When will the growth of fiber-to-the-premises (FTTP) finally meet our industry’s high expectations?
The answer, I’m afraid, is when the population of immigrant sports nuts becomes the dominant U.S. consumer group. I’m talking about people who get up at 4 a.m. to watch an Indian-Australian cricket test match or who take the afternoon off to watch Hamburg battle Munich in soccer. This is the kind of demographic that is willing to pay enough to support profitable substitution of fiber for copper.
For the other 99 percent of us, all of FTTP’s benefits – bandwidth that can, in one glorious package, support real-time transmission of the most distant events, infinite programming, and full-action HDTV – simply aren’t worth the extra costs. And those extra costs seem unlikely to go away soon, since they are based on the necessity of digging new trenches for fiber installation by guys making $22.75 an hour.
So the rest of us will do just fine with copper, thank you, using incremental improvements like ADSL2+ to squeeze out more bandwidth. And what we don’t get with copper, we’ll make up for with such things as TiVo and other storage devices, which continue to move unimpeded down the most powerful and reliable price/performance curve in all of electronics. (Have you noticed lately that it’s less than a dollar a gigabyte on a hard drive and less than 10 cents a gigabyte on a DVD-R?)
It’s time to abandon our long-held fantasy about fiber’s prospects for rapid growth. Will ubiquitous fiber happen in our lifetime? You bet. Will it happen in the next 10 years? In 20 years? No and no. That’s because fiber deployment will grow no more rapidly than the existing copper infrastructure deteriorates. Unless the federal government intervenes in some unexpected way, fiber will be a big industry, but it will be an industry built on incremental growth.
This is heresy, I know, but I feel I have earned the right to state it. I was part of the group that coined the phrase “Fiber-to-the Curb” in the late 1980s. I helped design the first commercial Passive Optical Network that was deployed in Germany in 1992. I still have BellSouth’s late-80s forecast that said 80 percent of homes would be wired with fiber by 2005:
Source: Raynet & Southern Bell, circa 1989, via Drew Lanza
Like many of my industry peers, I have had my hopes raised as, time and time again, the RBOCs have dangled an RFP hook in front of potential residential broadband system builders, saying, in effect, “We’re going to install fiber. Who has the best system?” And, just as we bite, the hook gets pulled back.
One cannot, in a sense, blame the RBOCs. Why should they invest billions of dollars in fiber infrastructure that may not be driving significant revenue for years? Only a (highly unlikely) guarantee of monopoly would provide the 20- to 25-year payback they require.
And remind me again why we are so enamoured of putting fiber in the ground in the first place. It may be smaller and glass and generally “cool.” But our ability to drive bits down copper (or wireless, for that matter) continues to expand. Do we really need to install fiber all the way to the premises?
Continuing this line of questioning: How many bits do we really need? If we’re sending mere text, we’ve had enough bits to do that job since we began sending messages with two cans and a string. Voice is also trivial. If we’re sending still pictures (like Web pages), we require nothing more than a bit rate of 100 to 200 kbit/s. Even very high quality audio requires no more than 200 kbit/s.
That leaves us with video. To watch a video in real time on HDTV would require about 12 to 15 Mbit/s. If you have three HDTVs operating simultaneously in one home, you could run into requirements of 40 Mbit/s. This extreme scenario might call for fiber to the home.
But who would ever conceivably need some 40 Mbit/s in real time? The models we have had for video-on-demand have been, first, Blockbuster and, more recently, Netflix. Both suffer from latency, but latency that many people find quite tolerable. For Blockbuster, I have to climb in my car, drive 10 minutes, pick up a hit video or DVD, drive back home and then, after viewing the movie, hop in my car and return it. For Netflix, I trade off climbing into a car for receiving DVDs via the mail. The latency is a minimum of two days, but I get a much wider selection. I can program my Netflix membership so that I automatically receive every first-run romantic comedy and every classic comedy as they come out on DVD.
As the wide range of choices expands, the attractiveness of real-time viewing decreases. In fact, the question of how much bandwidth I need often comes down to just one final question: How impulsive am I? If I’ve just received the Marx Brothers’ “A Night at the Opera” from Netflix, but decide I’d really rather watch the madcap quartet in another film – say, “Duck Soup” – how much am I really willing to pay to indulge that whim?
With more choice, the answer is becoming an increasingly obvious “not that much.” Only our prototypical immigrant sports nut, craving the instant gratification of real-time, non-local, HDTV cricket action, really needs, and might be willing to pay for, what only fiber could potentially offer.
The rest of us have more access to entertainment than we know what to do with (or are even that aware of). For decades our cable systems have poured hundreds of simultaneous channels into our homes around the clock – like water from a faucet with no one there to drink. And our DSL connections add ever-expanding Internet programming 24 hours a day at around a megabit per second. It’s all there, even though we dip into just one program and one channel at a time.
Why do we let this all go to waste? What we need is a stopper that captures enough flowing data to fill our information bathtub. In other words: storage.
What has hindered this until recently has been the high cost of storage. If storage were cheap, we could all be downloading all the information we want and keep it as long as we like. Even at the lowest-cost DSL transmission rate today, I could download one HDTV movie per day. That that adds up to five HDTV movies I’ve got ready to watch in your average workweek. Pretty good!
And, guess what? The cost of storage is falling more rapidly and more predictably than those other realms of electronics governed by famous price/performance “laws.” Moore’s Law for semiconductor performance, which says that the processing power should double every 18 months while costing the same, appears to be slowing. The law of WAN access, which predicts a halving of network costs every two to three years, may face an R&D challenge and VC funding gap. But, like clockwork, the cost of storage drops by half every 12 to 15 months. By the end of the decade, we may see homes connected at only 10 Mbit/s, but we’ll be able to store 10 terabytes of information on a device the size of a handheld tape recorder – and it will cost just $250!
To my mind, that’s the “infinity” we’ll be accessing. We’ll need intelligent agents to sort through it all. (As an example of emerging intelligent agents, take a look at Akimbo Systems, a company in which Morgenthaler
is not an investor.)
The measly 384 kbit/s typical of today’s average household access doesn’t even begin to tax copper’s capacity. If we could push fiber to within a mile of homes, we could easily get 10 Mbit/s over twisted pair copper. And at that rate, when you arrive home after a long day, you’d have an unwatchable amount of HDTV movies and other programming waiting for you.
Of course, the current DSL network has not been designed to pump bits 24 hours a day. But making it pump continuous bits does not require digging up everyone’s front lawn. The changes that are essential will come in the core of the network and the central office. Some such innovations, like XFP modules and 10-gigabit transmission, are fully productized and on their way to becoming industry standards (see Jumbo Optics).
So, as long as the copper in the ground is still intact, it can do everything we reasonably want it to do. And when the copper grows so old or becomes so torn up by storms that it needs replacement, then digging trenches and installing fiber is the right step, yes. But, in the meantime, it doesn’t make sense to tear up perfectly good copper.
[Editor’s note: That is, unless the price of copper keeps rising, in which case it might be nice to sell for scrap – see the chart below.]
High-Grade Copper, Price per Pound
Source: Omega Research
What it all comes down to is that, for most scenarios, the copper plant will provide adequate broadband coverage. As storage costs plummet and the existing network elements find deployment, the rapid, universal uptake of FTTP will be increasingly seen as a purist’s dream, a flawed extrapolation of Web-viewing behavior to TV-viewing behavior. It will never materialize. By contrast, the real-world network that we have here today is evolving incrementally before our eyes and will provide us with more viewing and listening opportunities than we can realistically consume.
— Drew Lanza is a general partner atMorgenthaler
and is based in Menlo Park, Calif. He was also a founder of Raynet, E/O Networks, and Lightwave Microsystems, so he actually knows something about fiber.
For another take on the FTTP debate, tune into tomorrow's Light Reading Webinar:Fiber to the Premises: Closing the Capacity Loop, sponsored by Alcatel, Cisco Systems, Entrisphere, and World Wide Packets.
My first question was, “Having the entire world’s knowledge is fine. When will I find the time to read it?”
Access to knowledge at a reasonable cost is the goal. Choosing to learn or not would then be up to the individuals and the groups.
My second question was, “Doesn’t most of the world need the refrigerator more than the knowledge?”
It's not about refrigerators. It's about getting connected to our entire world and making an effort to improve it. For example, more important than refrigerators are things like water and healthcare. Neither of which gets covered by FOX much.
Infectious diseases have been a major killer of humankind throughout our existence. But medical science has changed the demographics of mortality with antibiotics and vaccines, contributing to a life expectancy of more than seventy-five years in the United States. This compares to a life expectancy of 37 years in the poorest African nations.
http://www.undp.org/water/
Currently, over 1 billion people lack access to water and over 2.4-billion lack access to basic sanitation. Access to clean water is lowest in Africa, while Asia has the largest number of people with no access to basic sanitation. This water crisis is largely our own making. It has resulted not from the natural limitations of the water supply or lack of financing and appropriate technologies, even though these are important factors but rather from profound failures in water governance.
We need better information and knowledge diffusion if we are to use our power in a beneficial way.
I’m not a Luddite.
With all due respect, your analysis was not progressive nor were your questions enlightening. Somehow we all need to, and can, do better.
I’ve just read this whole thread. A lot of my comments may have been made in some form or another, but maybe my perspective will interest (annoy, amuse?) you.
When I was much younger, the Hi-Fi craze was in full swing. I had friends that invested in lots of stereo equipment to provide wonderful sound. Of course, given the high cost of high-end stereo equipment, most of these friends were on the far side of 30 years old. That meant they were paying good money for frequencies that they could no longer hear. (>7-10 kHz).
When I was in the GaAs chip business, we talked about the Total Available Market for our cellphone power amplifiers. Count the number of ears in the world and divide by 2 was the answer we came up with, with a recurring business for replacements/upgrades. So – 12 billion ears – 6 billion cell phones – 10% to 20% replacements per year (you wish!). Could be an OK business from that point of view. Who knew that the phones were going to be free?
Fast-forward (another blast from the past) to Fiber Optics. How much bandwidth does each one of these 6 billion people need? How about 500 Kb/s? No, too little. 1 Mb/s? No, I have here a market study that says “___ Gb/s.” (Fill in your favorite number.) So, off we went selling FO receivers to all of the companies that showed up with cash. There were lots of them. Their D&B’s checked out just fine. It’s not like we could turn down the business – Even if we suspected that they were all trying to get the big (Lucent, Alcatel, Nortel, etc.) contract. Well, guess what. They were trying but none of them got the contract because (Lucent, Alcatel, Nortel, etc.) didn’t get their contracts – and the rest is history.
As good engineers and scientists, we CAN deliver all that bandwidth and make the stuff faster and cheaper because that’s what we do. We don’t like limits. It’s our job to invent new limits – and then break those. There’s just one problem.
Others on this thread have alluded to it. In my home there are 8 functioning TV’s, 6 VCR’s, 1 DVD player (Sorry – a little slow there), 5 PC’s, 5 radios, 3 sound systems, and enough peripheral flotsam and jetsam to support a small company. I am awake for approximately 17 hours per day and I work at home. There are 3 people in the house including one who spends much of her day at school and another who works at home with me. How many bits can we consume?
Let’s make all the TV’s full 1080i HDTV. Let’s make the sound systems 5.1 or 9.8 or whatever the latest is. (I can’t hear it anyway – See above.) Let’s further have the PC’s doing high-level data mining and analysis (They don’t.) or running high-end gaming applications. (Not anymore since the son went off to CMU.) Now here is the key.
I personally can interact with approximately 2 of any of these devices simultaneously (3 when it’s a DVD/TV/Audio or VCR/TV/Audio) and often with only 1. I can listen to music while computing but usually don’t. I can have the TV on while computing, but it really messes up both activities. So how many bits have to be delivered to me during those 17 hours?
To look at it in another way. I am about 55 years old. (Oops, just lost all credibility.) Let’s assume I live another 40 years (I wish!) and spend the rest of my life watching HDTV movies (or whatever maximum bitrate application you choose) and nothing else. Other than needing a combined kitchen/bathroom/media center, how long will it take to accumulate 40 years worth of content at whatever bit rate you want?
Sorry, that was a trick question. It doesn’t matter what the bit rate is, because the rate-limiting step is MY bit rate, not the fiber’s. Many on this thread have talked about delivering a movie in a minute. So what! Don’t I have to watch it? Doesn’t that take 90-150 minutes?
I only have to have delivered to me the number of bits my senses or brain can consume. Add in extra bits for data mining and manipulation (which less than .0001 percent of the world’s population has any need for) and you have the upper end of what is needed. Beyond that and you are selling those kHz that my audiophile friends couldn’t hear anyway. Beyond that and you are delivering the stolen music and video that the stealers won’t have time to listen to. But hey, there are lots of businesses selling stuff that people don’t need and can’t use.
I remember a prediction, out of IBM I think, that said, “in the future, all the world’s knowledge could be stored in a cube the size of a refrigerator.” My first question was, “Having the entire world’s knowledge is fine. When will I find the time to read it?”
My second question was, “Doesn’t most of the world need the refrigerator more than the knowledge?”
I’m not a Luddite. I’ve spent most of my life inventing and building stuff that was clearly beyond the realm of possibility. I know the danger of making predictions about what is possible and what is impossible.
It’s just a fact however, that some limits are real.
Hi fbgboy, I'm still here, though drastically behind in postings... ;)
I think FTTH is a technology extension without a raison d'etre at the moment. I think it was Tony who said that it is part of the 'build it and they will come' mantra of the bubble. I agree with that to a certain extent. We are all talking about potential applications that would generate the market pull to increase bandwidth delivery to each household.
The difficulty with this approach is that there are many different methods of delivering various different levels of bandwidth to subscribers, including FTTH. There is no compelling business case that states in no uncertain terms that FTTH is the only viable solution in the near or even medium term. The main problem with mass deployment of FTTH, as almost everyone has said, is the high cost of installation. The bandwidth demand is not really an issue as Tony rightly mentioned that we will always find ways to fill what we are given.
So, the only real question to deal with is how to fund the deployment, as the demand is pretty much already there with the applications that we already have available? A few options that come to mind include:
- a drastic increase in the price of copper combined with advances in cable mining technology that make replacing the existing cable a positive economic proposition in itself.
- Municipal coalitions (which may include local governments, energy companies, security companies, gas & water utilities, telecom companies and ISPs, etc.) created specifically to install new, bandwidth-intensive metering/monitoring functionality and/or applications. This is a longer term/high management proposition which would reduce fiber costs relative to the telco doing the installation alone.
- bandwidth intensive consumer applications that result in consumers willing to pay for high installation costs over a set period of time. This is the only model that everyone is talking about. We actually have to realize that this is a box that limits our overall approach.
- there are most likely others that I have not included but are also worthy of discussion. Please feel free to add on...
The bottom line is that we have to diversify our approach and take something from all of the above to make the most compelling business case for FTTH as possible if it is to happen at all. From what we have all said, the third case alone will not cut it for quite some time.
I am using a bugmenot login (as I haven't registered) to post this ! (hopefully). So it's a one shot post.
Is everyone aware of the Telcordia-Bernstein report.
"It shows wireline opex as 43% of total current incumbent telco expense structure. 43%!!! Most of this is in Central Office (CO) expense, and it says that the ILECs would save 100% of CO opex by switching to fiber. Other opex would be reduced by 30-90%. At the end of the buildout, 57% of the fiber's benefit would be from opex savings. Repeat: the case for FTTP is driven by opex savings more than by new service revenues.
The study looks at a comparable Fiber to the Neighborhood (FTTN) buildout, where the last few hundred meters are via DSL. It says, "We came away disappointed." While FTTN is but 5% of the cost, it would deliver 8% of the revenue and none of the cost savings of FTTP."
The above is from David Isenberg's blog. http://www.isen.com/blog/ (Search for Telcordia)
Japan's move to 10Gb/s has already been mentioned. As has Cenic but see: http://www.cenic.org/GB/pubs/KillerApps.pdf
It gives the medical imaging example traffic http://www.cenic.org/GB/pubs/KillerApps.pdf of 2.8 Terabytes per day for a single imaging application.
If we go for widespread deployment the componet costs of deployment will fall further.
I think the pertunia issue is overstated especially if 10% of coax drop cables are replaced every year (as per a earlier post). In the UK cable TV is still new, and all new deployments require a new drop cable. This is not preventing deployment where the basic package is around £20-25pcm.
Here is David Isenberg on the subject of FTTH. http://www.vonmag.com/issue/2004/mayjun/columns/isenberg.htm
"Telmarc plans for FTTH to have internal costs under $20 per month per home with reasonable take rates, and that basic 10-megabit connectivity could be priced as low as US$30-40."
I have enjoyed reading the earlier posts, this is my contribution.
A parting thought: http://www.sysprog.net/quothist.html
arach_1 is correct in differing with me on the matter of home-based Web hosting, due to the many constraints imposed on last milers who are hoping to become first milers. Some of the constrants I speak of are artificially imposed to protect the service providers' own content delivery model. Which is to say, if increase caps for hosting, you can surely leverage the same higher throughput levels for video from the 'net, which works against the cablecos, and increasingly against the telcos' interests.
But most impediments at this time are actually "hard constraints" or a combination of soft and hard constraints imposed by the majority of present access network designs, with the SP always mindful of their bread and butter services.
I hear there's a bandwidth glut out there in the WAN somewhere. Let's use it. I hear that vendors such as WorldWidePackets and ONI can deliver Gb speeds to the resident at costs that are only marginally above those for 100 and 10 Mb/s. Symmetrical. Let's use it. I hear that the cost of storage and server hardware are plummeting with no end in sight. Let's make it user friendly and use it.
arch_1, I'm not espousing the immediate rush to residential Web hosting at this time, primarily for the reasons I've cited above. What I am suggesting, however, is a change of mindset that allows for what is clearly a doable proposition, and one that will materialize first in those locales that first _see_the_light_.
I'm off to the copper and silica mines, and late, at that. Later.
Frank mentions residential web hosting as an important potential driver for FTTH.
I beg to differ. Big time.
Anyone who so desires can create a web host, today, at a co-lo. The cost is trivial compared to a home broadband connection, and the web access bandwidth is high. Exactly how is FTTH supposed to compete with this?
Example: current residential broadband: about $50.00/mo, capped at 2GB/mo. Virtual machine at a co-lo: $20/mo, capped at 25GB/mo.
You can get an even cheaper high-data-rate co-lo web site if you do not insist on a root access Linux machine.
I answer: Time :Your remark is the same that was made by Graham Bell but the answer was that the royal mail had a project to spread telegraphs in the home and so response time would be adequate and with no risk of misunderstanding due to noise in transmission and with a written record of what was exchanged. It is the present e mail system. Video communication effectiveness: All you say is perfectly correct. The point is that it is possible to make video communication effective with eye to eye contact and body language transmission. I have experienced that type of video communication and I am sure that if you had done the same you would be as excited as I am.
It might be useful if we step away from all of the entertainment-oriented aspects of video for a moment and focus on some of the more socially relevant uses of the technology. I've attended umpteen hundred business videoconferences in my time, as well as a bunch of then for distance learning purposes, including those that cater to the deaf and homebound.
I agree with the advantages associated with poster ibeenframed concerning viewing the group body language in the business videoconferencing context, but where distance learning is concerned there is no question as to its efficacy and the benefits that can be derived from it. I recall attending one such session where the subject was organic chemistry - a lab session, at that - where an instructor in Austin was guiding groups in NY and Ann Arbor MI through lab procedures.
Whether business or educational, it really doesn't matter where this discussion is concerned. The examples I've given above required high quality connections with ample bandwidth in BOTH directions. Something that is unattainable today for the majority of most so-called residential BROADBAND services, still.
Likewise, the dearth of upstream in most BB connections goes on to prevent still another application whose software products would be flying off the shelves at Circuit City and Staples if ample SYMMETRICAL bandwidth were supported by service providers, and amend their acceptable use policies, accordingly: Residential Web Hosting.
Despite the ability to collect as much video and music content as you could possibly desire through the use of storage server farms, local lookup directories and switches, and the obligatory 24-hour downloading practices, the types of services that will really make broadband fly are not possible today for the reason I've cited above. It will become so only when adequate headroom is supplied with the providers' blessings to go along with it.
VoD may be the solution to copyright protection and piracy that is plaguing the entertainment industry right now.
Just consider the case where entertainment and content providers did not broadcast high-value content and instead "negotiated" a transaction. This way, TV as we know it will be replaced by internet computers, negotiating transactions for content. Every, channel will be a "pay-per-view" in real-time.
I do not believe the technology, nor the bandwidth required for this to happen is here yet. But all you naysayers who keep saying we don't need the unlimited bandwidth should think about it.
The fact that a simple solution like bandwidth and infrastructure can take care of the broken business models facing us right now, is great news.
This is already happening on the internet and the web as a natural course of events. All the content worth a premium needs a subscription or a one time payment. The stuff that is free is not free in the sense that it is still a money maker for the content provider in the form of advertisement or referals.
Sometimes just a simple view of things tells you more about it than all the analysis. Businesses need to make a profit from the goods they provide. Period. This I learnt from economics 101. If this is not the case the business model is broken and it needs to be fixed. Piracy prevention and content protection is therefore important to the economy and the human civilization as we know it. Nobody likes parasites, and even though we cannot prevent it completely it behooves us to reduce it. Look at the way software is distributed now, it is no-longer shrink-wrapped and it is getting increasingly difficult to copy and pirate it. It can be done, mind you, just that it requires much more effort.
I believe that is the reason that we need the high access bandwidth, VoD and other goodies. Mind you , I am not telling how to get there. It is quite clear that there are lots of challenges which range from technical to political. But this trend of thought saying that we don't need the bandwidth or that there is no demand for VoD or other such stuff is just plain and simple a short-sighted view. Sometimes one needs to zoom out to get the whole picture. Techies need to zoom out of technology and see more of the landscape.
I for one am glad that someone did with the telephone!
I believe your missing an important distinction with this analogy.
Time - the telephone was nearly instantaneous communications - the telegraph took longer to deliver and longer to get a reply back.
Video conferencing does not bring that differentiation. A video call is not quicker than an audio call.
But more fundamentally it lacks eye-to-eye contact. For that to really work appropriately the two people on the call have to look into the camera - not at the screen. But not looking at the screen defeats the benefits of the video.
What video should add is the ability for people to read body language - that unspoken portion of human communications. Those systems that use a "talking head" format are fairly useless in reading body language.
I have seen many of the conferencing systems and find that their primary value stems not from one on one connections but group-to-group connections where the body language of the group is easier to read. So far I haven't found a system that remotely approaches what I would consider the basic minimum capabilities necessary to replace in person communications.
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Source: Raynet & Southern Bell, circa 1989, via Drew Lanza
Source: Omega Research
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