FTTH Keeps GrowingFTTH Keeps Growing

TULSA, Okla. -- As of October 2003, fiber-to-the-home is now available to 180,300 homes and has been connected to 64,700, according to Render, Vanderslice & Associates, a market research firm that conducts an annual study of FTTH deployments in North America using a census approach. Growth in those connected with FTTH (fiber direct to the individual living unit) has been very strong, even during a severe recession for the communications industry.

Historic context illustrates the rapid pace of FTTH deployment. The first network to the home, copper (telephone) began connecting homes in 1876, and took about 90 years to reach 90 percent of Americans. The highest year-to-year subscriber growth rate was 75 percent in 1900. The second network, coax (cable TV), began connecting homes in 1948, and took around 50 years to pass 90 percent of Americans. The highest year-to-year subscriber growth was 130 percent in 1955. The third network, optical fiber, became commercially viable in 1998. Growth in subscribers has averaged 249 percent a year for the past two years. (For all three networks, data for the first three years was excluded from comparison due to the start-up small base values.)

Despite strong growth, FTTH has expanded slower than was forecast last year due to the delay of several large municipal builds. Growth, however, has been accelerating in the latter part of 2003, and there appears to be an increasing number of projects in feasibility and engineering stages.

According to the research, FTTH projects are increasingly being selected after an economic review of all “triple play” delivery options. Other FTTH deployments have been driven by local visionaries who reported battling obstacles to get them built. When interviewed, many of these pioneers spoke of their belief in a future with FTTH handling ever-increasing bandwidth needs complete with converged voice, video and data services, high definition television, more robust Web sites, and various new applications. Besides entertainment, they forecast new uses including more digital commuting, digital medicine, automated meter reading, and video security. In fact, several unique applications have been implemented in a few FTTH communities, including more video-based and interactive on-line education from area colleges, and localized narrow-cast video on demand such as local high school plays and sporting events.

The current bandwidth capacity of FTTH systems depends on the architecture used. Some of the FTTH communities already deliver as much as a gigabit of capacity to the home. The majority of deployments might be described as being more evolutionary in approach with current capacity exceeding hybrid fiber coax systems and upgrades likely in the future. A vast majority of systems already offer a triple play of voice, video, and data for one monthly price.

The appeal of fiber, combined with higher Internet speeds and triple play convenience, appears to be a marketable combination, with some competitive providers reporting consumer take rates exceeding 90 percent. Take rates vary significantly, however, based on service offerings, the degree of local competition, and other factors.

Early FTTH builds have been constructed by overbuilders, municipalities, public utility districts, independent telephone companies, and new home developers. Some of the large incumbent telephone companies are now planning deployments and will likely become a significant factor in the next few years. While many are building FTTH to deliver a full bundle of services, a few deployments use fiber even when only one service is offered. Because of its long distance carrying capacity, FTTH has also been used to connect homeowners in at least one low-density area that had never before had landline telephone service.

Contrary to popular opinion, there are far more homes passed by FTTH overbuilds than new home “greenfields.” Though greenfields developers report the lowest construction costs, they note that build outs take several years to complete. Those building overbuilds report much lower construction costs than many expect, with costs for underground drops usually well below $4 per foot.

While passive architectures (PON) dominate in terms of the number of deployments, active deployments have been larger on average, and the number of homes connected via active systems nearly equals those connected via PON.

Render Vanderslice & Associates