RBOCs to increase fiber investments to stay ahead of competition
By ROBERT PEASE
Telecommunications providers are gazing into 1999 with high hopes for their networks, and investing significant amounts of capital in fiber-optic applications and new technologies is high on most agendas. With data traffic surpassing voice in growth and demand, as well as fierce competition on all sides, regional Bell operating companies like US West and Ameritech are earmarking billions of dollars to build or upgrade new and existing infra structures.
Denver-based US West recently announced that it will invest $3 billion for improvements and expansions along its 14-state region. Much of the investment will be to accelerate upgrades in fiber-optic technologies and applications that will speed deployment of high-speed data to customers.
"Fasten your seat belts and get ready for one heck of a ride," says Solomon Trujillo, president and chief executive officer for US West. "A year from now, customers will look back in disbelief at how fast things have developed."
US West will spread its fiber-optic backbone investments across both existing and new infrastructure to ensure more end-to-end fiber deployments linking business and residential areas within the company`s facilities. State-specific investments were not finalized at press time, but US West says it will deploy these services across its region and focus on aggressively meeting the challenge of new competition where it appears.
According to Trujillo, a major roadblock to putting millions more people onto the "information superhighway" is the failure of the 1996 Telecommunications Act to work as Congress intended. In remarks at the Economic Strategy Institute`s "America`s Broadband Future" forum in Washington, DC, Trujillo said Federal Communications Commission rules that were intended to implement the 1996 Act and move the telecommunications industry from a regulated environment to open and free competition have instead discouraged broader-based investment. The commission has encouraged competition by new local phone companies only in the high-margin business market.
"We intend to work with policy makers and regulators to remove barriers to competition to bring new services to even more people throughout our region," says Trujillo. "US West continues to stand alone as the only telecommunications provider making billion-dollar investments right across our region. Other competitors could do the same but choose not to--focusing instead on serving a handful of lucrative business customers and ignoring everybody else."
Meanwhile, Ameritech, which boasts a more than $9-billion annual economic contribution in the Midwest, also announced it will invest $3 billion for communications networks during 1999.
Ameritech currently operates in five states: Illinois, Indiana, Wisconsin, Ohio, and Michigan. Pending a merger with SBC Communications that is currently underway, the company plans to go into about 30 additional markets. But moves outside of its five-state region are unlikely, according to Frank Mitchell, media relations manager for network services at Ameritech.
"Data and the Internet play significantly into our overall growth plans," says Mitchell. "In 1998, data was about 50% of our network traffic, with the other half being voice. That`s the first time that has ever happened. So we expect that in 1999, data will become the majority of network traffic, comprised of straight data, faxes, e-mail, and Internet."
To compensate for the growth in data, Ameritech plans to migrate its network from a voice network that is handling data, to a data network that can handle voice. "We`re not there yet," says Mitchell, "but one of the things scheduled for second quarter 1999 is to add some tandem switches. Then we can use our intelligent network to identify calls from Internet service providers that are 100% data and migrate those from the voice network through the tandem to be carried as far as we can away from the voice network. That way, the two types of services won`t be competing for the same space."
Of the $3 billion Ameritech is investing, about $2 billion will be targeted at enhancing the company`s core communications networks, with half of the total supporting data networking. The remaining $1 billion will go toward infrastructure for providing wireless communications, cable television, security monitoring, advanced data, and Internet services.
"We`re committed to meeting the needs of customers--faster speeds, additional lines, and secure, reliable connections," says Ameritech`s executive vice president, Tom Richards. "The days when a customer relied on the communications network only to make a phone call are over. Today, customers want and expect to make calls from phones without wires, receive television programming from cable, send e-mail messages around the world, and access the Internet--and they want these services in the blink of an eye."
Ameritech`s core communications network currently includes more than 1.7 million mi of fiber-optic cable. An additional 300,000 mi of fiber are expected to be deployed in 1999. The company boasts that fiber-optic infrastructure now reaches within 2 mi of 95% of its customers` homes and businesses in its service areas. Plans are underway for separation of some data traffic away from voice traffic as early as the second quarter of 1999 which, the company believes, will improve the network`s overall efficiency and reliability.
Mitchell says much of the optical investment will be for enhancements to Synchronous Optical Network (SONET) rings in major locations such as Chicago, Detroit, Cleveland, Columbus, Indianapolis, Milwaukee, and Grand Rapids. New SONET rings will likely be installed in areas where Ameritech wants to bring fiber closer to its customers.
Ameritech`s strategy in its five-state region has been to set up major five-year projects to meet telecommunications needs unique to each state. These projects, most of which began in 1995, are nearing completion this year. The company plans to develop new projects in the future, sticking to a strategy that seems to work very well.
"Basically, we approached the commission in each state and asked to be taken off of set rates," says Mitchell. "This allows us to set our own rates based on competition. In turn, we invest a certain amount of dollars over a five-year period in telecommunications networks." Meeting the needs of its customers to the tune of $3 billion each for 1999 should give Ameritech`s competition something to think about. At the very least, competitive network operators need to crunch their own numbers to see if they`re investing enough capital in new fiber-optic technologies to keep up with the pack. q