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Written by Dave Burstein
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Wednesday, 10 March 2010 19:52 |
I have placed this article temporarily on hold because Verizon has promised me some data that lead to different conclusions.
Larry Babbio in 2003 announced a plan for a once in a generation transformation of nearly all of Verizon lines to fiber. They've built the best large network in the Western world for half their customers,  but 15M Verizon homes remain unfibered. They did the rich suburbs first, and their decision to stop unexpectedly is hurting people of color in particular. Congressman Markey warned about the redlining in 2005. Verizon's Jack Hoey explained "the only reason the company has so far disclosed service deployments in suburbs is because construction is faster and easier there. 'We're very anxious to provide a choice for broadband and cable services to not only suburban but also urban customers, without question, unequivocally,'" (Peter Howe, Boston Globe) The city has long been ready to start. “We’ve been standing on our heads saying we’ll work with you,’’ said Mike Lynch, director of Boston’s Office of Cable Communications to Hiawatha Bray of the Globe.
Instead, Boston will apparently never be reached, although FiOS is in most of the affluent suburbs. Baltimore may be in a similar position. In 2007 Sandy Arnette of Verizon said they'll reach the city. “Stay tuned -- recognizing that we cannot build a fiber-optic network everywhere at once. We'll work through these issues in Baltimore knowing it's a good market for us.” (Jay Hancock, Baltimore Sun) In New York in 2008, Verizon had fiber to 100% of mostly white Staten Island, but only 6% of the Bronx. (Josh Breitbart, Gotham Gazette).
Because Babbio and Seidenberg were both so clear they intended to reach most Verizon homes, I believe those were honest statements at the time. Babbio now gone and Seidenberg about to retire. John Killian and Lowell McAdam, heirs apparent, don't have Ivan's competitive edge. Ivan himself had an epiphany last summer which he shared in his "Voice is Dying" speech at Goldman Sachs. It appears that soon after a strategic decision was made to stop FiOS after 2010 except where formal commitments had been made. Last fall, they canceled work in Alexandria, Virginia, which they had told the city was set to begin after they got a franchise; they've now formally backed away from the city.
Special thanks to Hiawatha Bray, Pete Howe, Josh Breitbart, Jay Hancock and Bryant Ruiz Switzky for the reporting that made these articles possible. Communities are paying a heavy price as newspapers are dying and reporting like this becomes scarce.
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Written by Dave Burstein
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Tuesday, 02 March 2010 00:20 |
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 I made a significant error two years ago drawing the conclusion that GPON was much harder to unbundle than active, point to point Ethernet. I particularly apologize if Vivenne Reding was influenced by what I said at the time.
The easiest way to unbundle GPON is "bit-stream" where the competitor connects behind the service provider's OLT. This can offer a reliable 100 meg to all customers because there's plenty of capacity in the standard 2.4/1.2 split 32 ways. Until any likely traffic model, that's 99% reliable at 200 megabits in both directions and much more so at 100 megabits. The trick here is to understand that the cost should not vary with traffic; the charge to the alternate provider should be for one connection at "up to 100 meg" rather than per gigabyte of traffic.. At a 1.5 to 1 oversubscription/contention ratio, there just isn't any congestion to worry about and hence no real cost for the higher speed/capacity. The result, if competition isn't too weak, will be higher speeds/caps for consumers at no additional local infrastructure cost. Since the backhaul/peering/transit is so inexpensive ($1/month typical), this will mean high speeds will cost only a little more than low speeds.
ECI's paper points to two other ways to effectively unbundle. The first is for competitors large enough to support a dozen or more subscribers from GPON splitters in the field. GPON requires only a single fiber, but there are almost always plenty of spare fibers. There's no technical reason the competitor couldn't simply pay for that fiber and install their own splitter for a dozen or two customers. This is essentially "sub-loop unbundling".
ECI is also suggesting that the 2.4/1.2 bandwidth of the OLT could be split between several companies directly. For example, one carrier could buy 500 megabits down, a second 200, and the incumbent would retain 1.7 gigabits. The carrier who bought only 200 megabits might offer a 50 megabit service at a 4:1 contention ratio to 16 customers, which should work fine. The carrier with 500 meg might offer 100 meg service to 20 customers with a similar low ratio. This requires substantial work in the OLT, but ECI equipment has traditionally been very robust enough to handle demands like that.
Google's gigabit service will probably be active Ethernet, which retains many advantages. ECI's white paper is http://www.ecitele.com/Products/FiberAccess/Fiber%20Access/Open_Access_and_Local_Loop_Unbundling_on_GPON_Networks.pdf
(Note: While publications often charge for linking to white papers, ECI didn't pay for this. It was interesting enough for me to make an article. I also offer white paper distribution as part of advertising packages) |
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Written by Dave Burstein
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Monday, 15 February 2010 01:15 |
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Most customers are only selling the service at 50 or 100 megabits, but the added cost for a true gigabit of active Ethernet is modest. Many of his customers are simply ordering the gigabit now rather than upgrade later, and starting to sell a full gigabit to commercial customers meanwhile. Vermont Tel is similarly selling a gigabit to schools and hospitals for about what many telcos would charge for 5 megabits of T-1. They gave me a “Gig-E for Vermont” t-shirt. If the stimulus helps with the fiber construction costs, they are ready to very quickly bring a gig to their 20,000 customers.
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Written by Dave Burstein
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Wednesday, 11 November 2009 10:56 |
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 New Seattle Mayor Mike McGinn wants fiber to every home,. He's ready to "direct Seattle City Light to build a citywide fiber optic network connecting every home and business in the city." 600,000 in Seattle and three million in the metropolitan area are among Qwest's richest customers. Because they only are wireline in a world going wireless, everyone - including the FCC chair - is concerned.
My Wall Street friends are near unanimous that Qwest is secure financially at least until some debt maturities in 2012, and probably beyond that. They are already losing a remarkable 12% of homes each year. Everyone, including the FCC chairman, is worried about Qwest going broke, because they don't have a wireless network when the world is going wireless. (We're all wondering if British Telecom, CenturyLink, and Frontier will go the way of FairPoint & Hawaiian Tel.)
There's no question that Seattle City Light - a government agency - has the skill to run a fiber network. SCL generates most of their own electricity and has the lowest electric rates of any major U.S. city. Seattle has AA and AAA credit ratings. There's no shortage of engineering talent locally, from Microsoft to Boeing.
When I ran the numbers, however, I discovered that Seattle is unlikely to be the straw that breaks the camel's back. Even a rapid build by Seattle is unlikely to take more than 20,000-35,000 customers/year. It's taken 4-7 years for Verizon to win 25% and 35% of the market for FiOS. Similar takeup by City Light's 345,000 homes would be 100,000 homes over 4-5 years. Qwest has much deeper issues, starting with the loss of a million customers in the last 16 months.
Standard and Poor's bond ratings find Qwest "faces major ongoing uncertainties to adverse business, financial and economic conditions." Qwest was for several years on the edge of bankruptcy, according to then-CFO Oren Schaffer. Schaffer did an extraordinary job re-financing debt, and Qwest now is OK until at least 2012 and probably beyond.
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Written by Dave Burstein
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Thursday, 04 March 2010 15:33 |
 40,000 homes in Hobart, 30,000 in Launceston and 10,000 in each of Burnie and Devonport will soon have a better Internet than Chicago, Houston, Boston or nearly all of Europe. That's about half the homes on the island, with 90% of Australia soon to follow. It's currently GPON, designed for 200-400 megabits but initially selling as 100 megabit. NBN chief Mike Quigley now tells Commsday a gigabit is so cheap he's ready to switch. “There have been questions: ‘what do you need 100Mbps for?’ But when Google made its announcement... suddenly the questions flipped over to ‘100Mbps isn’t enough!’ I wish we had the kind of power, just with an announcement, to suddenly flip from one phase to another. This network we’re building is quite capable of doing 1Gbps, all you’ve got to do is replace some of the electronics. The big costs are in the passive infrastructure; the fibre, the connectors, and the splitters. That’s where all the money is really going. Upgrading the electronics at the end is relatively trivial, which means we can move from existing PON which will be 100Mbps, to four times that capacity using 10Gbps GPON, and then up to WDM for another four times.” The budget for these 90K homes is about US$1,000/home. Given that everything is new, procedures undeveloped, and people need to be trained, that's consistent with the $600-700 figures from Verizon and France. It should come down significantly. The original estimate of $43B (Australian) was twice as high as the current costs. Australia has decided that 10% of the population is too expensive to reach with fiber, but most of the population is urban and suburban and shouldn't be particularly expensive to reach. |
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Written by Dave Burstein
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Monday, 15 February 2010 01:20 |
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At Best Buy a gigabit switch costs less than $50/port, so any geek can tell you even carrier-reliable gigabits just aren't very expensive any more. Sergey Brin, who personally inspired Google gigabit plans, is right on target for any network built today. Verizon is already planning to upgrade FiOS to that speed in a few years, and Juan Vela tells me they have already shipped 100,000 ports to customers. Everyone in Singapore is getting a gig connection within the next two years, and literally millions in Asia already have shared GEPON that hits top speeds close to a gig when traffic is modest.
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Written by Dave Burstein
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Tuesday, 17 November 2009 00:08 |
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 Xavier Grawitz of Normandy told the D.C. audience that fiber to the home cost them $650 to deploy. Manche Numerique is a successful “public-private partnership” - one of the few – that has reached 26,000 homes and plans 40,000 more in the next phase. That's similar to Verizon's cost per home passed of less than $700 but less than the estimates by Caisse de dépôt at the same event. The difference is partly explained by high costs in extreme rural areas but I'd guess better management plays an important role.
At the same Alcatel event, Gabrielle Gauthey explained effective competition was the main driver bringing France to first place in European triple play. Dynamic new entrants encouraged France Telecom to equip all their exchanges with first ADSL and soon after ADSL2+. Local loop unbundling complemented by bitstream was the essential first step. Local authority intervention has been crucial in the expansion. They have been much more efficient than the U.S. planned 80% subsidy, garnering $1 of direct private investment for every $1 of public money. In addition, the public sector often retains ownership, sometimes with a 30 year term of company management and investment recovery. Gauthey played a major role in French rural development and then at ARCEP as France ascended to world leadership. She's now an Alcatel Vice-President, brought over to provide some perspective on how to make the stimulus work. Perhaps her most important perspective is that France realized in 2004 that deregulation and leaving everything to the private sector had failed.
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Written by Dave Burstein
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Tuesday, 14 July 2009 23:50 |
Glen Campbell of Merrill Lynch believes “FTTP now appears to be cost-competitive with FTTN in an aerial overbuild.” Bell Aliant's cost in the towns of Fredericton and Saint Joh n will be C$850/US$725 per home passed. This is very similar to Verizon's current costs of about $670/home.
That compares to costs of “less than $300” for FTTN/DSL from remote terminals, which AT&T misleadingly calls “fiber to the node.” However, fiber maintenance costs are considerably lower, narrowing the cost difference over time. Chris Rice, then CTO of SBC/AT&T, famously said “I'm never going to put active electronics in the field again” because of the high cost of repairs. Verizon and British Telecom's estimates of the maintenance savings were originally 70-90%, but much of is due to replacing 20 and 50 year old equipment with new. Probably the better figure is about a 30% saving – when fiber is done right.
The fiber itself is cheaper than copper, and the fiber gear is getting cheaper very rapidly. A large carrier should be paying <$100/home for the central unit and another $100-200 for the home unit with battery and weather protection. Small carriers typically pay $100-200 more per home, especially in the U.S. The huge GPON orders from China Telecom and Unicom probably went for a price of $90-150/home total. Manufacturers were ready to do almost anything to get the orders, which will probably total 15-25M lines the next few years. They had to come close to the price of GEPON to persuade China Telecom to switch. CT is continuing GEPON as well, which will keep the suppliers competing hard.
The main difference in cost today is the labor climbing the poles and stringing fiber. Copper is already in place to most homes, and FTTN boxes are positioned to take maximum advantage. Verizon figures their cost per mile of fiber at $8,000 to $10,000, $400/home for 25 homes per mile. Small carriers usually assume a fiber cost of about $20,000/mile. So the cost per home to run fiber for most small carriers will be $1,000-$3,000.
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