Recent discussion about has reignited the debate of and justifying its expense. One argument suggests that cable companies appear to be winning the current broadband battle because their network is superior to a telco’s copper and DSL based network. FTTH would level the playing field, the argument suggests. There is some evidence to support this theory. When you look at Verizon, they did see a big drop in DSL adds last quarter – but they also added new FiOS broadband customers at a much faster rate than DSL customers. But at what cost? In a recent , Craig Moffett, an analyst with Sanford C. Bernstein is quoted as saying “… that Verizon would be $6 billion in the hole [as a result of FiOS] when all was said and done.” The New York Times article examines both Verizon’s and AT&T’s strategy for meeting the cable competitive challenge. It’s illustrative of an ongoing debate faced by telcos – should I “bite the bullet” and go with FTTH now, or should I try to extend the life of my copper plant investment for as long as possible. Both sides of the argument have merit.

The extending copper plant argument suggests that you should not strand too much investment in a new wireline network like FTTH, when the technology environment is changing so rapidly. Among other ongoing developments, there is no denying the momentous shift towards wireless for both voice and data. So there is some concern that plowing all this investment into FTTH may not pay off. The New York Times quotes AT&T CTO John Donovan as saying, “The last thing we want to do is overdeploy fixed capacity into the ground where there is no recovery for being wrong by putting in too much.” You certainly can’t disagree with the premise. Of course there is always a flip side to every argument. The competitive race is going on right now. The last thing any telco can do is stand still. FTTH proponents will argue, indecision will just allow cable competitors to pick you off, using a robust triple play bundle, powered by their “superior” network. So while you may not have “over invested” in a FTTH network, you also may not have a stable enough customer base to continue as a going concern over the long term.

What gets lost in this argument, especially when put into the context of Verizon and AT&T, is the impact of wireless. AT&T and Verizon can both afford to somewhat gamble with their wireline network of the future choice. The reality is, both of these companies are now really wireless companies, with wireline assets. Wireline derived revenue is increasingly becoming a minority of their revenue generation. If either of them mis-steps with their wireline strategy, they can afford to adjust accordingly. Other telcos who do not have that luxury are much more at risk with this decision. If you don’t have wireless, then your future obviously rides with broadband. Becoming the best at offering broadband in your given market should be the aim. Deciding on which route to take to achieve that objective will depend on a variety of factors. Factors like consumer preferences, competitor capabilities (present and future), technology innovation implications, and market demographics and firmographics, to name a few. Telcos need a comprehensive understanding of all of these factors before deciding which direction to take. Once these issues are understood, decisions about pulling the trigger on FTTH now, later, or never are much easier to make.

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5 thoughts on “Justifying FTTH

  1. this isn't an all or none proposition. We're adding ftth and maintaining copper. its a phased approach. we'll eventually go all fiber, but at a pace that makes sense.

  2. I’m in agreement with the prior comment. It has to be a balanced/gradual long-term project. Then a small Telco has to take into consideration the price of copper per pound. Do you pull it up or do you just leave it where it lies? But, FTTx is of great concern either way ultimately I can see all Telcos, that can afford it, going with FTTx just because it is the future. But, with that said it will be a gradual conversion.

  3. Good point regarding the fact that these companies are growing more from the wireless part of the business than wireline. I’m sure analysts have this in mind when they write, but it often goes unstated.

    Despite all the benefits of wireless, the guided medium will always outperform the unguided. It won’t be practical anytime in the near future to deliver HiDef VOD to 250 homes in an area via wireless. First it’s video, second it’s data, but I believe that wireline networks will remain the standard and primary link both residential and business services.

  4. While, this article points out some very valid arguments about justifying cost of deploying FTTx verus wireless technology for broadband it misses the main point, bandwidth. Wireless is certainly a convenient technology that is permeating most aspects of our entire society; however, it is very limited on the overall information capacity it can deliver.

    Just look at what happened on “911”, Katrina and other major events to the cell service. Within minutes of these events occuring the entire “wireless” network became saturated and unavailable. Yes, this happens to wireline systems as well, but not at the same rate and volume as with wireless. Even with the new 3G phones, my calls are dropped at a higher rate now than in the past, because of all the new services being offered.

    There is only so much wireless spectrum. With fiber optic networks, each strand of single-mode glass can handle multiple terabits of information with the right equipment. Of course, most FTTx deployments only use equipment which can provide more like 160-180 Gigabits per second, but even that is still hugh compared to the average “Wireless WAN or MAN” network.

    With most wireless devices, using 3G technology, you only have about 300Kbps bandwidth. Compare this to a typical FTTH network where each subscriber will have from 10Mbps – 100Mbps and if they have lots of money they can get up to 10Gbps. Looking at the current technology being offered to consumers, i.e. VoD, VoIP, HDTV, HDAudio, Gaming, Telecommuting, Telepresence etc. the average bandwidth needed per house hold will be around 75Mbps-100Mbps.

    I don’t see any “Wireless” technology being able to offer this much bandwidth to a whole community or even a partial community. Wireless capacity is directly related to number of users per area, and as more subscribers request high bandwidth services, the Wireless network will become quickly saturated and unreliable.

    Yes, Telcos can try to extend their current copper based technologies, but those have already proven to be inadequate for the bandwidth demands of the applications available. The real question to ask is not if FTTH, but when? Just look to Japan, Hong Kong, S. Korea and the Netherlands. They have realized that xDSL technologies and wireless technologies are to limited and those countries lead the world in FTTx deployments. Understanding that cost is a hugh barrier for Telcos to overcome, if they want to survive and compete in the broadband game they will have to get creative and find new ways to invest in infrastructure.

    Maybe, the US Telcos will follow a model being used in the European markets, where instead of the Telcos owning the infrastructure they lease it from others who make the investment in the fiber deployments. In the end, I don’t think the Telcos or anyone else in the broadband community will have a choice, but to go with FTTH. The capabilities of the fiber is virtually unlimited and the applications are becoming more bandwidth intensive.

  5. Wireless and wireline will both have a role to play in the future. Wireless will never be able to deliver the dedicated bandwidth of wireline. And wireline will never provide the mobility of wireless. There is room for both to grow, and having one probably makes a subscriber more likely to have the other in some ways.

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