More fiber optics needed in communications networks

April 1, 1997

More fiber optics needed in communications networks

Fiber-to-the-home emerges as an important issue at an fcc forum, but local telephone companies are reluctant to invest in new equipment if it can be accessed by potential competitors.

StePHen n. brown, mev inc.

Fiber-to-the-home (ftth), criticized as an investment that would gold-plate the nation`s communications infrastructure and heap tremendous expense on consumers and business alike, is being rehabilitated--a little bit. In January, the Federal Communications Commission (fcc) held a bandwidth forum composed of several prominent people from various parts of the telecommunications industry. The participants discussed network congestion, accessibility, affordability, and bandwidth deployment strategies for wired and wireless technologies. Bellcore`s Stagg Newman opened the forum and described several problems preventing the telephone and cable industries from delivering high-speed data and video services to small businesses and residential customers. Newman concluded his presentation with an apparent endorsement of ftth: "The ultimate answer is going to be fiber-to-the-home. And I believe that within five years that will be the economic choice. But it`s not here yet technically, and now you`re talking about totally rewiring America with fiber, which Corning and companies like that would love. But that`s a large capital expense....On the other hand, I think what you can`t do is sit on the side lines ...because of what`s happening in the Internet."

Newman`s comments appeared to legitimize ftth as a reasonable infrastructure strategy rather than something advocated only by spendthrifts. However, he tempered his bold support for ftth with a bow to political correctness, dutifully acknowledging the need for technological diversity in the nation`s communications infrastructure. Newman`s about-face was triggered by Les Vadasz, senior vice president at Intel, who said: "I think that where we have to get very rapidly is broadband connection to the home....I don`t want to lump that issue of broadband connectivity to the home into just one of the issues that we have to solve along the way, among the 100 issues. That is critical now--urgent--and it`s not happening."

Newman responded: "I just want to echo that. I believe the competitive marketplace will solve a lot of the problems. There are certainly major engineering problems in the backbone connectivity performance....There are lots of technologies available. There will be even more. I think [the] key is...we`re allowed to use all of those. We`ll need wireless to get to some homes. We`ll need cable to get to some. We`ll need adsl [asymmetrical digital subscriber line]. So you need to...deploy [all those] technologies, let all those technologies roll."

Policy indecision reigns

The switch in Newman`s thinking within a thirty-minute span is typical of the indecision that beleaguers U.S. telecommunications policy. Neither industry nor government is willing or able to establish a priority of technologies in the nation`s communications infrastructure. Setting a priority requires centralized decision-making, which means some people get to overrule others and some technologies are ruled out. This is not the way telecommunications policy is set in the United States. Instead, the country faces a "let-all-those-technologies-roll" situation.

Are all the technologies rolling? Not according to Alan Stewart and Alan Pearce, co-authors of The Silence of the Bells, in which they say local telephone companies "believe the climate is not right for deploying new technologies....Their approach is to let equipment vendors spend money to develop high-tech products that can be field-trialed and mothballed." By "climate" Stewart and Pearce mean that the local telephone companies are still involved in deliberations with competitors and with the fcc and state commissions on so-called unbundling issues. These deliberations will determine the extent to which local telephone companies must allow their networks to be accessed and used by competitors. The authors conclude that the unbundling issue is suppressing deployment of new technology by local telephone companies because "any new equipment the incumbent carriers install now in their local exchanges eventually may put them at a disadvantage with respect to...potential competitors. Ergo: the best thing is to do nothing." Stewart and Pearce suggest that wireline technologies such as Integrated Services Digital Network (isdn) and adsl will be minimally deployed: "In 1987...the industry established isdn....Today, there are still [fewer] than one million isdn lines in service....Will adsl follow the same route?"


At the fcc`s bandwidth forum, Pat White, Bell Atlantic`s vice president for research and development, said: "We`re still trying to struggle with the implementation of the Telecom Act. To the extent that that increases the risk for new investment, then I think [it] could have an impact on the willingness of operators to...aggressively deploy ...adsl."

White`s comment was followed by a telling exchange with Steve Stewart of ibm`s Governmental Programs Office. Stewart asked: "First of all, Mr. White, you mentioned that Bell Atlantic is investing about $2 billion a year in networks. Can you tell us roughly what percentage of that is going to adsl investment or other broadband networks? The second question is: If you look at your adsl and other broadband technology deployment over the next five years, can you give us a rough percentage of the number of homes that would have [it]... at the end of `97, at the end of `98, etc.?" White responded: "I do not have that data off the top of my head, but I`ll be glad to get back to you with it."

No commitment to broadband

From the company`s perspective, White`s response was probably smart because it avoided a public commitment to a deployment schedule for broadband technology. His response may also suggest that if there is no deployment schedule, then perhaps there is no strong commitment to deploy broadband technology to consumers, at least until the unbundling issues are settled, despite a Bell Atlantic press release in which the company trumpeted: "Progress Report on Opportunity New Jersey Shows Infrastructure Modernization Commitment On Schedule."

White sparred with Intel`s Vadasz, who complained: "Despite the Telecommunications Act of 1996, the personal computer user is more of an afterthought in all that happens when it comes to deploying network capabilities....We cannot buy a reasonable PC communications service. We merely piggyback on the telephone service and get a very inadequate connection....Our telecommunications carriers today...spend...significantly...more effort in trying to get into each other`s business rather than trying to develop new business for PC users."

White responded: "Bell Atlantic currently spends in the neighborhood of $2 billion a year...on new construction and maintaining the network....I would hardly say that is compatible with not investing in the network...." He also suggested that even if the telephone industry were ready to offer broadband communications, the PC industry itself was not ready: "When I`m downloading files, I`ve never seen my PC record anything even approaching a megabyte per second....As my friend at Intel keeps increasing processor speed, Bill Gates keeps using it up with more and more "bloatware"....You are looking at spend money to...fully upgrade....Put two million customers on the Net by the end of the decade? That sounds like sending a man to the moon....There is almost nothing that we could do, at least within the immediate future, to make use of that bandwidth. I mean, the PCs are not there."

White`s rejoinder to Vadasz opened the way for Steve Stewart`s question, but White`s sidestepping of the question caused two fcc staff, Elliot Maxwell and Robert Pepper, to pursue him. Maxwell asked: "By the end of 1997, Pat, what would you expect to be the isdn penetration in Bell Atlantic territory?" White did not reply. Later, Pepper asked: "What percentage of lines or households could be provisioned with adsl...without having to significantly upgrade the networks, other than just putting on the box in the home and a box in the central office?"

White responded: " I hate to answer questions like that off the top of my head, but I think you are probably talking 20% to 30%....And the rest would require some fiber."

Pepper then made a very important point, one that can be interpreted as confirming the need for additional and substantial fiber investment in both the cable and telephone industries: "So in some ways it is very comparable to the cable industry situation, which is basically that...between 50% and 70% or 80% of all households would have to have their basic networks upgraded before you could deploy the latest consumer technologies."

White replied: "Right."

Stimulating or stifling competition?

Clearly, ftth is not just an idea for spendthrifts. It is an idea whose time will come when the local telephone companies are certain their competitors cannot get their hands on fiber-in-the-loop. Exactly when the local telephone companies can have that certainty is anyone`s guess. The Telecom Act mandates competitors` access to local telephone companies` facilities. The act has no language that says after a given date, competitors can no longer access the local companies` facilities--new or old. Thus the act may stifle local telephone companies` investment for a long time, a peculiar development for a law meant to stimulate investment through competition.

This spring, Congress is expected to have several oversight hearings on the Telecom Act to evaluate its performance to date, but no changes in the law are expected. Sen. John McCain (R-AZ), chairman of the Senate Commerce Committee, has let it be known that he does not support any changes at this time. Thus the problem identified by Alan Stewart and Alan Pearce will continue for a few years. q

Stephen N. Brown is president of Nashville-based mev Inc., which specializes in market research and public policy toward new technology in the telecommunications industry. He can be contacted at tel: (615) 399-1239; e-mail: mevinc@aol. com.

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