Fighting FiOS With Fiber

Although some chinks are appearing in Verizon Communications Inc. (NYSE: VZ)'s armor as it continues to lose wireline share, it's a safe bet the telco will continue to make subscriber gains against cable operators by wielding FiOS, its fiber-fed service platform for Internet and video services. (See Verizon to Raise Prices, Cut Jobs and Which Gnat Will Go Splat?)

So, how can cable and its hybrid fiber/coax (HFC) hope to battle against Verizon and other telcos thar are ratcheting up speed and capacity via expanding fiber-to-the-premises (FTTP) footprints? Install more fiber, of course. At least that was the tech-laden answer provided by execs at Aurora Networks Inc. and CommScope Inc. , the headliners for a recent Cable Digital News webinar titled "FiOS Fighters: Cable MSOs & FTTP."

While Aurora preached that cable should drive fiber deeper, CommScope said operators should consider (and can afford) FTTP architectures in some "greenfield" situations.

Cable operators have been careful to say that they have techniques such as switched digital video, advanced compression, and analog reclamation at the ready to keep bandwidth requirements at bay. But they will need to do more to keep up with the surging demands of high-definition television and high-speed Internet services, according to John Dahlquist, Aurora's vice president of marketing.

Cable network "capacity must be expanded... [with] more bandwidth per home passed," he says.

Cable's low-cost first response is segmenting the nodes, which can immediately quadruple narrowcasting and return capacities, and can be done only where it's required.

Beyond that, operators can push fiber deeper into their networks and eliminate the bottlenecking at the node. That architecture, which reduces the need for amplifiers and power supplies required on the network, can dramatically lower an operator's operational expenses, Dahlquist explained.

In a sample cable system passing 20,000 homes, a traditional HFC network would require 1,133 powered up "actives" (i.e. RF amplifiers and optical nodes), versus just 200 in a fiber deep architecture. The HFC power cost over ten years would run $564,170 for HFC, versus just $278,373 for a fiber deep system, according to Aurora's analysis. Also from this same ten-year view, maintenance costs would plummet.

Table 1: Fiber Deep vs. HFC*
Traditional HFC Fiber Deep
Power supplies 55 20
RF amplifiers 1,100 0
Optical nodes 33 200
Total active devices 1,133 200
Actives per mile >5 ~1
Cascaded RF amplifiers 5 0
Network availability 99.98% 99.995%
Power cost (10 years) $564,710 $278,373
Maintenance cost (10 years) $871,500 $229,500
* 20,000 home-passed sample

Source: Aurora Networks

But it does cost a bit more from a capital standpoint. Dahlquist said fiber deep architectures can cost 20 percent more than an upgrade to "good, conditioned HFC plant." However, for an operator building a new network or conducting a "major" HFC rebuild, the costs for fiber-deep are just 3 percent to 5 percent greater than a traditional HFC upgrade. Fiber deep "is a real plus in the greenfield application," he said.

But who's giving fiber-deep the vote? Dahlquist said mid-sized MSOs "have really grasped the concept early on," though some larger operators are giving it a shot as well. Some examples: Rogers Communications Inc. (NYSE: RG; Toronto: RCI) and Vidéotron Telecom Ltd. of Canada, Bresnan Communications LLC , CableOne , and Suddenlink Communications .

"This [fiber-deep architecture] is an intermediate platform that enables cable operators to cost-effectively scale their spending behind revenue demand for services," Dahlquist insisted.

But some vendors see cable ops taking fiber all the way to the home now, albeit only in certain circumstances.

CommScope, like other vendors, has developed a cable FTTP platform that preserves an operator's headend and consumer-side equipment, such as set-tops and modems. (See CommScope Sees BrightPath for Cable FTTP.) A broader standard called "RF Over Glass" (RFOG), led by the Society of Cable Telecommunications Engineers (SCTE) , is also underway. (See Fog Lifting on RFOG.)

Mark Vogel, CommScope's manager of technology development, said the FTTP approach works best for new builds. But there's no reason for operators to start from scratch, apparently.

To reduce disruption, some of the FTTP systems tailored for cable are designed to tap the operator's existing provisioning, monitoring, and conditional access systems, Vogel said. And, instead of an Optical Network Unit (ONU) on the side of the customer's home, CommScope's system uses a simpler, less costly network interface unit that converts optical signals to electrical as they enter the home, and the opposite in the reverse direction.

Because CommScope's BrightPath architecture reduces the need for amplifiers, Vogel said deployment costs are near or below parity with HFC in mid-to-low densities, and can be cheaper than HFC in some low density scenarios. But those deployments carry a 20 percent premium in high-density situations.

He said the top five U.S. MSOs "have shown interest" in the platform, with some having started trials. Those deployments are limited mostly to new home developments, in small pockets of 100 to 300 homes. Some operators are also looking toward systems like BrightPath as a way to deliver services to business customers as well, Vogel said.

— Jeff Baumgartner, Site Editor, Cable Digital News

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Pete Baldwin 12/5/2012 | 3:42:10 PM
re: Fighting FiOS With Fiber I was thinking along similar lines. It sounds like cable still faces a heap o' costs to deploy fiber in situations that aren't greenfield or nearly greenfield -- which makes sense; digging up old ground ain't cheap.

BrightPath and RFOG are all nice, but the hard questions are around how to battle FTTP on their existing networks, right? Does cable end up having to make a FiOS-like, $20 billion commitment?
OldPOTS 12/5/2012 | 3:42:10 PM
re: Fighting FiOS With Fiber The competition (FIOS) has a similar problem too.

Comcast (now TWC) in my neighborhood used fiber to distribute from the head end to the neighborhood and then used the installed coax to the premise

Are prices going up or BW going up???? What great competition.


Keebler 12/5/2012 | 3:42:09 PM
re: Fighting FiOS With Fiber Sorry, but this is a pet peeve:

Premise: (noun) Logic. a proposition supporting or helping to support a conclusion.

Premises: (noun)
a. a tract of land including its buildings.
b. a building together with its grounds or other appurtenances.
c. the property forming the subject of a conveyance or bequest.

Fiber to the premise is fiber to the assumption. While perhaps a valid editorial statement, that is not an accurate industry term.
rjmcmahon 12/5/2012 | 3:42:08 PM
re: Fighting FiOS With Fiber We're on the front side of a natural monopoly. To realize such an infrastructure requires a return on investment. Raising prices for the early adopters is the sound approach. Competition here and now is equivalent to a nuisance line in the days of RR construction. It's doesn't add any value nor help towards real progress.
thebulk 12/5/2012 | 3:42:08 PM
re: Fighting FiOS With Fiber I think that MSOs are going to need to push fiber deeper into there architecture almost to the point of a FTTC or FTTP type build. and it will no doubt be a costly endeavor for them to undertake; but the way i see it there is not way they can afford not to do so.
rjmcmahon 12/5/2012 | 3:42:07 PM
re: Fighting FiOS With Fiber Why do the MSOs need to push fiber to homes? There is no price erosion to their residential revenues due to VZ's FiOS or T's u-verse investments. Even if there was, why should shareholders have them invest more to engage in a price war?

It kinda reminds me of the Vanderbilt/Gould rate war in 1870. Don't think either the MSOs or ILECs are going to repeat that.

GÇ£During a rate war with the New York Central (VanderbiltGÇÖs line) to attract cattle shipments flowing east from buffalo to New York City, Gould put his per-carload rate down to $75 from VanderbiltGÇÖs original high of $125 per. When Vanderbilt retaliated with a drop to $50, Gold put the Erie (GouldGÇÖs rail line) at $25, only to have Vanderbilt go to a ridiculous $1 per carload, with a penny a head being charged for hogs and sheep. At first Vanderbilt delighted in reports that while his cars were packed, the Erie trains ran empty. Only later did he learn that Gould and Fisk (Jim Fisk, GouldGÇÖs frequent investing partner) had bought every bit of marketable livestock coming into Buffalo from points west, which they then shipped to New York via (VandebiltGÇÖs) Central, realizing enormous profits (from his losses).GÇ¥
thebulk 12/5/2012 | 3:42:06 PM
re: Fighting FiOS With Fiber the main reason that MSOs need to push fiber deeper is simple, capacity.
Kreskin 12/5/2012 | 3:42:04 PM
re: Fighting FiOS With Fiber

The MSO's are already pooping the bed ... just running 12 HD channels compressed has latency and video tiling problems ... it's a joke to talk about anything but fiber.

FIOS runs 100 HD channel with no compression ... higher quality video ...
ponguy 12/5/2012 | 3:42:04 PM
re: Fighting FiOS With Fiber I am biased towards Fiber, but think the MSO's will eventually tap out the Coax and have to suck it up and go all fiber to match the services of FiOS or even a quad play of Lightspeed. RFOG, which is DOCSIS 3.0 over fiber, is all the cost with none of the benefit of fiber. For their sake lets hope it is not too late for them by the time they reailize it...
rjmcmahon 12/5/2012 | 3:42:01 PM
re: Fighting FiOS With Fiber According to VZ they have spent $23B for 1M FiOS subscribers. Let's say we're conservative (like a Brinks Homes) and we can tolerate a 7 year payback with a modest interest. The monthly payment needed from the consumer just to recover the sunk costs is $347.13. That doesn't pay for content nor operational costs (not to mention the political graft built in to the system.) These sunk costs are primarily labor so reducing equipment or cable costs doesn't solve the fundamental problem. Nor does cutting off the graft money supply to the politicians.
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