Telephone companies ponder driving fiber deeper into loop
Fred A. Joyce
Joyce Telecom Group
With the exception of San Francisco-based Pacific Bell, which is planning a $16 billion project to provide new services and streamline its telecommunications operations, U.S. local exchange carriers await permission from the Federal Communications Commission to implement advanced broadband services before deploying fiber-optic networks closer to the customer.
Industry analysts stipulate that many local exchange carriers are carefully studying the service and network field trials of similar and competitive providers and the large-scale deployments of hybrid fiber/coaxial-cable networks by Pacific Bell and others so they can benefit from the results.
Indeed, the local exchange carriers seem to be holding off their future fiber-network plans until the technology improves further and the cost of delivering advanced services decreases. The costs associated with retrofitting the residential local loop with an entirely new fiber/coaxial-cable-based infrastructure are immense.
Industry experts have pegged today`s costs to deploy new networks at approximately $1000 per residential customer. However, those same experts expect infrastructure costs to decline below $900 per residential customer during this year. In addition, the support electronics required to deliver video and telephony over these new hybrid networks is comparatively expensive and still in the developmental stage.
Yet, nearly all the local exchange carriers are discussing vast plans for major fiber infrastructure retrofits, which would bring the Information Superhighway to residential customers as soon as it is feasible. These plans include the on-ramps and connections to future broadband networks that will deliver video, voice, data and images to businesses and residences.
In this regard, the local exchange carriers are committing to upgrade from their present analog copper-based infrastructures to fiber-based, broadband digital networks capable of delivering a variety of new competitive services.
The prime mover
In commitment and execution, Pacific Bell is the primary local exchange carrier mover in developing local loop deployment and services and in preparing for tough competition in the residential market. "Pacific Bell is introducing technology to be prepared for competition," according to Keith Epstein, vice president for Pacific Bell information services. The company estimates it has lost during the past several years perhaps as much as $2 billion in access revenues to competitive access providers and long-distance carriers.
Pacific Bell prefers a proactive approach to fend off such other competitors as cable-TV multiple system operators and nationwide CAPs, including Teleport Communications Group, which will soon be vying for residential customers. It is "building a network that will allow Pacific Bell to compete in the long term," states Steve Harris, external affairs vice president at the San Francisco-based local exchange carrier. He also says the fiber deployment plans for the first targeted cities should be completed within two years. These new installations are expected to provide significant savings over the present copper-based local loop infrastructure.
In the regional Bell operating company competition, Pacific Bell has therefore taken the early lead in the broadband infrastructure deployment battle. Whereas other local exchange carriers have preferred a wait-and-see posture in bringing fiber to the local loop, Pacific Bell is moving quickly.
To compete in the future telephony market, analysts maintain that local exchange carriers and other competitors must provide high-capacity-bandwidth networks to businesses and homes. The Pacific Bell project will include re-engineering and modernizing its wireless network undertakings in California and installing digital switches in all its central offices. The broadband network investment is expected to total $5.3 billion.
Equipment suppliers benefit
Cable, electronics and transmission equipment suppliers, as well as system integrators and technical advisers to the local exchange carriers, stand to profit immensely from the local exchange carriers` network expansion projects. AT&T has already won several large-dollar contracts for system equipment, integration and installation.
"Virtually every cable-TV operator and telephone company is discussing and building broadband networks," notes AT&T network systems spokesperson Ken Croley in San Ramon, CA. He added that Pacific Bell is the first local exchange carrier to retrofit its infrastructures, which include networks in San Diego, Orange County, the Los Angeles metropolitan area and the San Jose-Silicon Valley area.
In general, fiber-optic networks will link Pacific Bell facilities to a central node location in the neighborhood, serving less than 500 homes, where a remote network interface unit developed by AT&T will be installed. Coaxial cable will be used to make the last-mile distribution connection to homes.
AT&T will supply the fiber-optic and coaxial cables, host digital terminals, systems integration and technical services. Croley says AT&T will deploy the underground portion of the fiber network, estimated to be 40% of the total fiber deployed, whereas Pacific Bell will do the aerial installation.
In 1993, the company awarded network contracts totaling $1.65 billion, according to Pacific Bell. These funds will ensure conversion to an all-digital network by 1997 via the installation of lightwave facilities and associated electronics.
With a population in excess of 30 million, California offers a rewarding telecommunications service market. As a local carrier, Pacific Bell has focused on retaining and growing market share in California. Today, it serves approximately 75% of all Californian residences. The company estimates that by the year 2000, more than 50% of the 10 million households it serves will be linked to the new $16 billion infrastructure.
With the location of numerous and leading high-technology companies in the San Jose-Silicon Valley region, Pacific Bell realizes the market importance of providing advanced telecommunications networks to end-users who are generally progressive in their acceptance of new technologies and telephony services.
Broadband deployment will initially provide video-on-demand services or what some local exchange carriers call video dial-tone, according to Pacific Bell`s manager of corporate communications, Craig Watts. He adds that telephony services will come later, primarily because the electronics technology needed to send quality video and telephony transmissions over the new broadband networks is not yet commercially available. Watts also predicts that San Diego and the San Jose-Silicon Valley areas of the state could be the first served by mid to late 1995.
Others make their move
Another local exchange carrier, US West, is busy with network and service field trials. Company spokesperson Dave Banks says the company`s $100 million Omaha multimedia network architecture will support a newly added asynchronous transfer mode switch to bring advanced video services to residential customers. He says US West decided to go with the ATM platform based on the switching technology enhancements realized during the past 12 to 18 months, since the Omaha trial began.
By choosing dual delivery paths, US West will transmit services over two network architectures. The local exchange carrier plans to deliver video over coaxial cable and telephony over copper links. It asserts multiple architectures should enable the network delivery of digital telephone, data communication and digital interactive video-on-demand services.
After analyzing these network architectures and services, industry analysts claim that US West`s $100 million network in Omaha will have major service delivery problems. In retort, US West says it is combining streamlined hybrid fiber/coaxial cable and fiber-to-the-curb architectures.
The Omaha multimedia hybrid fiber/coaxial-cable network is expected to pass 50,000 homes; however, as the video services come online, US West expects to provide 25% of these homes with advanced services. It also expects within three years to provide advanced services to perhaps 25% of the homes in other metropolitan areas. Beginning in 1995, the company is scheduling fiber-network deployments in Denver; Boise; Minneapolis; Portland, OR; and Salt Lake City.
US West is also planning to enhance its existing telephony plant with fiber-to-the-curb technology, but insists these deployments are not so much to fend off competitors as to offer new services. It is developing these new fiber-based networks to expand its business sphere and sell new services, according to Banks. He explains that the newly deployed and planned high-speed networks will elevate US West from a local access provider to a full service provider, and enable the company to provide access to customers worldwide.
The switch to video
Bell Atlantic, another leading local exchange provider, is surveying customers on video preferences before offering new services. Based on one such survey of 500 cable-TV subscribers located in its operating region, Bell Atlantic discovered that 46% of those polled would switch to its video services if the price was reasonable. If the survey is accurate, consumers appear more willing to try cable services from a telephone company than to try telephony services from a cable operator.
The Bell Atlantic survey also uncovered that 56% of those surveyed would switch if the telephone company offered movies on demand; 61% would switch if offered cable programming plus movies on demand, at a cost 10% lower than that offered by cable companies; and 30% of telephone customers who do not currently subscribe to cable services would be willing to try the Bell Atlantic video services if it included movies on demand. These survey results are encouraging because they reinforce the concept of a potentially profitable video market for local exchange carriers.
On the telephone front, Bell Atlantic has deployed copious fiber in the local loop for telephone company applications, according to company spokesperson Paul Miller in Richmond, VA. It expects to serve as many as 8 million homes with a fiber and coaxial cable infrastructure by the year 2000.
Competition is fierce, however, in Bell Atlantic`s territory, especially from competitive access providers such as MFS Communications, which has its fiber networks in Baltimore. Miller notes that the Maryland state government has approved competition in the local loop.
Video dial-tone services
Not to be overshadowed by the other local exchange carriers, Ameritech Corp. has filed an application with the FCC to provide video dial-tone services within its midwestern region. This local exchange carrier wants to furnish broadband services to 6 million of its telephone customers by the end of the decade, according to Ameritech`s director of external relations Larry Cose. The company initially plans to develop video dial-tone services in the suburban Chicago area.
Ameritech has also proposed two major strategies for competing in Illinois: unrestricted local loop competition within the state and permission to enter into the long-distance market. Calling the competitive move "Customers First," the local exchange carrier has petitioned federal regulators to approve its blueprint for opening the state to all telecommunications competitors. Industry critics have dubbed the plan "Ameritech First," indicating that the telephone company wants to be the first local exchange carrier into the lucrative interexchange business.
The Federal influence
The FCC decision last October, which allows the local exchange carriers to provide video services, could stimulate the regional Bell operating companies to retrofit their local residential networks with hybrid fiber/coaxial-cable networks.
To date, the only local exchange carrier to receive FCC approval to provide video dial-tone services via a new broadband fiber/coaxial-based infrastructure is Bell Atlantic. The company plans to retrofit its network in Dover, NJ.
According to industry analysts, the FCC has received 28 applications to upgrade local exchange carrier networks. The process of approving these applications for new network deployments and service offerings (such as video) has taken up to two years. Telecommunications industry executives expect this process to be accelerated in 1995, but still anticipate approval on a case-by-case basis.
The cable-TV industry is carefully observing the competitive video service efforts made by the local exchange carriers. As established video service providers, cable-TV companies are not ready to provide local telephone (switched) services other than dedicated point-to-point alternate access, according to Dan Carter, vice president for development at MMS Telecommunications in Englewood, CO; he works closely with cable-TV service providers.
During the past several years, cable-TV multiple system operators have deployed fiber-optic networks that link headends to distribution points within their serving areas. Working in conjunction with Teleport Communications Group, which is currently owned by four of the largest multiple system operators, these cable-TV operators have joined various franchise areas and headends with fiber for distribution (or handing off) of cable programming and advertising content.
These new fiber-based networks have been for the most part constructed in a ring topology, and have been developed to pass by large concentrations of end-customers. Various cable-TV companies working independently or in concert with Teleport Communications Group have begun to offer basic point-to-point alternative access services to corporate end-customers and non-telephone company fiber links to interexchange carriers.
Industry analysts contend that cable-TV multiple system operators and smaller franchisees are in an operational position that can provide only basic point-to-point, alternative access and high-capacity services such as DS-1 and DS-3 dedicated links from end-customers to interexchange carriers. In most circumstances, the cable-TV operators lack the technological expertise in digital telephony and central office switching equipment required to offer basic switched services, according to analysts.
These companies and their unregulated CAP enterprises are initially focusing on business end-customers, but are gradually offering limited switching services (initially to business end-customers only) as state governments open local loop switching to competition.
Fred A. Joyce is president at Joyce Telecom Group in Colorado Springs, CO.