With Google building a Fiber-to-the-Home (FTTH) network in Kansas City, Kan., local municipalities building their own FTTH networks, smaller telcos deploying fiber with their stimulus awards, and cable operators pulling even more glass, there’s momentum behind the technology. But where is it going?
Daniel O’Connell became president of the Fiber-to-the-Home Council in 2010 after nearly 30 years in the private sector, most recently as the national sales director for Verizon Enhanced Communities. He spoke with Communications Technology Associate Editor Linda Hardesty about some of the hottest topics in FTTH.
Communications Technology: There are more than 100 municipalities that have built fiber-to-the-premise (FTTP) networks in the United States. Has this phenomenon accelerated recently? And what’s driving this trend?
O’Connell: There are a number of reasons. First, more local communities are taking matters into their own hands when the incumbent service providers don’t demonstrate an interest in or commitment to enhancing their existing infrastructure to serve the market.
Second, the Google fiber initiative increased awareness and interest among municipalities and community groups nationwide, with nearly 1,100 communities submitting proposals to host Google’s pilot gigabit FTTH project. With so many community and local business leaders across the nation working on their applications – and actively contemplating what they would do with gigabit service and how they would use it to advance economic development and quality of life – the program created a nationwide buzz, which was great.
Finally, state legislative issues around municipal network builds have been in the news more frequently over the last few months, it seems. North Carolina received the most media coverage, as legislation prohibiting municipalities from operating broadband networks worked its way through the process. Overall, I believe there’s much more awareness today regarding munis as viable network operators than there has been at any time before and, in general, we’re paying much more attention to this segment of the market.
CT: The most common technologies for FTTP networks are BPON, GPON, Active Ethernet and RFoG. What are the main considerations, generally, when selecting a technology?
O’Connell: Let me start by saying I don’t believe there’s a single solution that makes sense for all applications. Service providers have to give consideration to a number of factors when selecting the FTTH technology that will work best for their situation. This includes capex vs. opex constraints or preferences, with consideration for how much capital investment in a FTTH deployment the operator can justify today vs. deferring some capex to later years as subscriber numbers or bandwidth demands warrant additional investment.
Various FTTH technology solutions present alternatives in this regard on such issues as building out shared vs. dedicated plant, offering gigabit capacity today vs. something less now until gigabit service levels are demanded to support common applications and so forth. Providers also have to weigh the pros and cons of maintaining active electronics in the field vs. operating a passive network, vis a vis the services or bandwidth capabilities those respective solutions may allow them to deliver, and the operational considerations of supporting those respective designs. Operators will view these tradeoffs differently.
And there are issues such as distance from the central office to the customers, density of the customer base and related factors that might favor one technology over another. Similarly, operators have to assess their space requirements for the respective solutions, project customer take rates for the fiber-based services, and ensure that their physical facilities support their choice or can be adapted to do so.
So it’s all pretty complex. But whatever shape it takes, the essential key is that increasing numbers of telecom service providers are moving to FTTH technology, in one form or another, recognizing the need to enhance their legacy networks in order to meet the demands of the market going forward.
CT: Small to medium-sized telcos were major recipients of broadband stimulus funding to build FTTP networks. Where does this leave cable companies in the competitive landscape?
O’Connell: The FTTH Council believes those that don’t upgrade to all-fiber will ultimately be at a significant competitive disadvantage. Industry data suggests broadband consumption is doubling every two years. Internet video, or over-the-top video, is growing at a 52-percent annual rate and now constitutes more than 50 percent of all Internet traffic. By 2014, video will represent more than 90 percent of all traffic on the Internet and will include user-generated content as well as downloaded programming — much of which will be long-form, HD or 3D in nature. Add to that the growth we’re seeing in such applications as telemedicine, distance learning, home energy management, smart grid and others, and the need for robust broadband connectivity becomes even clearer.
Service providers that choose not to invest in technology that will allow them to meet the marketplace demands of today and the future will struggle. I don’t think there’s any doubt about that.
CT: Will we reach a point where many rural areas have higher Internet speeds than do major metropolitan areas?
O’Connell: I don’t believe we will anytime soon. Consider that there are about 20 million U.S. households passed by FTTH networks today. More than 15 million of these are served by Verizon, which operates in urban and suburban markets overwhelmingly. The Council projects an additional 2 million to 3 million homes will be passed with fiber this year and perhaps into 2012, including Verizon’s continued buildout, but led by the efforts of hundreds of smaller service providers in mostly second- and third-tier markets or rural areas.
The RUS BTOP program funded more than 100 last-mile FTTH projects, most of which are underway or planned to break ground in the near term. While this is a significant number of networks being deployed, the majority of these communities are smaller and, in total, will add hundreds of thousands of households passed to the 20 million existing homes.
I do see tremendous interest from rural America in all-fiber technology; I see hundreds of projects being initiated in these markets. In many respects, companies in these areas are demonstrating themselves to be true technology leaders and innovators in this space, which is a testament to their commitment to serve and strengthen their communities. But I don’t see rural markets overtaking urban/suburban areas in the near term, in terms of the number of households passed or served by FTTH architecture. We’ll see great growth in the rural segment but it will take a few years.
CT: Some states are preventing municipalities from building FTTP networks. What would be the reason for this?
O’Connell: Competition. I don’t believe that municipalities are necessarily interested in building out FTTH networks in areas where the incumbent telcos or cable companies have invested in next-generation broadband technologies. Rather, they’re doing so when they see no viable alternatives for ensuring their communities will be able to maintain their competitiveness in a global economy that demands ubiquitous access to information, education and health care as well as communications and entertainment services.
Community leaders recognize FTTH technology serving every home, small and medium business, anchor institution and larger commercial enterprises can attract investment, maintain and grow jobs, support essential government services, and keep the next generation of leaders home vs. seeking opportunity elsewhere. As an incumbent operator, if I am not willing or able to make the investment in next-generation technology, I certainly don’t want anyone else doing so in competition with me.
The incumbent operators sometimes have valid concerns about competing against a government-backed entity, but we believe municipalities should have the right and authority to build FTTH networks and ensure access by their residents to the services they will need to remain viable in a changing world. So the answer is not to prohibit municipal networks but rather to simply ensure that the rules under which such networks are built and operated are fair to all involved.
I also think the respective parties need to give consideration to operating in a more creative manner that leverages the incumbent providers’ expertise in delivering data, video and voice services while taking advantage of the municipality’s interest in being a part of the solution. Rather than fight to prevent a municipality from entering the arena, look at the options for joining forces to provide the best technology, services and applications.
CT: Open-Access Networks (OANs) are becoming popular in Europe. What are they, exactly, and do you see the United States moving toward them?
O’Connell: Simply put, in an OAN, one company or entity owns and operates the network, while others offer the retail services to consumers and businesses over the infrastructure. This differs significantly from the common U.S. model in which one company builds, owns and maintains the network, and offers services over it on a proprietary or exclusive basis. It wasn’t too many years ago that telcos were required to make elements of their networks available to competitors via UNE-P, or unbundled network elements. So the concept has been recognized and utilized, in part, in the United States but not nearly to the extent of the current OAN models in Europe.
Proponents of OANs argue this approach allows an underlying network operator to leverage its capital investment by maximizing utilization of the network as multiple retail service providers pay wholesale rates for the privilege of riding the network, and that the availability of service options drives increased take rates among the households served by the network, thereby driving utilization even higher. Retail service providers that compete for end-user business do not have to incur the capital costs of building out the infrastructure or the operating expenses associated with running and maintaining the network. And end users are presented multiple service options and price points that benefit from the competitive structure in place.
The fact that the U.S. service delivery model has been built on a concept of build, own and operate – both by telco and cable operators – suggests to me that the introduction of OANs here won’t happen quickly on a large scale. Moreover, some of the initial attempts domestically at deploying and operating OANs haven’t met with the level of success those operators had hoped to see, I believe. Nevertheless, the discussion is coming up more and more as a result of the Google fiber initiative, the fact that NTIA BTOP stimulus funding requires that the middle-mile networks being deployed to serve more than 3,000 anchor institutions be open access in nature (given that they are funded by taxpayer dollars) as well as the recent efforts by several companies new to the U.S. market to introduce this approach as a means of proving-in fiber builds that might not otherwise have been considered. Those efforts appear to be gaining traction.
I don’t foresee any large-scale U.S. movement to this approach in the near term but I do believe the discussions have to be had. When pondering the most efficient and effective means to bring broadband capabilities to currently unserved areas, OANs will be given consideration.
Contact Daniel O’Connell at email@example.com.