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Businesses Face 'Fiber Gap': Report

Dan O'Shea
4/9/2014
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Islands of businesses not connected to fiber are the norm rather than the exception, according to a recent report.

The number of businesses in the US connected to fiber networks, the predominant medium for Ethernet, is growing at a healthy clip, increasing to 39.3% of all US businesses with 20 or more employees by the end of last year, according to numbers just released by Vertical Systems Group. That stat is up from 36.1% in 2012, and far from the 10% to 11% numbers the industry was lamenting a decade ago.

If almost 40% of US businesses are connected by fiber, then more than 60% still aren't. They remain in the so-called "Fiber Gap," according to VSG.

That's a pretty big gap. In fact, when the gap is bigger than what isn't in the gap, I don't know if you can still call it a gap -- it's more like the real state of things. If anything, the groupings of actual fiber-connected businesses in this country still look a lot more like islands.

Something else worth noting: The rate of growth in business connections has slowed a bit recently -- it was 31.8% after 2011, so the rate of growth has slid from 4.3% to 3.1% in that span.

Let's not celebrate too much a stat that tells us the number of fiber-connected businesses remains well below 50%. The cable guys have done their part to stoke the market in recent years, but the real sweet spot for many of them continues to be the size of business that is not even considered in this report -- small businesses with fewer than 20 employees. (See TWC Tops Cable List on Carrier Ethernet Leaderboard and Cable's Business Boom.)

The MSOs are increasingly targeting the middle of the market, but even so, they are focusing primarily on the businesses within their own cable TV footprints. That leaves a lot of untapped potential for the national network operators.

When the number of fiber-connected businesses hits 50%, maybe then we can start celebrating -- if being half finished is anyone's idea of an accomplishment.

— Dan O'Shea, Managing Editor, Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
4/12/2014 | 2:17:27 PM
Re: Market forces
mhhf1ve - "there are too many industry lobbyists arguing that net neutrailty is anti-capitalist. "

Which it is. It is against the interest of people who invest in carriers. 

But it's also pro-free-market. 
brookseven
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brookseven,
User Rank: Light Sabre
4/11/2014 | 11:58:54 AM
Re: Market forces
Dennis, Verizon deployed the numbers out of the original RFP from July of 2003. I can't tell you what they promised NJ or if where deployments happened changed over time. The original plan from the RFP was never more than 50% of the Verizon network. Seven
JQuinnOnTelecom
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JQuinnOnTelecom,
User Rank: Light Beer
4/11/2014 | 10:45:50 AM
Re: Market forces
My understanding is that Verizon has indicated it will cease further expansion of its fiber-to-the-home "FiOS" service. I don't believe Verizon will ever stop deploying fiber to buildings, cell-sites, business parks, and other locations with lucrative business and access service demand. 
mendyk
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mendyk,
User Rank: Light Sabre
4/11/2014 | 9:04:13 AM
Re: Market forces
Seven -- Do you know if VZ rolled out to all the areas it planned, or did it cut the footprint down at some point? I ask because regulators in NJ are acting as though VZ has reneged on its rollout promise. One person I know who works directly in this process from the regulatory side insists to me that VZ didn't finish the job.
brookseven
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brookseven,
User Rank: Light Sabre
4/10/2014 | 6:22:03 PM
Re: Market forces
mhhf1ve,

Before FiOS started (and I was working at AFC), the FCC ruled that FTTP did not have to be unbundled like copper loops.  We lobbied the FCC to get FTTC (no more than 500' of copper) to be dealt with the same way.

FiOS was announced not to expand at the time of the START of FiOS when we won the RFP back in 2003.  The ruling around unbundling was already in place at that time.

So, I think you need to go back and completely rethink that argument.  Unless you can argue that over 10 years of regulatory certainty is really just a blip.

seven

 

PS...Dennis, Verizon stated the scale of the rollout at the very beginning.  They wanted to keep lines in urban and suburban properties.  That mission has been by and large accomplished.  They could care less about rural lines and I think would give them to the cable companies if at all possible.
mendyk
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mendyk,
User Rank: Light Sabre
4/10/2014 | 6:03:51 PM
Re: Market forces
The facts suggest otherwise. Verizon was very aggressive in rolling out FiOS, and then it put on the brakes. If it were concerned about regulatory issues, it wouldn't have started out aggressively to begin with.
mhhf1ve
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mhhf1ve,
User Rank: Light Sabre
4/10/2014 | 5:16:51 PM
Re: Market forces
That's not a regulatory issue that is "slowing this technological transition" -- that's a business decision.

BUT.. what is that business decision based on? I'm pretty sure that Verizon doesn't want to invest in FIOS b/c there's too much risk in the investment being handed over to competitors if the FCC decides that broadband should be regulated like copper phone lines.

If the FCC decided in no uncertain terms that fiber was never going to be regulated like copper facilities, I'm sure Verizon's business decision would change instantly. 
mhhf1ve
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mhhf1ve,
User Rank: Light Sabre
4/10/2014 | 5:13:24 PM
Re: Market forces
The EU is committed to net neutrality:

http://ec.europa.eu/commission_2010-2014/kroes/en/blog/netneutrality

I can understand why the FCC hasn't made a decision yet... there are too many industry lobbyists arguing that net neutrailty is anti-capitalist. 
mendyk
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mendyk,
User Rank: Light Sabre
4/10/2014 | 5:02:06 PM
Re: Market forces
You do understand that Verizon has announced that it will not expand its fiber network beyond the current footprint. That's not a regulatory issue that is "slowing this technological transition" -- that's a business decision.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
4/10/2014 | 4:38:19 PM
Re: Market forces
mhhf1ve - "I think many carriers are stalling their fiber buildouts because there is uncertainty in how their facilities will be regulated."

Makes sense. Regulatory uncertainty is a huge drag on business. In many cases, businesses can live with just about any regulatory decision, but they can't live with indecision. 

I'm reminded of a conversation elsewhere on the boards, where the new FCC commissioner says they need more time to study net neutrality. This is not encouraging. Why do they need more time? Net neutrality has been a hot topic for a decade, and the ancestral regulations for net neutrality go back literally to 1860 in the US. No, that's not a typo -- 1860. Telegraph lines were regulated to require messages be sent on a first-in-first-out basis. 
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