On the one hand, the market is growing. In "Access 2003," CIR forecasts that deployments of "Fiber to the X," including fiber to the home (FTTH) and fiber to the business (FTTB), will enjoy sizeable double-digit increases over the next five years. FTTH in particular will grow by at least 80 percent a year:
But CIR senior analyst David Gross cautions that growth will build on a very small existing base, particularly in the case of FTTH. "Fewer than 1 percent of all homes in 2007 will have access to fiber," Gross says. Further, progress won't come from the places some industry observers have expected.
Instead of a burgeoning market driven by regulatory progress and a clamor for newfangled applications like video-on-demand from RBOC customers, Gross says the FTTx market will be served by independent rural telcos and municipalities -- and video will have little or nothing to do with demand.
"Video on demand isn't doing that much. It costs more money and provides less selection than DVDs by mail," Gross says. He says the big applications for FTTH may not even have been invented yet.
Instead, FTTH is being driven by municipalities and independent telephone companies looking to build networks in areas where there's room for alternative services to compete with those of ILECs and cable TV providers. One such area comprises the Western United States served by Qwest Communications International Inc. (NYSE: Q) in its US West regional network -- Idaho, Utah, and Wyoming, in particular.
For FTTB, growth will be steady but slow, and it will be driven not by big businesses but small ones, such as law firms in office buildings that seek a faster link to other office buildings. The provider will be the owners of those buildings.
Gross says there also won't be any dramatic technologies stepping up to relieve pent-up demand in the last mile. PON (passive optical networks, which deploy passive splitters to siphon bandwidth among multiple users) will always be a niche market, Gross maintains. Free-space optics likewise remains too costly to be practical. Wireless LANs will probably take root faster than other solutions, but a mix of technologies will ultimately evolve to rule the last mile.
In the end, Gross says, patience must replace hype as the source of planning for FTTx. Certainly, that's a less exciting look at the market, but perhaps a more sensible one.
— Mary Jander, Senior Editor, Light Reading