DSL price collapse holding back dual-band routers, says D-Link

By Sholto Macpherson on Jun 22, 2010 8:56 AM
Filed under Communications

Newer models to cost about $300.

The development of dual band, 802.11n routers has been delayed by the collapse in DSL prices in Australia, whose advanced tastes helped drive global R&D in router technology, said Domenic Torre, managing director of D-Link Australia.

Although the 802.11n standard was ratified last October and vendors have demonstrated prototypes at tech fairs earlier this year, large gaps remain in the higher end of the router market.

Most notably, routers featuring dual band technology are still scarce. Early implementations have received poor reviews for low throughput or a single radio and few have high-end features such as USB storage and print server. 

Torre, who said he has been pushing D-Link Taiwan to develop dual-band technology, explained that lower margins for ISPs selling DSL services had a domino effect on margins in the router business. Consequently vendors were reluctant to invest in developing top-end routers. 

Intense competition among Australian ISPs has slashed prices for DSL broadband home accounts from the $80 a month charged five years ago. “Now it’s all you can eat for $29.95. They’ve lost their margin,” said Torre. 

Falling DSL prices killed off the tactic of giving away routers to secure a two-year DSL contract, which covered the cost of the router.

Giving away a router on a $29.95 plan is a huge cost to an ISP, so it has turned around and cut the vendors’ margins to ensure it can sell potential customers a router at a low price point instead, said Torre.

A significant amount of profit on routers comes from volume sales to ISPs, so vendors agreed to cut margins to win business. However, unlike the ISPs, the router vendors have no recurring revenue, so the price cuts ate into their profits.

ISPs “want a product that works and is reliable but they don’t want to pay the price”, said Torre. He said that as a consequence a “low effort” was going into developing dual-band technology. 

Another problem holding back development was a lack of education. Despite booming sales of wireless devices, few consumers were aware of the benefits of dual band, which raises network speeds and increases range by reducing interference, or the speed increase under the 802.11n standard.

D-Link is still making 802.11g routers with built-in DSL modems for ISPs which are generally sold to technology-naive consumers, but it has stopped making 802.11g routers for retail.  

Dual-band N routers were in effect caught in a Catch-22. Manufacturers like D-Link would only invest in developing dual-band N routers if they were guaranteed to sell thousands of units a month through ISP deals, said Torre. 

However, ISPs were unwilling to commit to selling these routers until prices had dropped to a point where consumers would by them en masse.

“The challenge is making a product that is a loss leader to get the volume to a point where they can reduce the cost of manufacture,” said Torre. 

Torre predicted that dual-band routers would be sold predominantly through retail at a premium of about $300 “because the market is not asking for it”.

Business customers were not likely to guarantee sales and subsidise development of dual-band N routers either, said Torre. Most small and medium sized businesses use $100 consumer-grade modems on a switch and connect wireless access points, he said.

“Will they spend $500 on a business-grade modem? I don’t think they will.”

 

 
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