Electro/Telecom Industry Trends
Feb 2006
The Long Road Home
 |
| Issue Table of Contents |
|
|
Long a mainstay of long-haul communications, fiber optic cable is increasingly playing an important role in many phone companies’ strategies to compete with cable operators on their own turf. After spending billions of dollars on installing fiber to the home (FTTH), and with plans to spend billions of dollars more, these companies hope to deliver a killer combination of services including voice, Internet and on-demand video access that local cable companies may find difficult to compete against.
Promising speeds 20 times faster than other types of broadband connections, such as DSL, fiber optic cable offers telecommunication companies a new opportunity to support data transfer speeds unthinkable with the copper wiring typically used for residential telecommunications services. Until recently, however, fiber’s prohibitively high costs made many companies reluctant to use it for residential last-mile installations. But lowering costs and increasing demand for ever-greater bandwidth have caused many phone companies to rethink their strategies. They are also motivated by the issuance early in 2005 of the Triennial Review Order by the U.S. Federal Communications Commission, which states that incumbent carriers are not required to give their competitors access to the new fiber optic cable they are using to link to their customers’ homes.
The FTTH phenomenon, however, isn’t restricted to the United States. According to the FTTH Council Asia Pacific, of the million subscribers already using fiber, the majority of them are located in the Asia Pacific region. The organization expects worldwide capital expenditures for FTTH technology to reach $22.8 billion in 2013, of which the Asia Pacific market will represent nearly 58 percent.
In the United States, interest in FTTH is also on the rise, as more than 650 neighborhoods in 46 states gain access to FTTH. Much of this fiber network has been installed by Verizon, which offers access to the Internet over fiber through its FiOS service. Yet Internet access is only the first step for Verizon, which promises to provide video service over the network at speeds of 100 Mbps downstream and 15 Mbps upstream.
Not all companies in the United States are in agreement with Verizon’s approach. Rather than install fiber directly to the customer’s doorstep, companies such as BellSouth and AT&T Inc. (formerly SBC Communications) have adopted a fiber-to-the-curb (FTTC) or fiber-to-the-node (FTTN) approach, which enables them to run the fiber optic cable to a central node that can serve a number of customers. From there, they connect individual customers to the node via coaxial cable or copper.
The allure of FTTH is even bringing a surprising new competitor into the marketplace: municipalities. Many local governments, especially those in rural areas, which have become frustrated with the seemingly slow progress of their incumbent phone operators in providing their communities with high-speed Internet access, are taking the lead in implementing their own fiber optics-based networks. In response, phone and cable companies are pushing for state bills that would prohibit local communities from building publicly funded networks. They argue that it’s not in the customer’s best interest to allow local governments with little telecommunications experience to build out and manage these types of networks.
Yet no matter how broadband access is delivered, demand for it shows no signs of abating. And as new applications that require ever greater amounts of bandwidth continue to be developed, it looks as if FTTH will continue to be an increasingly important part of phone companies’ strategies.
Subscribe to eNewsletter