AFC on the Benefits of Fiber to the Premises

The telecommunications industry’s worst days may be behind it. In fact, there are signs that specific portions of the industry may begin to demonstrate an upward tick sooner than expected. One of those areas is the access network, which may be a key focus for carrier investment in the near future as carriers continue to roll out DSL and begin their migration to FTTP.

ILECs remain focused on two critical issues: increasing revenues and reducing operating expenses. At the same time, they’re seeking ways to evolve their networks to advanced technologies that position them ahead of their competitors. Faced with the prospect of existing voice and data revenue streams eroding, ILECs must evolve their networks to meet the growing bandwidth requirements of next-generation services.

A number of these carriers are in the early stages of deploying video over DSL — a fastgrowing business opportunity that provides carriers with new tangible revenue streams, as well as the ability to add emerging services in the future. By adding video to their offerings, carriers are able to complete the triple play, competitively bundling voice, video and data services over one network. They must also be able to scale service offerings to reach 100 percent of their potential subscribers, while minimizing incremental costs and maximizing profits.

The race between broadband providers is to capture the “subscriber gateway” interface — initially with voice, video and data — and later add services such as home surveillance, interactive network gaming, utility-meter reading, interactive shopping and customized advertising.

While DSL enables carriers to maximize their existing copper loop infrastructure, the evolution to FTTP architecture is also beginning. This FTTP rollout will take years — maybe decades — to complete, and this must co-exist seamlessly with a video over DSL architecture. With the growing buzz about migrating to fiber, three of the four RBOCs have issued a joint RFP for the deployment of FTTP.

FTTP is the “holy grail” of the access network. It offers the most bandwidth to every user in the network and has obvious appeal. But conventional wisdom says this is a very expensive network to roll out and that initially it would probably only be used for greenfield applications. So why is there so much interest in FTTP, and what may be wrong with so-called “conventional wisdom?”

The first factor involves competition with the cable MSO. Cable MSOs have more than 60 percent market share in residential data. Some would argue they have a more competitive offering. And for cable MSOs that have entered certain markets to offer voice services, industry estimates suggest they have taken between a 10 percent and 15 percent share of the voice market in less than 12 months.

ILECs are very concerned about reducing churn on their voice customer base. UNE-P will be a part of the landscape for the next few years. So it is imperative that they take action to minimize churn. In addition, many cable MSOs are developing plans to roll out packet voice services in the coming years. So, for ILECs to continue to compete effectively, they must look to cannibalize their own profitable services, rather than enabling a competitor to do it. With an FTTP architecture, the local exchange carrier is able to offer the broadest range of services — protected against cable offerings — and position itself to expand into emerging services as they are defined.

In terms of regulation, all eyes are on the FCC’s Triennial Review. The initial read suggests FTTP is the best architecture to deploy since there is no requirement to unbundle an all-fiber architecture for greenfield deployments, only a requirement to offer narrowband voice channel in an overbuild scenario. In brief, regulation would appear to favor this new architecture.

Looking at the network infrastructure, it’s fair to say that over the long term, a copper infrastructure is not as competitive as the cable MSO network. Again, a fiber network offers more bandwidth potential per user than either the copper used today or the hybrid fiber/coax infrastructure of the cable MSO. But it’s not just about more bandwidth. Without taking action and upgrading their networks, carriers face a risk of declining revenues as their core business continues to be challenged.

Industry estimates indicate that deploying fiber universally in the access network will decrease operation costs between 20 percent and 25 percent. Provisioning new services, maintaining and operating the network are all less costly because there are no active electronics in an FTTP architecture. Couple this reduction in operating costs with the advances in current technology and lower material costs, and it becomes no more expensive to deploy fiber in a greenfield application than it is to deploy copper — and even in an overlay deployment, costs appear to be competitive.

What are some of the core elements in an FTTP solution? A key element is the optical network terminal or ONT. This device is positioned at the residence or at the business office. It is the critical interface that provides the subscriber with a connection for voice service, data service and/or video access into the network. This box is connected directly over a fiber link back to the local CO. No copper is involved, nor is there a need for active electronics in the outside plant.

There are two other important pieces of equipment located at the CO. The OLT, or optical line terminal, is the fiber-optic device that terminates all traffic coming back into the phone company's network. The second item is the voice gateway, a device that converts voice traffic into a form that can be understood and handled by the voice switches in the network. Data and video traffic are funneled directly from the OLT via a high-speed optical link to the core data networks.

Again, there is opportunity in the access network. Broadband is driving an upgrade cycle that has been gaining momentum since the initial rollout of DSL and increasing interest in FTTP is adding to this inertia in the access network. This activity represents the first significant growth catalyst we have seen in more than three years.

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