Fiber deployment by incumbents will make additional broadband overbuilds less likely

Fiber optic cable deployment by incumbent telephone and cable companies will have a
significant impact on the prospects for last-mile broadband competition. Once a customer is
served by fiber cable, all non-mobile communications services could be provided over the single
fiber pathway: voice, super-high-speed data, and HDTV quality video. Once fiber is put in place
by one provider, the business case for additional high-speed last-mile facilities weakens. This
fact is readily discernable by efforts of incumbents to block fiber-to-the-home projects that have
been pursued by municipalities. Both incumbent telephone companies and incumbent cable
operators have taken steps to disable the attempts of municipalities to deploy fiber. Thus, fiber
optic cable, either connected directly to the household, or terminated near the home (and using
existing metallic cable distribution to bridge the last few hundred feet), will provide a virtually
unlimited supply of bandwidth to any end-user. Once fiber is deployed, its vast capacity will
undermine the attractiveness of other technologies which are not capable of delivering the
extremely high bandwidth (e.g., 100 Mbps) which fiber is capable of delivering to end users.

It is simply not reasonable to believe that capital markets will support numerous last-mile
overbuilds, using fiber optics, wireless, or broadband over power line technology, especially if
incumbent telephone company and cable companies are well on their way to deploying fiber to,
or close to, the home. Alternative technologies have deployment or operational problems. For
example, broadband over power line (BPL) technology, which has the potential to share existing
electric company power distribution networks is currently in the trial phase, but problems have
emerged with this technology, especially due to its generation of external interference which
affects radio transmission of both public safety agencies and ham radio operators. The generation
of radio interference has been an unresolved issue in several BPL trials, and led to the termination
of at least one trial. BPL may offer some promise as an alternative last-mile facility if the
interference problems can be overcome. However, expected transmission speeds from BPL
(2Mbps to 6Mbps) are much lower than those available from fiber optics. Furthermore, BPL
will face a market where incumbents have already gained first-mover advantage by deploying
fiber. As was recently noted by one analyst: “By the time it (BPL) really arrives in the market,
terrestrial broadband will be almost fully saturated”.

Fixed wireless services, such as WiMax service, may be deployed with lower levels of
investment and sunk costs than fiber, but suffer from other limitations, including the requirement
that high-frequency radio waves be utilized to provide the service. Higher frequency radio waves
are more likely to require a direct line of sight between points of transmission. Constructing
line-of-sight wireless networks may be useful for network transport, but it is much more costly to
install as a last-mile facility. The very high frequencies in which WiMax operates, ranging
between 2GHz and 11GHz for the non-line-of-sight service, and up to 66GHz for the highestspeed
line-of-sight transmission, indicates that the spectrum is not optimal for last-mile facilities.
Finally, it is also notable that due to the pending merger of at&t and BellSouth, the resulting
company will control a significant number of WiMax licenses. Regulators may require the
divestiture of these licenses as a merger condition, however, if they do not, it is difficult to
imagine that the licenses will be used by the merged company to compete against its fiber-based
broadband offering.
Advertisements

, , ,

  1. Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: