roles the companies are likely to play will be key for advancing the high-speed Net access scheme.

The largest and most influential companies in personal computing are expected to announce next week at a communications conference in Washington that they are working with four of five regional Bell telephone operators (RBOCs) to develop hardware and software for high-speed connections to the Internet, as reported yesterday.

Individually, Intel, Microsoft, and Compaq are expected to reveal what initiatives they are undertaking to make high-speed access to the Internet easier. How real is DSL? Essentially, the plan is to allow buyers of DSL modems and DSL-equipped computers to make a call to their service provider, plug in their modem or computer, and, connect--presto!--to the Internet at speeds which approach 30 times today's modems.

Intel's main interest is in promoting the use of the Universal Serial Bus (USB) port, a comparatively high-speed connection on new PCs hitting the market. By connecting the modem through this port rather than the Ethernet network interface card required by most DSL modems, installation is simplified. Intel demonstrated a USB modem with ADSL technology from Alcatel last year at the Fall Comdex exposition.

As recently as six months ago, Intel was toying with the idea of getting into the DSL chipset business as a part of its networking products group, but apparently hasn't made any serious moves yet, says Dean McCarron, an analyst with Mercury Research. Intel actually once manufactured modems but exited that business in 1994.

"Ultimately, the issue is that Intel wants PCs to have high bandwidth access," McCarron notes. With more content coming in to the PC, increasingly powerful processors will be required in systems.

McCarron is somewhat skeptical that Intel can do much to speed DSL adoption. "Realistically, the deployment rates are such that it's an option available to some small subset of the population," he says. Even with cooperation of the three PC industry companies they "won't make the [ telecommunications] infrastructure go from zero to 100 percent overnight," he observes, referring to the need for the regional telephone companies involved to upgrade their own equipment.

Another necessary element for widespread availability of DSL technology is a standardized way for modems and central phone office equipment to talk with each other. Currently, various flavors of the technology have been rolled out in different regions.

The United Nations' International Telecommunication Union is conducting meetings to standardize DSL technologies so that a modem from any vendor will interoperate with equipment installed by the RBOC.

All three PC companies are expected to talk next week about how they will contribute to the standardization of DSL "lite," or "splitterless" DSL. Typically, a DSL-enabled household requires that the phone company install a telephone line "splitter" that divides the a line into upstream (from the home to the carrier), downstream (from the carrier to the home), and voice components. DSL lite does away with this requirement.

A formal agreement upon a standard that will allow users of different DSL flavors to communicate with each other might not come until this fall, though. That timetable would make the goal of widespread DSL service by Christmas this year farfetched, according to analysts.

Not unlike Intel's involvement, Microsoft's involvement in the effort stems from an effort to continue to grow revenues at a rapid clip. "The deal is that...all the things that they want to do to grow financially essentially depends on a larger pipe being available," said Chris LeTocq, software analyst with Dataquest.

With the extra bandwidth available from DSL and presumably more viewers, Microsoft can expand ad and subsciption revenues from its various content ventures, including its partnership with NBC, as well as a number of regional and commerce-related Web sites. All that remains for Microsoft to add to its operating system are drivers for DSL lite modems, a relatively simple task, LeTocq says.

Compaq, the world's largest PC maker, is likely to discuss its intention to offer DSL technology in new computers as a way to help drive demand for DSL service. McCarron thinks that Compaq could offer DSL as an add-in card option on a wide range of systems within the next few years. Compaq declined to comment.

If all goes well in the standards process, Compaq, Intel, and Microsoft could help DSL be deployed sooner by 12 to 18 months if they are successful in generating some pull from end users, according to Beth Gage, an analyst with Telechoice, a telecommunications industry research firm.

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