from the Atlanta Business Chronicle
This $100 billion fiber-to-the-premise (FTTP) contract by BellSouth (NYSE: BLS), Verizon Communications Inc. and SBC Communications Inc. will mark the first major push by telecom carriers to replace decades-old copper wires with fiber for some 70 million homes.
Eventually, data, Internet, high-definition video and voice services will be provided on fiber lines that can carry 100 times as much capacity as today's DSL and cable lines.
Peter Hill, vice president of technology planning and deployment for Atlanta-based BellSouth, said the fiber deployment project is crucial if BellSouth is going to meet the demands of customers several years from now.
"You've got the arteries and the veins that feed the system, but it's the capillaries where all the major work gets done," said Hill, comparing the last-mile connection of telephone networks to the human circulatory system. "[Fiber] has this enormous capacity to move around all sorts of information that society will need ... and we'll be able to provide services on fiber that we can't even begin to envision today."
Estimates vary widely, but most industry analysts say that less than 100,000 homes and businesses in the United States currently have direct fiber feeds. Most of these feeds were installed as "green field" developments when the homes and business were being constructed.
Another 2 million to 3 million homes and businesses across the country are located near fiber lines that have been installed at nearby curbs or service boxes, and these homes simply need to be connected to the fiber lines.
Hill said the consortium of Bell companies had invited about 30 fiber equipment companies to submit bids on the FTTP project, and that "we've got them to a short list and have been analyzing the short list in detail."
Telecom analysts and observers say that short list includes France's Alcatel SA, Advanced Fibre Communications Inc. (AFC) of California and a joint team of Motorola Inc. and Massachusetts startup Quantum Bridge Communications Inc.
Of those companies, Alcatel is one of the strongest bidders and is "almost a given for this," according to Matt Davis, telecom analyst with the Yankee Group Inc.
Competitive pressure
A major driving force behind the Bells' efforts to deploy fiber directly to homes and office buildings is increased competition from cable operators, whose cable lines are capable of carrying high-definition TV, video-on-demand and, eventually, voice services.
Without the competition from cable companies -- which have spent a collective $75 billion on upgrading their lines and already have twice as many cable modem Internet subscribers than the telecoms have for DSL -- some analysts say the Bells wouldn't even be considering laying fiber.
"The writing is on the wall for the cable operators to be able to offer voice on their own networks someday, and that scares the telcos in a big way," Davis said. "They don't want to find themselves in the position of having to catch up."
Competition from startup phone companies and long-distance companies that sell local phone service also has put a squeeze on the Bells, Davis said.
Despite those incentives to deploy fiber and draw more revenue from the premium services it could carry, Davis doubts the fiber build-out will happen as quickly as the Bells embraced DSL.
"Companies like BellSouth went from zero availability for DSL to 75 percent in two years, and that was incredible," Davis said. "They just made all these DSL investments and the copper still works in a lot of areas, so it's not an emergency situation."
Local telecom analyst Jeff Kagan agrees that fiber deployment is not something the Bells consider urgent, but it is clearly something they consider necessary longer term.
"Even though we use wireless phones for more conversations, the line that comes into the home and into the business is still going to be there," Kagan said. "We're going to want greater speed and greater capacity and better services, and that means we need fiber."
Federal regulators also have set policies that encourage fiber deployment.
The Federal Communications Commission's recent review of the 1996 Telecom Act gave the Bells more control over competitive access and pricing to advanced fiber networks.
This hands-off approach by the FCC gave the Bells more incentive to build fiber networks, because it means they won't have to give heavy discounts to competitors that want to buy and resell service on costly fiber networks.
"The FCC has basically continued to regulate yesterday's voice services over copper lines, but they have given the Bells a reason to install fiber," Kagan said.
Fiber by 2015
All three of the Bells already have done some initial fiber tests in their home territories.
Thanks to the Southeast's housing boom of the late 1990s, BellSouth is farther along in fiber-to-the-curb deployment than any other carrier, with fiber lines installed near the curbs of almost 1 million homes and businesses.
When this contracted fiber rollout begins in earnest, New York-based Verizon is expected to take the lead by laying fiber in heavily populated metro areas that are already served by existing networks.
This "overbuilding" strategy is by far the most expensive way to deploy fiber, though it also has the greatest potential for early adoption by consumers in high-density areas who are willing to pay top dollar for premium services.
BellSouth and SBC both have indicated that they intend to watch Verizon's early fiber trials and then begin heavy deployments of their own, analysts said.
Each of the Bells are expected to spend $700 million to $1 billion per year over the next decade to get an aggregate 70 million American homes and businesses fitted with fiber by 2015, analysts say. It is likely densely populated neighborhoods and new developments will be among the first to get fiber, followed by areas where copper lines are old and failing.
Current estimates for bringing fiber directly to individual homes range from $1,100 to $1,500 per residence, but the Bell companies are hoping to trim that figure to the $800 range or lower.
Hill said the joint consortium will help equipment-makers adopt common standards and common architecture, which will in turn drive down the prices of equipment and help accelerate deployment schedules.
"The key is to get the fiber in the trenches or on the poles, and that's really the major cost," Hill said.
The three Bells are expected to select one or more contract winners sometime in September or October, and then begin price negotiations by November. Work is scheduled to begin during the first quarter of next year. |
