Cable Tech

Ethernet Operators Face Up-Front Costs

Plenty of vendors and service providers are betting big money on gigabit Ethernet becoming the predominant protocol in access networks, on the basis of its ability to deliver big bandwidths with low-cost equipment.

But significant upfront costs in deploying gigabit Ethernet -- laying fiber to the user’s door -- emerged at last week’s Gigabit Ethernet Conference in San Jose, Calif.

One service provider rolling out gig E to the home, the Grant County Public Utility District, said it would spend $120 million in the next five years, laying fiber to "all the farms, homes, and businesses" in the rural, mid-Washington region (see http://www.gcpud.org/zipp/default2.htm for details).

The county doesn't expect full payback on its investment for at least 15 years, according to Jonathan Moore, its senior telecommunications engineer.

"Right now we're spending $3,500 per home, but we expect that to drop to about $2,100 per home by 2003," he told delegates at the conference. The county already has 1,700 customers using the open-access network to order Internet, phone, and cable television services from a growing list of providers, paying approximately $75 to $80 a month for a combination of all three.

Other operators also appear prepared to pay big bills to connect customers, judging by comments made at the conference by Steve Albanese, director of information systems at CPI Wireless, a former division of Varian, which manufactures microwave and satellite components.

Albanese says his company's decision to purchase Ethernet services from Yipes Communications Inc. was helped in part by the service provider's willingness to dig a trench for free.

"We didn't have to put down a penny until it worked," says Albanese, who admits that CPI got "an early-user discount" when Yipes paid for about $40,000 worth of fiber-digging and hookup costs to link CPI Wireless's building with the local fiber loop. Yipes also threw in an Extreme Networks Inc. (Nasdaq: EXTR) customer-premises Ethernet switch as part of its service.

Free gifts aside, Albanese says Yipes's services delivered as promised, allowing the company to completely replace the frame-relay network it used to rely on for its 1,300-node network, which spans six locations in the U.S. and Europe.

"We now have four times the bandwidth for about half the cost of the frame-relay network," says Albanese, adding that provisioning headaches with the previous network of T1 (1.5 Mbit/s) leased lines "almost made me quit my job."

In general, the cost of laying fiber to customer sites "is not so exorbitant that it gets in our way," says Jerry Parrick, Yipes’s CEO.

Parrick points out that fiber-access alternatives to digging trenches do exist, such as existing power or sewage conduits. However, he admits that fully half of Yipes's current customers have needed some type of construction work to bring fiber inside, a task that Parrick says can cost between $50,000 and $60,000 per building. Yipes is sometimes able to share the construction costs with other service providers, he adds.

Of course, having to lay fiber can also delay service provisioning considerably, and might also limit the speed at which Ethernet-based services can be deployed in general. If you’d like to share your views on this topic, take Light Research's new interactive poll, at The Future of the Metro.

-- Paul Kapustka, Editor at Large, Light Reading http://www.lightreading.com

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netskeptic 12/4/2012 | 8:29:43 PM
re: Ethernet Operators Face Up-Front Costs (1)You have to have a fiber to run GE, and it all comes as a surprise, unbeleivable.

(2)As far as I can digest all these 'Ethernet everywhere' stories the only problem they truly solve is bypassing carrier's line provisionning nightmare. Should we reinvent the whole thing just to improve/bypass inadequate capacity management ? My prediction is that once ILECs will got a right to provide internet access, they will give all these guys a good run for the money.

(3)My second prediction is that once ILECs will be in ISP business there will be new opportunities with new devices specifically addressing needs and environment of ILEC/ISP monsters, and it is not going to be Ethernet.



Scott Raynovich 12/4/2012 | 8:29:43 PM
re: Ethernet Operators Face Up-Front Costs Reading the kind of Money these guys are doling out to get customers makes me think twice about these business plans. Anybody have any thoughts?
LightBeating 12/4/2012 | 8:29:42 PM
re: Ethernet Operators Face Up-Front Costs I've paid $2000 for my computer, $500 for my TV, another $1000 for the home theater audio system, plus the DVD etc. So, like many people, I pay a lot for home entertainment already.

If someone knocked at my door and asked me if I want to pay $2000 to lay a fiber to my home, and have gigabit/s bandwidth, I would seriously consider it. If this is to last me 15 years, that's only about $140 per year, or $12/month.

Let the bandwidth come in, and I'm sure some clever people will find a way to offer me some interesting new services. The internet right now is going nowhere because it's too limited by the average person's available bandwidth.

Those who dare lay fiber now are sure to be the winners.

optinuts 12/4/2012 | 8:29:42 PM
re: Ethernet Operators Face Up-Front Costs who's paying for all the home wiring.

i can't believe the farms, homes, and businesses of rural washington are going to fork out the dough needed to rewire their homes to support gigE, for what killer applicaiton?

scott, why put something up for discussion when it doesn't compute at all?
mrand 12/4/2012 | 8:29:40 PM
re: Ethernet Operators Face Up-Front Costs >(1)You have to have a fiber to run GE, and it
>all comes as a surprise, unbeleivable.

Actually you don't. Marvell's 1000Base-T chips do something like 180 meters on Cat 5 cable. This gets you over 500 feet. You could EASILY aggregate over 15 houses (and in many cases, over 20) in most suburban areas with that kind of reach, depending on the plot size and shape.

And it's cheaper to fix and replace Cat-5 when someone goes digging a new fence post with their shovel.

> 2)As far as I can digest all these 'Ethernet
> everywhere' stories the only problem they truly
> solve is bypassing carrier's line provisionning
> nightmare

Besides provisioning, high bandwidth to the house also provides a channel for utilities to "read the meter" electronicly. The labor and equipment savings that go along with that are supposedly VERY VERY high.
cfaller 12/4/2012 | 8:29:40 PM
re: Ethernet Operators Face Up-Front Costs I believe the logic goes something like this: in network buildouts, the cost of laying fiber is only a fraction of total cost. Because the optronics are so expensive, the cost and complexity of managing the network is big, laying cable becomes a relatively small problem when compared to the whole network.

With ethernet, the boxes are cheap, the network expertise is (relatively) minimal, and the service is more granular, so the service can be sold at a premium over leased T1s and T3s. Selling services at a premium would cost justify a lot of cable builds.

Having said all that, I think it's extremely unclear whether these ethernet providers will succeed. The problem, in my opinion, is that ethernet is a closed system- it can only talk ethernet to other ethernet elements. All of a sudden interconnecting the metro ethernet network to the Bells is a complicated, expensive, and time consuming task, so a lot of providers opt to build out to the customer instead.

I'm not ready to write off the ethernet providers yet, but I'm definitely doubting that laying cable to every customer is the way to go.
Peter Heywood 12/4/2012 | 8:29:38 PM
re: Ethernet Operators Face Up-Front Costs Kevin Kalkhoven thinks broadband cellular wireless will end dominating access networks for consumers.

I guess operators have already had to fork out billions for broadband wireless licences, so there's a huge incentive to spread this cost over as many homes as possible.

All the same, a $1 billion licence divided by 1 million homes is $1,000 a home - even before you start installing the actual network.

Sounds as though this might not be that much cheaper than fiber.

I suppose the advantage is that once the antenna are in, provisioning delays vanish.
kbkirchn 12/4/2012 | 8:29:38 PM
re: Ethernet Operators Face Up-Front Costs http://newsroom.cisco.com/dlls...

Is 5-15 mbit on up to 5,000 ft cooper loop really all that bad?

netskeptic 12/4/2012 | 8:29:37 PM
re: Ethernet Operators Face Up-Front Costs > With ethernet, the boxes are cheap, the network
> expertise is (relatively) minimal,

This is true as long as you use ethernet bridges in the core, which is hardly possible, because L2 networks do not scale up at all.



kaps 12/4/2012 | 8:29:36 PM
re: Ethernet Operators Face Up-Front Costs Optinuts -- a bit of addl' info that got edited out of the main story may help you:

Grant County PUD has hyrdroelectric power plants (dams) on the Columbia River, and they resell excess power to places like California.

They're using some of this money to pay for the fiber buildout -- with the idea that two-way connections will let them better monitor power usage (so they know how much they can sell).

Between this application and their cut from providing services, they expect the infrastructure to be paid off in 15 years.

-paul k
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