There is an industry consensus that future telecom access networks will use fiber optic media and IP/Ethernet protocols. However, there is no consensus on what to do with the 100s of millions of copper twisted-pair subscriber lines in the ground almost everywhere. Though U.S. residential circuit switched voice access line subscriptions are declining at about 10 percent per year and business subscriptions are declining at about half that rate, analog voice is still the most common wireline service. For example, Verizon reports 3.3 million FiOS subscribers in service compared to 19.0 million residential switched access lines. Businesses also use a lot of copper. Total business switched access lines are only a little less than total residential lines. In addition, business T1 and DSL services which are typically delivered over copper are far and away the most common business service offerings. (The very popular IP VPN or MPLS VPN business service has given new life to copper-based T1.)
There are two technical barriers to replacing copper access with fiber. The first is the cost of building out the Optical Distribution Network (ODN)-fiber-optic cable, enclosures, and distribution terminals. It accounts for at least 85 percent of the cost of an all fiber access network. The second technical barrier is that there are no Next Gen alternatives to the line equipment modules used by circuit switches to send dial tones, touch tone signals, voice, and ringing currents down copper subscriber loops.
The fiber deployment business case is that sufficient new video and high speed Internet subscribers can be added over and above the existing voice customers within a given access area to justify constructing the ODN. The high cost of the ODN requires attractive demographics and a minimum of competition especially from Cable and Satellite TV. Factors that increase construction costs such as required use of buried cables, low population density, and large access areas must also be considered.
My view is that video programming take up rates are critical to the fiber deployment business case. The programming could be delivered as a proprietary service like existing cable TV services or accessed over a high speed Internet connection. The wireline telecom operator's challenge is to displace the incumbents. Currently 56 percent of households use Cable, 27 percent use satellite and 16 percent use broadcast to watch television. Therefore, fiber appears to be attractive for about a third of the wireline market. Verizon's actual experience with FiOS seems to support this estimate. It reports that 30 percent of the homes passed by FiOS have subscribed to the service.
Copper retirement need not depend upon the success of Triple Play offerings if a lower cost alternative to circuit switching and copper twisted pair is found. The absence of an alternative to circuit switching line equipment modules, however, is a significant obstacle. Current softswitch and media gateway products are considerably more cost efficient than the digital switching matrix and common control elements of a circuit switch. Unfortunately softswitches rely on the same line equipment modules that are used by circuit switches to drive the copper loops. Consequently, softswitches are restricted in application to subscriber lines that are terminated with fiber, T1 carrier or digital loop carrier systems. Little technological progress is expected here because wireline operators' circuit switched voice revenues are declining and thus are last in line for technology development dollars.
There also is a regulatory barrier to copper retirement. CLECs are vitally dependent upon access to incumbents' copper plant to access their customers. This is so because the FCC has ruled that the Telecommunications Act of 1996 requires that CLECs be provided access to incumbents' copper plant at attractive wholesale rates. This enables CLECs to offer services such as DSL and MPLS VPN. The FCC, however, also ruled that incumbents need not offer CLECs access to fiber facilities at wholesale rates--they may obtain access at the same retail rates as other subscribers. Therefore, CLECs are strongly opposed to incumbents' copper retirement initiatives.
The industry and public policy challenge is to find a solution that avoids bifurcating access networks between those that serve prosperous neighborhoods with fiber and poorer ones with aging copper-based infrastructure. The current problems at FairPoint in Northern New England and Hawaiian Telecom are forerunners of what could be a common problem in the U.S. and elsewhere.
Michael Kennedy is a regular FierceTelecom columnist and is the co-founder and Managing Partner of Network Strategy Partners, LLC (NSP) www.nspllc.com -management consultants to the networking industry. He can be reached at [email protected].