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FTTH's Benefits Are Not That Easy to Prove

Carol Wilson
9/28/2011

3:30 PM -- ORLANDO -- FTTH Council Conference 2011 -- When David Russell set out to answer the question, "Does FTTH Drive Economic Growth?" he was pretty sure the answer was yes.

But, as the Calix Inc. (NYSE: CALX) executive confessed to a packed room here this morning, it turns out the answer might be no. Or maybe, "We don't know yet." Or even, "We can't prove it one way or the other."

That's a tough thing for a guy to admit at an FTTH event, especially when he represents a company selling FTTH gear.

Using an interactive database that measures economic growth (an Edward Lowe Foundation database created by the man who invented kitty litter -- I kid you not!), Russell looked at the impact of a group of well-known FTTH projects on the economic development of their communities, measured by business creation and job creation.

They turned out to all be municipal builds, not because that's what Russell set out to do but because these five FTTH buildouts were the only ones that met his criteria: They had been around for five years; were true, all-inclusive builds; and were the commercial centers of their MSA (metropolitan statistical area). That latter provision was necessary because the database didn't sort data down to the individual town.

Based on what is available today -- data through 2008 -- Russell looked at the growth between 2004 and 2008 and compared the results from the towns served by FTTH with the rest of their states. It turns out that of the five -- Bristol, Va./Bristol, Tenn.; Dalton, Ga.; Jackson, Tenn.; Reedsburg, Wisc.; and Windom, Minn. -- only three did better in business creation than other towns in their state. In both Dalton and Reedsburg, business creation trailed other areas of Georgia and Wisconsin, respectively.

When it came to job creation, only Bristol and Dalton did better than other towns in their states. But that's not to say they added jobs. Bristol actually lost 3 percent of jobs and Dalton 9 percent.

So only the Bristol area did better than the rest of its state (it was measured against Virginia) in both job and business creation.

It's no coincidence that Bristol is often cited as the poster child for FTTH success.

This certainly doesn't mean that FTTH is failing to live up to its economic promises. Some of those attending Russell's presentation pointed out that telecommuting and home-based businesses are enabled by FTTH and might not be measured by a national business database.

Nor is the benefit of FTTH on education, health care and population retention -- all goals of rural FTTH in particular -- measured by Russell's calculations.

One woman from an Iowa telco said her customers demand the high-end data packages that FTTH enables because otherwise their data-addicted kids won't visit them. That struck me as truly sad until I realized that my adults kids probably wouldn't hang around our house much either if they came home and found no broadband.

But Russell's admittedly ad hoc study did show a couple of things: First, economic development doesn't magically happen because you build fiber to the home. And second, the FTTH industry might want to consider digging a little deeper to generate more proof of fiber's positive impact on the economic health of the regions it serves.

— Carol Wilson, Chief Editor, Events, Light Reading

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DCITDave
DCITDave
12/5/2012 | 4:52:24 PM
re: FTTH's Benefits Are Not That Easy to Prove


Our gov't keeps funding broadband buildouts to remote locations so that previously disconnected people can take advantage of the glory of the Internet. Then people don't sign up for service because they got by just fine without it. FTTH hasn't solved that issue, either.


 

paolo.franzoi
paolo.franzoi
12/5/2012 | 4:52:22 PM
re: FTTH's Benefits Are Not That Easy to Prove


Economic Impact of FTTH really has to be tied to applications deployed by other people.  I think the question is does an FTTH setup really do much for the businesses.


Let's use health.  Are we doing FTTH to a doctor's home so that he/she can see X-Ray's taken at a nearby hospital?  I have seen TV commercials for remote medicine, but I suspect that those are from business locations and not residential ones.  There are other programs for government facilities to get high speed (call it 100 Mb/s Ethernet) to things like libraries.  So, I think the big non-entertainment applications are happening anyway (without FTTH).


From what I have seen (and I know a lot of folks on this board disagree with me), residential high speed internet access is primarily an entertainment thing.  I don't see how that adds any local economic value.  I can see how it adds (potentially) remote economic value.  Now what I remember of the muni pitch was that the cool infrastructure would attract cool companies with cool jobs.  I have not really heard of any companies relocating say from AT&T U-verse properties to Verizon FiOS properties.  Anybody heard of people moving businesses for that?


seven


 

cnwedit
cnwedit
12/5/2012 | 4:52:22 PM
re: FTTH's Benefits Are Not That Easy to Prove


This is all based on a small sample - that was admitted up front. Each of the five communities involved had some economic struggles and looked to FTTH to address those issues.


Each of these five deployments is considered successful, based on uptake of service, etc. The challenge being discussed here is whether FTTH helped reverse the economic situation the community was facing.


I think it may be too early to tell, especially given the jobs lost - beginning in 2008 -- in every U.S. community.


The point to this presentation and article is that the industry shouldn't be glibly touting FTTH as the solution to all economic woes.


Bristol is the big success story and part of the process there is major development and promotion of business services that helped attract some new companies to that area. Fiber to the business was important, but it wasn't solely responsible for the economic success that followed.

paolo.franzoi
paolo.franzoi
12/5/2012 | 4:52:16 PM
re: FTTH's Benefits Are Not That Easy to Prove


 


Duh,


Couple of comments:  My sister is an answer line nurse and telecomutes 4 days a week.  She is on a cable modem.  No need for FTTH.  I grew up on a dairy farm.  We used State Extension Services of the Agriculture Department in the 70s for information.  I think the real time aspect (at least for dairy farmers) is overblown.  I can't choose my milk purchaser in any meaningful way.  I can't choose the pricing of milk on any real time basis (the price we were paid was much more tied to where we were approved to ship than anything else).  I am not saying that having the information online would not be handy - I am just not sure that FTTH is required for any of it.


seven


 


 

Duh!
Duh!
12/5/2012 | 4:52:16 PM
re: FTTH's Benefits Are Not That Easy to Prove


Observation #1:  I have been around for long enough to remember the same tired list purported business case and/or social investment justifications when it was initially created at the National ISDN Users Forum.  Remember:  tele-medicine, tele-learning, tele-work....  They popped up in the context of ISDN, Broadband ISDN, the Global Information Infrastructure, xDSL, FTTx and probably some others that I've forgotten about.  Probably millions of airline miles, thousands of nights in hotels (mostly in Geneva), endless streams of food and libations.  And still no more substance then than now.


Observation #2: This would have far greater weight if it were a Ph.D dissertation in economics (preferably from a university near a large body of salt water), if it were published in a peer reviewed journal of economics or if it were produced by either the a strictly non-partisan government economic research agency(i.e.,  CBO or GAO).  With due respect, it seems doubtful that Mr. Russell has applied a rigorous methodology to his work.


Observation #3: It is difficult to draw clear boundaries between residential and small business applications of broadband technologies. 


Observation #4: I have yet speak with a medical doctor or advanced practice nurse who thinks that a cheap video camera and some telemetry is an acceptable substitute for a hands-on examination. 


Observation #5: Hype notwithstanding, there are individuals and communities whose full participation in the economy can be enabled by applications delivered over broadband.  Consider:


a)  telecommuting as an enabler to allow people to take jobs without moving or driving extraordinary distances.  As an aside, I note with regret that several leading companies in the broadband access equipment space do not eat their own dogfood in this respect.


b) store fronts for home based businesses.  Obviously, a producer of handicrafts or specialty foods isn't going to be hosting their website at home,  or doing credit card transactions... but other back office functions require a broadband connection


c) modern farmers need real-time weather, real-time farm commodity pricing, satellite imagery, ordering of parts and supplies, the occasional bit of advice from their state extension service or an equipment manufacturer, bookkeeping, and probably some other broadband enabled information that I can't think of right now.


d) there is a great deal of quality courseware on the Internet, some of which can might help some individuals to obtain or retain jobs.


Whether all of this is sufficient to justify FTTH as a social investment is a problem for economists to figure out.

Duh!
Duh!
12/5/2012 | 4:52:15 PM
re: FTTH's Benefits Are Not That Easy to Prove


Seven,


To be clear... I really don't think end users care whether it's FTTH or DOCSIS or fixed wireless or barbed wire carrier.  It's really about acceptable latency, price and availability.  Policy makers, of course, do confuse the means and the end.   Now, as a practical matter, achieving acceptable latency will require building out new infrastructure (except in areas already served by decent HFC plant), and at this point, fiber and fiber + wireless are the only rational choices; maybe you  can also make an argument for FTTN in some areas.


My understanding is that wheat/corn/soybean farmers - whose crop is traded on commodity exchanges - do have to make strategic decisions in near-real time in order to maximize their prices.    Some of them also make pretty heavy use of satellite imagery for maximizing yields, managing herbicide/pesticide programs and so on.  And real-time access to doppler radar images can literally be a life-or-death matter in a lot of rural areas.


Whether all this contributes enough to the public good to justify government investment, or whether network effects justify USF-type subsidies, I leave to the economists. 


 


 

wardboy
wardboy
12/5/2012 | 4:52:08 PM
re: FTTH's Benefits Are Not That Easy to Prove


I think some people may be missing the point.  FTTH isn't needed to access the Internet (now), but if we are going to build a network, what is the point in building a copper or HFC network that will be obsolete, or the at the very least non-competitive, in our time?  No other network infrastructure can match the ability to deliver BROADband like fiber.  As HDTV and 3DTV become the standard, no other network delivery method can deliver enough bandwidth to watch multiple streams of HD/3DTV like fiber can.  An that's just TV, the minute my kids stepped into gradeschool they had to have broadband at home to thrive.  We will see the time, and very soon, that broadband will be ubiquitious, and having FTTx to your home or business means you have an advantage.  If we are going to spend gov't money to build something, we might as well build networks that are on par with those in Asia and Europe.  If we don't, our kids and grandkids will suffer for it.  I think asking if fiber networks actually benefit commerce, quality of life and education is like asking if clean drinking water is essential to sustain life.  We all know the answer to that, right?

bsicable
bsicable
12/5/2012 | 4:52:07 PM
re: FTTH's Benefits Are Not That Easy to Prove


Most farmers our crews experience cantact with as they deploy remote area or rural area fiber these days bend over backwards to help in any way possible to make the project progress smoothly and efficiently as we pass their properties, then bring the service entry (fiber) to their doorsteps. The reason? They have waited so long for more options than only a simple dailup connection they currently "enjoy" that their businesses have suffered as a result. They are made keenly aware of the opportunities they are missing out on. Their children who have left for education or far away jobs in far away cities make sure these growers and producers are made aware each and every holiday when they return home, and themselves are isolated and distanced from what has become a very critical part of their personal success stories that they share with those rural and remote families on those visits home. Then add the benifits the adding of fiber will bring to the future smart grid deployments, small town enterprise community and wireless backhaul. Its a no brainer.

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