Home North AmericaNorth America 2005 Fibre to the Internet: the last-mile endgame

Fibre to the Internet: the last-mile endgame

by david.nunes
Krish PrabhuIssue:North America 2005
Article no.:6
Topic:Fibre to the Internet: the last-mile endgame
Author:Krish Prabhu
Title:Chief Executive Officer
PDF size:96KB

About author

Krish A. Prabhu is CEO and President of Tellabs and a member of the board of directors. Before joining Tellabs in 2004, Mr Prabhu was a venture partner at Morgenthaler Ventures. He had served previously as Chief Operating Officer of Alcatel Telecom and as Chief Executive Officer of Alcatel US. Krish Prabhu joined Alcatel through its acquisition of Rockwell’s Network Transmission Division. At Rockwell International’s network transmission division, he served in various positions in research and development and management. Mr Prabhu began his telecommunications career at AT&T’s Bell Laboratories as a member of the technical staff. Mr Prabhu holds a Bachelor of Science degree in Physics from Bangalore University in India and a Master of Science degree in Physics from the Indian Institute of Technology in Mumbai, India. He also holds a Master of Science degree and a Doctorate in Electrical Engineering from the University of Pittsburgh.

Article abstract

Information and Communication Technologies (ICTs) boost economic, social and cultural development, facilitate efforts to combat poverty and promote equality and gender empowerment. Developing countries trying to implement ICTs have often failed due to the quality of the available human resources. This is a dilemma, since many countries implement ICTs precisely to improve their human resources capacity. To foster sustainable human development, a concerted effort is needed to integrate ICTs into educational programmemes and to promote learning as a basic human right.

Full Article

The ‘last mile’ has long been the final impediment to a brave new world of broadband, both for business enterprises and consumers. In recent years, network operators have moved aggressively toward mitigating this bottleneck through increased fibre penetration coupled with more efficient bandwidth usage. As is often the case with such a tectonic industry shift, the barriers to change are more economic than technical. End-user service demands and other economic forces Last-mile fibre deployment’s hour has arrived primarily for two reasons: end-user services that push the limits of copper twisted pair and, imminently, coaxial cable, and also the macroeconomic forces relating to such things as economies of scale and technology standardization. From a services standpoint, demographic shifts currently shape residential broadband needs. The rise of the ‘echo boomers’, the children of the baby boomers, signals the emergence of a tech-savvy group with an increasing appetite for online entertainment, communication, e-commerce and telecommuting. This results in not only new service demand, but also services such as Voice over Internet Protocol (VoIP) and video distribution that are increasingly bandwidth-hungry and are intolerant of network congestion issues. Standardisation, too, plays its part in last-mile fibre deployment: while there is a continued inevitability of standards coexistence and migration, history shows that the most promising standards eventually gain acceptance, driving critical mass and interoperability, and fostering scale economies that perpetuate a virtuous cycle of broader acceptance. Coexistence then stabilizes on a handful of standards that most effectively meet the needs of prominent customer segments. Fibre standards such as Broadband Passive Optical Networks (BPON), Gigabit Passive Optical Networks (GPON) and Fibre to the Curb (FTTC) are now mature enough for large providers to have confidence in continued interoperability and scale. Historical parallels to the ‘fibre to the Internet’ upheaval A new concept, Fibre to the Internet (FTTI) takes the end-user perspective that last-mile fibre provides the gateway to all the services that the Internet can offer. A historical analogy to the market prognosis for FTTI is the wireless industry. Mobile service emerged in the 1980s first as a technical gadget with the ‘bag phone’, then as a status symbol for the privileged classes, and ultimately a mass-market but highly customized end-user service. Standardisation, market coverage ubiquity and volume-driven price reductions combined to create this mass-market acceptance. Often cited as a potential barrier to realizing last-mile fibre, based upon experience with the late 1990s spending excesses, is the risk of over investment. However, historical precedents give reason for optimism. In the 1870s the railroad industry boomed to the point of over investment and speculation, and subsequently lurched to a halt as it weathered bankruptcies and stock market losses. A new wave of investment then followed, driven by engineering advances and economic recovery, which made railroads a driving force in American business for decades. Similarly, the early twentieth century saw a host of car manufacturers that evolved into a few survivors–but these survivors turned the car industry into an icon of economic progress. There are also parallels to the unforeseen benefits of technologies like the Internet–specifically, the Internet Protocol or IP. During World War II, General Dwight D. Eisenhower saw the advantages Germany enjoyed due to the autobahn infrastructure, and used these systems to enhance mobility of the Allies when they entered Germany. Upon becoming President, Eisenhower endeavoured to build a national road network, originally called the National Highway Defence System, similar to the German autobahn. Today, the National Highway System (NHS) reaches virtually every part of the United States, with about 90 per cent of America’s population living within eight kilometres of an NHS road. Counties that contain NHS highways also host 99 per cent of all jobs in the nation, highlighting the unforeseen benefits of this dramatically new infrastructure–economic growth, the fostering of interstate commerce, the advent of metropolitan suburbs and so forth. IP and the Internet also arose out of a military need–to create a connectionless network resistant to disruptions in individual network links. Today IP is the ubiquitous currency of national and international commerce, and is generally regarded as the endgame for consumer services over fibre through such developments as VoIP and IPTV (Internet Protocol Television). Economics of fibre For much of the history of communications, copper has been the preferred medium, initially to deliver voice, and later both voice and data services to the home. This cost-effective technology has served the end user well and, until now, incremental bandwidth upgrades continue to improve the Internet user’s experience. Times are changing; today, applications like Video on Demand (VoD), IPTV, High Definition Television (HDTV), high-speed Internet access, work at home applications, remote medical applications, online gaming and so forth, are driving the need for even higher bandwidth delivery direct to the home. Fibre deployment to the curb or home is the logical solution to these increasing bandwidth requirements. As mentioned previously, the limitation of Fibre to the Home (FTTH) deployment has been economic rather than technical. The economics of last-mile fibre, though, have finally reached a point of liberation for operators. The end of 2003 marked the milestone of cost-deployment parity between fibre and copper for new builds, aided by declining electronics costs and the operational cost benefits of fibre over copper. The following graph illustrates the move toward the cost parity of fibre and copper in the last mile. When maintenance factors are included, the overall advantage of fibre deployment is comfortably achieved, driven by several factors. First, fibre has a projected life expectancy of up to ten times that of copper. Second, significant operational cost savings are enabled because fibre is less dependent upon active electronics than copper. As a result, estimated fibre-deployment cost savings can range from 15 per cent to 35 per cent. Furthermore, the economic option value of fibre’s higher bandwidth provides an additional return on investment because it enables future higher speed applications. There is a common adage that new customer acquisition costs can be up to ten times higher than those to retain an existing customer. Service bundling has been shown to improve the customer experience and reduce churn or customer loss. Fibre deployment to the home enables the delivery of bundled voice, data and video high-bandwidth services. Service providers now realise the strategic advantage of being a first mover to deploy fibre. They can retain their existing customers, acquire new customers and develop a market share advantage that will be very difficult for slower-moving competitors to overcome. Societal benefits of last-mile fibre Fibre’s ability to deliver the promise of the broadband world has seen significant backing in the United States from the current administration. This administration sees the societal benefits of delivering universal broadband throughout the United States as a key component of plans to move the country forward in the information age. “The spread of broadband will not only help industry, it’ll help the quality of life of our citizens”, said President George W. Bush in a 24th June, 2004, speech. In addition, the Federal Communications Commission (FCC) has adopted strong pro-broadband policies. As such, a stated FCC goal is “to establish regulatory policies that promote competition, innovation and investment in broadband services that foster the availability of broadband to all Americans”. These policies are derived from a growing consensus that significant economic and social benefits to society can be captured through the wide-scale deployment of fibre for broadband access. Community ‘halo effects’ of broadband British Telecom, an early proponent of fibre access, commissioned several studies to ascertain the economic benefits of broadband access to local communities. The studies found a ‘halo effect’ associated with increased economic development in these local communities. One of the British Telecom studies states that 76 per cent of businesses find economic benefits to broadband. In addition, the study found that broadband availability increased the teleworking rate in these communities from 17 per cent to 30 per cent. Clearly the message that British Telecom and others have learned from these studies is that there are significant economic benefits associated with widespread broadband access. These economic benefits are in addition to significant societal benefits associated with the greater ability to balance work and home life as well as round-the-clock instant access to information for personal and business use. Industry growth Many applications are made possible, or enhanced, by the widespread deployment of broadband–telemedicine, teleworking, distance learning, e-government, public safety and tourism among others. An examination of the use of broadband in the telemedicine, teleworking and distance learning sectors reveals the following benefits: √ Telemedicine enables patients in rural areas to get access to medical care without the need to physically visit a doctor. With the appropriate technology, telemedicine can be performed anywhere, significantly raising the medical care level available in areas where expertise is scarce; √ Teleworking results in significant advantages for both businesses and their employees. Employees spend more time working and less time commuting, which brings improvements in productivity as well as quality of life. As a side benefit, employers reduce recruitment costs due to improved employee retention rates; √ Distance learning over broadband opens a world of new possibilities to people from any geographic location with educational opportunities previously unavailable to them. Distance learning can be a significant tool in aiding underprivileged communities by improving their quality of life and helping them join the global economy. Broadband services have evolved from the early adopter phase to mass-market appeal, driven by the economic and societal benefits these services offer. To that end, last-mile fibre deployment is the long-term solution for service providers who want to future-proof their networks. There are many reasons for optimism about FTTI’s potential for success, including such examples as historical precedents from other industries, economic parity with new-build copper deployments and the societal benefits gained from increased broadband penetration. Over the next few years the industry will see FTTI become the dominant driver for end-user service liberation.

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