Fiber to the Home - A Realistic Perspective

Fiber to the Home - A Realistic Perspective

Fiber to the home (FTTH), whether considered the first or �last mile�, is a long way from having true success. Current U.S. broadband penetration rate (via cable modems or DSL) is about 18%. By 2005, it is estimated that the U.S. will rank eighth worldwide in regards to this statistic. The telecom industry is struggling and cautioned financial investments are the norm.

Local exchange carriers like SBC or Verizon previously had no incentive to invest in upgrading their data circuitry due to mandates by the FCC to open up those lines for competition. As provided by the recent FCC ruling, those regulations have been abolished. These carriers still may not invest in upgrades because of their being disgruntled about the remaining stipulations that force them to still share their local voice loops or simply for lack of broadband competitors.

Outside of the dismal position that the telecom sector currently finds itself in, there should not be such concern about FTTH when so much of the country still has not experienced basic broadband. Many believe that next generation broadband networks will be able to support voice-over-IP, video-on-demand, and other multimedia applications, helping to jumpstart ailing companies.

Once again, the cart is being put before the horse and these service suppliers are attempting to create artificial demand. Similar assumptions were present when large sums of money were being dumped into long-haul fiber networks. Those mistakes put many businesses deep into the red or out of the game all together � one variable in the telecom bust.

For the average U.S. household, the ability to have an �always on�, reliable, higher speed Internet connection is more than enough to be satisfied. Again, most do not even have that yet. Users are only involved with basic tasks like browsing, instant messaging, or emailing, although streaming audio is advancing in popularity. With the exception of the last item, each does not require a large amount of bandwidth, with the average web pages being quite small (about 10K for the techies out there). Broadband connections offer up to 1.5 Mbps to homes, making even streaming audio feasible.

Overall, there seems to be a tremendous focus on providing high speed alternative last mile options. The reasons lead back to the local exchange carriers� hesitancy in rolling out broadband, as one of two major providers of this type of service (the other being cable companies).

Choices such as wireless local loops and satellite providers have not enjoyed huge amounts of success, while gaining ground in niche markets. The highly acclaimed broadband over power lines (BPL) may one day be the answer to a third competitor, finally bringing true competition into this market. Its effects will reduce costs to consumers, as providers will have to fight for customers and lower their prices. Technological advances will then be based on market demand, a much healthier way of doing business.

The National Research Council estimated in November 2001 that to rewire every house in the U.S. with fiber optic cable, it would cost approximately $100 billion. Hardware and infrastructure investments would definitely be passed to the consumer. Americans already are sticking with dial-up because of broadband prices ranging from $30-$50 per month, which would mean anything more costly would be easily ignored. Some early estimates showed that providers would need to charge $112 per month with 50% penetration rates needed to have profitable businesses. Highly unlikely.

While important to have a larger perspective and a vision for the future, it would be more beneficial for Telco companies to concentrate on the problems of the present. They should figure out how to utilize their current resources efficiently instead of needlessly spending money on technology that will offer questionable returns. Once the majority of Americans have had a taste of broadband, they may one day become hungry for the advanced multimedia applications like video-on-demand that content providers are hoping to offer.