Broadcom Lands Deal to Supply Chips for Fast Internet Access

Canadian phone giant Nortel Networks has agreed to use Broadcom Corp.’s chips to send high-speed Internet, phone and video services over traditional copper phone lines, the companies are expected to announce today.

The deal will help Irvine-based Broadcom straddle the fence between telephone carriers and its traditional customer base: cable companies and set-top box makers. It also will allow Nortel, the multinational telecommunications firm based in Ontario, to be the first to offer VDSL--”very-high-data-rate digital subscriber line” service--on a wide scale.

Broadcom’s VDSL chip, developed jointly with Nortel, uses a turbo-charged version of “digital subscriber line” technology, which allows consumers to download data and images at much faster speeds than with commercially available modems.

VDSL reaches much higher speeds--up to 52 megabits per second--which lets phone carriers deliver digital video to consumers just like cable companies.

“Clearly, Broadcom is staking out the [telecommunication companies] as their turf,” said Cynthia Brumfield, principal analyst with Broadband Intelligence Inc., a Bethesda, Md.-based research firm. “Other telephone companies have dabbled in VDSL. But Nortel’s plan is the first we’ve seen of a large-scale [VDSL] roll-out.”

Indeed, US West Communications last year jumped into the VDSL market. In a residential trial in Phoenix, the phone company began offering consumers integrated digital television and high-speed Internet access. The set-top boxes that residents used for this service use Broadcom chips.

Nortel plans to offer a similar service in Canada later this year, officials said Friday.

Both the cable and the telephone industries are vying to dominate the emerging broadband market and provide the fat pipe into residents’ homes that will deliver a smorgasbord of multimedia goodies.

The competition, already fierce, heated up last week. Toshiba America Information Systems and Thomson Consumer Electronics became the first to unveil compatible cable modems at computer superstores, giving customers the choice to own instead of renting proprietary units from cable broadcasters.

Such cable modems don’t need a separate line to download data, giving faster access to the Net, and are compatible with equipment made by rival manufacturers.