CenturyLink (NYSE: CTL), like other telcos, may be enjoying the fruits of lower cost FTTH equipment -- including optical line terminals (OLTs) and optical network terminals (ONTs) -- but to overcome the construction burdens associated with underground brownfield deployments, it has developed a new method to trench fiber underground into existing neighborhoods.
Stewart Ewing, CFO of CenturyLink, told investors during the Oppenheimer's recent 18th annual technology, Internet and communications conference that while lower-cost electronics are helpful, the largest challenge lies within network construction.
"[In] areas that aren't greenfield areas or areas where the homes are already there, roads are already there and utilities are already there, the most expensive part where it is not aerial is getting the fiber to the home in terms of doing the boring and the labor and things like that," Ewing said. "The cost of the electronics coming down will help somewhat, but you still have the basic cost with deploying the fiber."
In Seattle and Minnesota, the telco has begun trialing a method it co-developed with the University of Louisiana where it cuts a shallower-than-usual trench in the edge of a roadbed, deploying conduit and using a polymer seal over the top of it. This method would reduce fiber installation costs.
"We're looking at new techniques like that," Ewing said. "If it holds through the winter and we don't see degradation, hopefully we can start deploying it more broadly, which will help us reduce our costs somewhat versus just boring."
Another factor that has helped CenturyLink control costs in deploying FTTH is that a lot of the builds leverage the existing utility poles so the company can deploy fiber aerially.
CenturyLink's average cost to deploy FTTH aerially on existing utility poles costs about $600, excluding the drop cable and the optical network terminal (ONT) to terminate the fiber.
"The areas we have been focused on to deploy fiber to the home to this point have been areas that have aerial cable in those neighborhoods, and we can do that for about $600 a home per home passed, excluding the drop, excluding the electronics, which makes it [a] pretty viable roll out services in those areas," Ewing said.
In the markets where CenturyLink said it would bring the 1 Gbps FTTH service, Ewing said that the telco will continue to roll out FTTH in its target areas on a neighborhood-by-neighborhood fashion.
"We're not doing it more or less on a blanket basis, but rather on a neighborhood-by-neighborhood basis where we are in the process of doing that this year. And we'll continue to use some of the capital budget that we have available for future years as well," Ewing. "That should hopefully lead to our ability to be able to be more competitive with the cable companies from a speed standpoint, and be able to hopefully [see] the stabilization that we have in the consumer business and ultimately grow it with those services."
These new capabilities will certainly come in handy for CenturyLink. The telco has set some impressive targets to get 1 Gbps FTTH to 700,000 households and 500,000 businesses by the end of 2015 with more deployments to follow.
CenturyLink is hardly alone in looking at alternative methods to lay fiber underground to save costs in rolling out FTTH. Verizon and Google Fiber are working on similar projects.
Verizon (NYSE: VZ), in conjunction with New York City, began a pilot project in 2013 that will use "micro-trenching," a method that will allow the telco to carve shallow grooves in the ground to deploy fiber.
Although the micro-trenching process could give Verizon an advantage over its main competitors like RCN and Time Warner cable by reducing fiber installation times in other parts of the city, the micro-trenching will provide room for other providers that want to participate.
Google Fiber is also getting into the alternative fiber trenching act as well.
In a patent filing, Google Fiber (NASDAQ: GOOG) said it has developed a narrow edging strip that would conceal fiber run into homes from demarcation points in the streets to subscriber's homes. Similar to the micro-trenching process, the service provider noted in the patent application that this edging is unlike the current method of burying cables in yards or gardens, which it notes "requires significant effort and time."
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