Communications
Taking Fiber to the Home
ABSTRACT
Telecom firms are struggling along a rough road in 2004, as voice businesses weaken and cable increases its lead in data services. Their plight comes just when cable companies are pushing triple-play services – video, voice, and data – to customers in one package. Some telecom firms are matching cable’s moves, but with greater trial as the two groups remain on unequal infrastructural footing. Cable can offer the triple play via one wire to the home, but telecom must work with satellite television providers to provide video. So while voice was a relatively simple addition to cable’s menu of services (marketing challenges aside), adding video to telecom’s bill of fare will prove a far more difficult challenge.
To counter cable’s threat, a trio of incumbent local exchange carriers (ILECs) has announced plans to extend their optical networks all the way to customer premises using fiber-to-the-home (FTTH) technologies. They are not alone in their fiber initiatives, however, and were even slow out of the gate. Nearly 70 FTTH deployments have been announced in North America by entities ranging from rural municipal governments to independent local telephone companies, and even real estate development firms. Still, the potential scale of the ILEC business gives FTTH equipment manufacturers the most hope for broader industry development.
But with prices reaching $1,364 per household in urban areas and $2,705 per household in rural domains, and a total U.S. price tag of more than $233 billion, fiber networks will not come cheap. Even with scale-related equipment cost reductions, the length of time required to recover per-subscriber investments will be measured in years. Fiber networks could, however, prove telecom’s only long-term option to neutralize cable’s threat. It is thus very likely – despite the massive price tag – this year will see an increasing number of fiber buildouts across the country.
This report details the theoretical cost to deploy such fiber networks, referred to generically as fiber-to-the-x (FTTx) networks, where the “x” represents a particular type of customer premises. The report, generated with the assistance of HAI Consulting, is the next segment in RHR’s coverage of the FTTx space. It is intended as a reference for network operators, municipal authorities, industry analysts, journalists, and academics researchers reviewing the economic feasibility of FTTx networks within the United States.
Red Herring Research February 2004
Pages: 43
Format: PDF
Price: $1,295.00
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Regional U.S. telephone giant SBC Communications is one step closer to offering cable television to the 18 million households in its 13 state coverage area. The company announced a $195 million contract with Scientific-Atlanta Thursday to provide a video operations center and regional hubs for the new service. Under the brand name, U-verse, the SBC's television rollout is set to launch in 2006 after field trials begin later this year.

The company is seeking the so-called "triple play," where a telecommunications company offers voice, data and video in one bundled package. Local telephone companies like SBC have been losing business to cable TV companies, which have added telephone and Internet services in recent years.

In a slew of recent deals, SBC is looking to stop that trend. Within the past six months it has signed alliances with various technology firms to build out a fiber network to the home strategy. For instance, SBC has a $1.7 billion deal with Alcatel to build out its fiber optic network and a 10-year, $400 million, pact with Microsoft to license its IPTV technology to allow multi-channel television to stream over its Internet backbone.

In most of the U.S. only cable TV companies like Comcast have been able to offer the "triple play" of voice, video and data services. But traditional phone companies like SBC and Verizon have been upgrading their copper wire telephone networks to fiber optic. SBC says it plans to spend billions of dollars to overhaul its telecommunications network, saying the aging and brittle copper wires which were originally laid in the early 1900s do not have enough bandwidth to allow television capability.