BT pauses its SDSL rollout: Is there an heir apparent in BT Max?

BT recently announced that in September it is 'pausing' its rollout of SDSL due to 'significant' lack of demand. The SDSL upgrade programme announced in January 2005 detailed that BT would extend the availability of the Broadband Symmetric portfolio (BT IPstream and Datastream Symmetric) to a further 500 exchanges. The curtailment of the upgrade will fall short of 93 exchanges against the original plan.

This is not necessarily bad news, although BT is being relatively tight-lipped about the whole affair. The decision to pause further deployment of SDSL is a tactical one — there's no suggestion of a change of thinking or strategic shift in the statement. Clearly the gamble earlier in the year to cut SDSL prices has not come off, as the availability of cheaper synchronous bandwidth has failed to kick-start the market. To date, some of BT's SDSL-enabled exchanges have no subscribers at all.

However, the really interesting question is how long will it be until SDSL is a mass-market product — or will it never come of age?

Insufficiently mature UK market for SDSL
Adoption of uploading applications (which generate traffic from the user to the network) such as voice over IP, web conferencing and some hosted applications is fuelling demand for higher upstream access products, such as SDSL. As ADSL has a limited upstream bandwidth capacity (around 256kbps in the UK), it will fall short of a proportion of enterprises' uploading requirements.

So why aren't enterprises falling over themselves for SDSL today?

• Market caution. Although VoIP demand is picking up, the technology has not been adopted by the majority, particularly among the SME segment. Hosting and other heavy uploading applications are finding their feet today, but it is a slow, considered migration by enterprises as they sweat existing communication assets and gain confidence in emerging ICT techniques.
• Contention has not hit home for all. I have encountered CIOs who have reported satisfactory performance of branch offices running VoIP services over a 20:1 contended ADSL service. Others, whose local exchanges are heavily subscribed to, rely on 5:1 services or have upgraded where they can to SDSL, to maintain a relatively beefy upstream service however heavily contended the service. Service variability due to contention will therefore grow as exchanges become oversubscribed, further driving greater upstream bandwidth demand.
• For some, speed is nothing without control. There remains a hardcore element of the enterprise market who have not migrated to xDSL, preferring legacy technologies such as leased lines which offer higher security and guaranteed performance. Already some providers have begun to address these needs through offering xDSL with bandwidth guarantees, through reducing their exchange contention ratios and improving their network aggregation policies. Other providers are looking to offer quality of service within the access element itself.

BT's 'pausing' gives the market time to catch up with technical capability. The alternative of further price cuts to (synthetically) stimulate demand would erode valuable margin further on down the road when the SDSL market matures. However, pricing pressure here is beginning to intensify as new entrants, such as Updata, who specialise in SDSL are ultimately looking to bring their pricing in line with ADSL.

BT Max — a more gentle migration
Although there is no direct link in the announcement, the soon to be launched BT Max product may also have contributed towards the decision to rethink the SDSL deployment programme. BT Max is a wholesale ADSL product which runs a line to its technical limit. At installation, the line is monitored for seven days to determine how fast a line can run and is then set at the highest sustainable speed. RAMBO, BT's line monitoring tool continues to monitor the line to maintain optimum performance.

The BT Max proposed product set is detailed in Figure 1.

Figure 1: Proposed BT Max product set

Source: BT

Although 8Mbps is vanilla ADSL's downstream bandwidth limit, BT Max's alpha trial (of 500 users) found that over half of the lines ran at around 6Mbps due to line quality, the subscribers distance from the exchange, and other local environmental factors.

A beta trial is expected to commence in September with a launch date rumoured to be around April 2006. Please note that all details of BT Max timelines and product specifications were obtained informally from BT and are therefore subject to change following trials.

Given the rollout plan, at the forefront of the BT product managers' minds may have been that BT Max's development costs (in particular RAMBO), which would not have been cheap. Further price reductions in SDSL would risk the BT Max investment, as a low-cost symmetrical product would cannibalise some of its market. However, this statement is conjecture.

A stepping stone
BT Max's higher upstream speed of up to 832kbps may be just what the market is looking for, rather than a more expensive but bandwidth richer SDSL product. For many enterprises, BT Max could be the stepping stone towards higher upstream products and therefore may take-up some of the demand originally earmarked for SDSL. In addition, BT Max will be available wherever ADSL is enabled, which will make for a rapid diffusion of technology once it is made available. As opposed to the stop-start growth of SDSL availability.

A differentiated approach
The Max product addresses those enterprises seeking higher bandwidth services, yet their distance from the exchange or local environmental factors would mean that would have to default to the lower speed product. A fully rate adaptive service such as BT Max would offer a line that would bridge the gap between a provider's silo products. The Max product is a differentiated service as it pushes the copper to speeds that other providers with silo products cannot reach.

Figure 2: BT Max versus silo products