Can Optical Networking Outshine DSL and Cable?

Masha Zager, www.NewsFactor.com

As if choosing among cable, DSL and T1 lines were not confusing enough, a new contender has stepped up to join the broadband ranks: optical networking.

Fiber-to-the-Home (FTTH) installations have grown by more than 200 percent in the last year, an industry group called the FTTH Council has announced. The technology is now available to an estimated 80,000 homes in 50 U.S. communities, and many more locales are installing or planning to install it.

FTTH differs from FTTC, or Fiber-to-the-Curb, which is more widely available but leaves subscribers with a slow Internet connection. In contrast, FTTH brings a high-speed connection directly into the home. It can carry voice, data, television, voice over IP (Internet Protocol) and IP video, which is used for videoconferencing.

New and Future-Proof

FTTH has been technically feasible for several years, but falling prices made it economically feasible only recently. According to James Salter, president of the FTTH Council, the technology was first deployed in early 2001, and most installations have occurred in the last six months.

In fact, many installations are so new that subscribers have only just begun signing up for service. Ultimately, providers expect 50 percent or more of households in FTTH areas to subscribe to the service. "Clearly, the owners believe this is going to give them higher penetration rates than anything else," Salter told NewsFactor.

Unlike competing technologies such as DSL and cable, FTTH has almost unlimited bandwidth, according to Salter, who called it "future-proof." And Giga Information Group research fellow Lisa Pierce told NewsFactor that although FTTH is not needed to run today's broadband applications, it might have an advantage for upcoming applications, such as high-definition television.

Starting Small

Most early deployers have been small communities and new housing developments. Because FTTH provides telephone, Internet and television service, it is most appealing to new or underserved markets where inadequate communications services exist.

Another reason FTTH appeals to small communities is its economics of installation. Unlike other types of broadband facilities, FTTH does not have significant economies of scale.

The infrastructure is relatively inexpensive to install, and most of the cost is in the connection to the home. Thus, far fewer subscribers are required in order for providers to recoup their investment.

Another potential FTTH market, according to Pierce, is high-rise apartments undergoing major renovations. However, areas that are already well served by broadband are unlikely to convert, she said. "The cost of retrofitting existing infrastructure on a massive, unfocused scale is often high," she told NewsFactor.

Indie Telcos

To date, most FTTH providers have been municipal utilities, although a few housing developers and independent telephone companies also have installed the technology. Larger telecommunications companies, some of which overinvested in broadband, have not yet turned their attention to FTTH.

"Major telcos will not upgrade infrastructure without a clear benefit to their bottom lines," Pierce said. "And it is easier to do that in some areas than others, because of prior decisions about infrastructure investment."

Real and Growing

Some larger communities are beginning to look at FTTH as well. According to Salter, the average size of deployments has grown steadily over the last 18 months. Some of the 2,200 U.S. cities with municipally owned utilities -- which already own poles over which fiber can be strung -- are considering entering into competition with existing broadband providers in their communities.

"FTTH is real, and it's growing," Salter said, adding that he expects to see 300 percent growth in availability over the next year. While 300 percent of a small number is still quite small, vendors are feeling optimistic enough about the industry's prospects to schedule the first-ever FTTH conference, which will be held in October in New Orleans, Louisiana.

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