July 15, 1999 Web posted at: 9:40 a.m. EDT (1340 GMT) by Brett Mendel

From...

(IDG) -- Information technology managers who are tracking the battle for broadband currently being waged by telecommunications giants may rightly ask: What's in it for my company?

Many of the blockbuster deals, from AT&T's buyout of cable operators MediaOne and Tele-Communications Inc. to Qwest's recent designs on US West and Frontier Communications, promise cheaper bandwidth and a host of services for consumers. But the rush to plug fat networking pipes into consumers' homes could make the IT manager the ultimate winner.

Telecommunications heavyweights such as AT&T are putting their money on both cable and Digital Subscriber Line (DSL) technologies, creating a race that corporate buyers should follow closely. Despite the strong consumer bent to existing services, cable and DSL are already being implemented as alternatives to laggard dial-up access for remote users and expensive dedicated lines for branch and small offices.

What's more, there are signs that the Telecommunications Act of 1996 is taking hold: A bevy of competitive local exchange carriers (CLECs) are horning in on the corporate market, competing in terms of price and even offering outsourced remote access service.

This trend is due in part to the immense and underserved demand for affordable bandwidth.

"We really don't care what form it's in, we just want high-speed access," says Neil Hennessy, director of global networks at PeopleSoft, in Pleasanton, Calif. "PeopleSoft is a completely connected company. Our culture is to provide employees with as much technology as possible to do their jobs better."

As a result, almost every employee hooks up remotely to the corporate network at some time, Hennessy says. The most bandwidth-hungry users are the company's software engineers, who require speedy, two-way data transfers when they need to hammer out code from home.

To improve the experience for those who connect regularly from a remote location, PeopleSoft, a maker of enterprise resource planning software, recently enlisted regional Bell operating company (RBOC) Pacific Bell to provide DSL access for telecommuters in California and support services for high-speed remote LAN access for all its employees across the country.

Although DSL service offerings remain spotty throughout the country, Hennessy and other wide-area network managers are counting on the rapid deployment of new broadband services.

PeopleSoft may be early on the curve, but the outlook for DSL is favorable. By the first quarter of this year, approximately 92,000 DSLs were in service in the United States, according to TeleChoice, a telecommunications research company in Owasso, Okla. That number is expected to jump almost tenfold to 904,000 by the middle of next year and to approximately 2.4 million by mid-2002.

Still, in terms of numbers served, DSL lags behind cable modem services, which now count 850,000 U.S. customers, according to Kinetic Strategies, a broadband research and consulting company in Phoenix. The cable modem user base is projected to rise to 1 million by the end of this month and 2 million by the middle of 2000.

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Building out

With so much industry activity, notably AT&T's push into cable and Microsoft's recent investment of $5 billion in AT&T, those figures could go even higher.

"Part of our investment strategy is to accelerate the launch of [broadband] infrastructure and new services," says Hank Vigil, vice president of consumer strategy at Microsoft, in Redmond, Wash. "Step one is getting these networks built out, and that's an expensive proposition."

The immediate focus for both companies, however, remains consumer-oriented. As part of the agreement, AT&T will deploy double the number of set-top boxes that use Microsoft Windows CE software to 5 million.

Current DSL use also favors the consumer. TeleChoice estimates that three-quarters of today's lines are residential. However, the figures don't account for the growing population of remote corporate employees who often obtain service in their homes.

"If you look at DSL or even cable modem budgets in the corporate space, they're probably used more for work-at-home applications," says Jeannette Noyes, a Seattle-based research manager at International Data Corp. (IDC).

Noyes attributes that trend to a growing population of telecommuters and "day extenders," employees who continue their work when they get home at night.

These facts have not been lost on broadband service providers as competitive offerings indicate a recognition of corporate interest in these technologies.

Cable Internet service pioneer @Home Network has been beefing up its @Work division to the point of resembling a tier-one ISP of broadband services. In addition to special telecommuter service packages it offers via cable-operator affiliates TCI, Comcast, and Cox Communications, @Work is trying to attract corporate customers in other ways.

Besides providing traditional high-speed access such as T1 lines where other, less-expensive broadband services are not available, the company has put together a high-speed, national IP network backbone to carry its customers' traffic. The OC-48 network, which will operate at 2.5Gbps, will go live later this summer, says Don Hutchison, senior vice president of @Home, in Redwood City, Calif.

On the DSL front, services from CLECs such as Rhythms NetConnections, NorthPoint Communications, and Covad Communications and even from some RBOCs such as Pacific Bell are targeting companies with remote employees and offices.

Vendors say they are moving in this direction because the demand for this kind of bandwidth has been around for some time yet has not been a cost-effective alternative for most organizations.

"There's a very active movement by corporations to make [remote] employees productive, to take the experience they have at work and moving that to their home," says Catherine Hapka, chair and CEO of Rhythms, in Englewood, Colo.

Simulating the work environment at home requires that several services, including data, voice, and video, flow through a single broadband connection, Hapka adds.

Wide pipe dreams

A total officelike setting at home is one of the eventual goals of PeopleSoft's push into new high-speed connectivity options. In addition to helping end-users do their work with faster network access, the company hopes to use broadband lines to extend its office phone service to its remote locations, PeopleSoft's Hennessy says.

"We're just waiting for the [telephony] technology to mature," Hennessy says.

Hence the arrangement with Pacific Bell. As part of a recently enacted program dubbed PeoplePipes, Pacific Bell has been contracted to provide DSL for the remote connections of PeopleSoft employees in areas served by the RBOC and its parent company, SBC Communications, an area which covers California, Texas, and the Southwest.

In places where Pacific Bell and SBC either don't serve or don't yet offer DSL, the next option is ISDN DSL service from Covad.

In addition to these services, remote workers may choose from a variety of other technologies to boost access speeds, including cable modems, frame relay, and even ISDN.

Approximately 65 percent of PeopleSoft's 6,400 employees have been targeted as candidates for the program, but eventually everyone will be signed up, Hennessy says.

But the preferred option remains DSL. For starters, PeopleSoft hopes to trim costs from the steep usage fees employees were racking up with services such as ISDN, which is slower than DSL.

Another feature of DSL that appeals to the company is the capability of maintaining private connections end to end. Traffic from remote workers travels directly to central-office collection points, where it is transferred to dedicated high-speed lines leading into the nearest regional office.

This eliminates the need for virtual private networking security mechanisms, which the company implements for cable modem users. "There's a security issue with cable because of its party lines," Hennessy says, referring to the shared nature of neighborhood hubs.

Call for cable

Still, cable has a following, and it's not just the set-top-box crowd.

For example, customers of Momentum Securities, a day trading company in Irvine, Calif., are more likely to use cable than other services when accessing the company's servers remotely.

"Cable is preferred because it's been around longer," says Vince Ingram, a remote systems administrator at Momentum. "Most people come to me already with cable Internet access."

He estimates that 50 percent of remote users have cable vs. 30 percent who have DSL and 20 percent who have dial-up. Cable, being more ubiquitous, has won over users who have a desperate need for speed.

"More of our customers are going remote every day, and the last thing they need is to hit a bottleneck," Ingram says. "They could lose hundreds of thousands of dollars in seconds that way."

The company has its own direct connection to Nasdaq's systems, which allows trading orders to be executed in real time.

At the remote end, Ingram and his staff sets up users with the company's trading software and Microsoft's Point-to-Point Tunneling Protocol for authentication to Windows NT-based servers at Momentum.

However, the company's DSL customer base is growing faster than those on cable, Ingram notes. That's due in large part to the guaranteed bandwidth delivered by DSL lines, as opposed to the shared lines of cable.

"Some neighborhoods [in southern California] have watched download speeds drop dramatically" as more customers sign up for service, Ingram says.

Out clause

Whereas Momentum relies on service providers to install and configure remote machines and its own staff to follow up with support, the story is quite different at PeopleSoft.

A critical aspect of the PeoplePipes program is the complete outsourcing of everything from installation to troubleshooting. For that, the company has contracted Pacific Bell Network Integration, the services arm of Pacific Bell, even for workers who will not be subscribing to the RBOC's DSL service.

PeopleSoft's decision may be just the beginning of an outsourcing trend in the broadband space, say industry watchers. "We'll start seeing a lot more outsourcing," IDC's Noyes says. "There are issues that go beyond remote access, especially on the installation side."

Currently, technicians must help install DSL service by splitting the phone line into one channel for data and another for voice. Configuring the users' PC is also often required, both with software and an adapter card.

Remote access historically has been a labor-intensive, burdensome aspect of network administration that managers have been keen to outsource. Only now is it becoming more realistic, some providers say.

"There are new service providers now. Before the only choice you had was an RBOC, and it was never their intention to serve customers with a total access solution," Rhythms' Hapka says.

Still others say the appeal of outsourcing has grown as a function of the improvement of technologies being offered.

"To warrant a change in the current way of doing things [in-house], you have to offer an incentive for the disturbance," @Home's Hutchison says. "IT managers have probably only recently seen [broadband] providers as capable of carrying the load. Providers finally have the network, infrastructure, operations, customer support, and geographic diversity to make outsourcing worthwhile."