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Cable/Video

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

opto 12/4/2012 | 8:27:37 PM
re: Ethernet Operators Face Up-Front Costs DKP - Hsu is referring to a price for a purpose built stb for special networks such as Hotels, as noted in the article. That means this is not a consumer device, and especially not a digital video one. A box like this most likely has a traditional analog only input and output, and a separate, integrated DOCSYS (CableLabs' open standard) modem. This is very very far from a single input of FastE, producing RF out to a TV, along with Ethernet computer (and RJ45?), as used at Grant county.
DKP 12/4/2012 | 8:28:03 PM
re: Ethernet Operators Face Up-Front Costs
> FastE in, RF out, same fcns as current
> set tops, under a $100? What planet are you
> from?

http://www.informationapplianc...

"Using the StrongArm solution has allowed us to lower prices to $100 to $120 each," said Hsu.

Taiwan, Korea mfgs just focusing on OEM sales are starting to be very price aggressive. They have a different business model than GI/Motorola and Scientific Atlanta.





John Honovich 12/4/2012 | 8:28:05 PM
re: Ethernet Operators Face Up-Front Costs DKP,

I would, honestly, be very interested in knowing who is making IP stbs under $100. That would be great for IP video but I, unfortunately, haven't seen it.

Which vendors are selling IP stbs for less than a $100?

opto 12/4/2012 | 8:28:08 PM
re: Ethernet Operators Face Up-Front Costs DKP - FastE in, RF out, same fcns as current set tops, under a $100? What planet are you from?
DKP 12/4/2012 | 8:28:15 PM
re: Ethernet Operators Face Up-Front Costs > Myrio has acknowledged that Grant
> is using $500 IP set-top boxes.

IP set tops already cost lower than $100. Grant is either price insensitive, or they have added Personal VCR (hard disk) and DVD features to their box. IP video is very do-able right now, offering the same feel as CATV, but more interactive, multimedia, web-based features.

optinuts 12/4/2012 | 8:28:33 PM
re: Ethernet Operators Face Up-Front Costs thank you, opto for a very considered and sensible post.

i agree...ftth will only come when there is a compelling reason for it. i'm sorry, utility meter reading isn't it. neither is videophone. there are no killer apps for it. neither are there any competitive pressures. the economics doesnt justify it on its own. the japanese have tried this for 20 years without the necessary drivers. the penetration is still very low.

copper is still the medium to the home, twisted pair or cable. the regulators have to get out of the way to make that work.

there isn't enough competition in the industry to push anyone to spend the huge amounts to deploy ftth.
cfaller 12/4/2012 | 8:28:35 PM
re: Ethernet Operators Face Up-Front Costs "Given enough bandwidth, you have video-phone (meaning, for example, that you can plug your own video camera onto the network and send live images to family, friends,etc.), video-on-demand, interactive programming, and so much more" blah blah blah!

Interactive TV? Ask Time Warner and the rest of the cable industry how they feel about that. They'll spew a few epithets, with the word "Qube" sprinkled around.

Videophone? What are you smoking? People don't want videophones, period.

Video on demand? Again, people don't want it, they would prefer to save a little money and drive to the local video store.

I believe FTTH is inevitable because of it's inherent flexibility, and it's going to be a long haul of probably 10-15 years before we see critical mass. But let's not get carried away- the new services that will be 'enabled' by FTTH have been tried before, and have been rejected by the market.
John Honovich 12/4/2012 | 8:28:37 PM
re: Ethernet Operators Face Up-Front Costs LightBeating,

I do not think we are denying the visionary possibilities that FTTH delivers. However, I would surmise that opto's point is the financial viability of Grant's deployment.

How much more does the World Wide Packet solution cost than comparable solution? One of the things that isn't even included in these numbers is the price of IP Video Set-top boxes. With an Ethernet platform to deliver video services to TV sets, this is a necessity. World Wide Packet's partner, Myrio has acknowledged that Grant is using $500 IP set-top boxes. Each TV that wants video service over the Ethernet network will need a separate set-top box or a (more expensive) residential gateway.

With all these things acknowledged, to be financially competitive with traditional solutions, how much more in revenue must they generate compared to these traditional solutions? 50%? More than that? How do they get that?

Grant County's people have acknowledged themselve a 15 year payback period. This is fantastically long.

So, lightbeating, i grant you the promise, but to speak to us about the financial reality of the deployment.

Thanks.
LightBeating 12/4/2012 | 8:28:39 PM
re: Ethernet Operators Face Up-Front Costs Opto wrote:

"Does anyone really believe that successful Telcos and Cablecos would deliberately use technology that does not get them the most services revenue for each dollar spent providing them?"

The answer is no. I believe the real answer, though, is in those two words: "service revenues".
Most people think of those services in terms of what is existing right now: broadcast TV, telephone, internet. Nobody seems to realize that given enough bandwidth, you don't need broadcast TV anymore, you don't need the telephone, and the internet becomes much more than a display of static, boring web pages. Given enough bandwidth, you have video-phone (meaning, for example, that you can plug your own video camera onto the network and send live images to family, friends,etc.), video-on-demand, interactive programming, and so much more. Forget your old computer and mouse, who needs that in a house anyway. The computer will be in the sophisticated set-top box that will deliver those services around the house to, for example, high-definition LCD or plasma displays and ambiophonic sound systems, with portable keyboards and mouse-like remote controls.

Just a few Mb/s bandwidth downstream and upstream opens a totally new realm of possible services, and if those services add to the entertainment and convenience that people look for, they will pay for them, because they already pay for telephone, cable TV, internet, movie rentals, etc.

Think about it. To say that FTTH is science fiction...the internet was science fiction 10 years ago, PC's were science fiction 20 years ago, pocket calculators were science fiction 30 years ago. For Heaven's sake, WDM was science fiction less than 10 years ago! I've heard big executives from companies such as Nortel or BT swear that they would NEVER need that sort of bandwidth! It took a visionnary like David Huber to found Ciena and dare offer commercial WDM systems and force the others to follow.

Who will be the next visionnary to offer both the bandwidth AND the services that go with it?

LB
opto 12/4/2012 | 8:28:47 PM
re: Ethernet Operators Face Up-Front Costs Doco is right that those FTTH costs are just eqpt. Not so right about costs of large scale fiber to the home construction.

--- The 1990's FTTH trials went bust because of two things:
1) Not only is installing fiber to each and every home expensive, but maintaining it is as well. Why? For one, because it is hard to find enough field persons who can competently work with it. I gave training on fusion splicing in 1992. We found that in each class of journeymen splicers in the Telcos (very highly skilled workers compared with Telco home wiring installers), about half of each class would never learn to competently splice fiber. Even if we had the money, could we find enough people to install it and maintain it on a large scale, at any price? Unfortunately no.
2) It is never just about dumping a bunch of bits in each home. That does not a business make. Only a total systems view shows if the business potential is really there. Technology in use today is there because it is the most cost effective. Cable Co's and Telco's that are in business and profitable today are there because they focus on the customer, not the technology. Fiber is incrementally increasing in usage in both Telco (DLC's) and in Cable (Hybrid Fiber Coax), but it is not going to the home any time soon. Sure, there are always tradeoffs that make solving only a part of the total network look much better with some new technology. But when the rest of the network is considered, supposedly obvious improvements most often do not pan out.

--- on the comment about meter reading, friends at utilities have stated many times that their cost is extremely low. One person with tennis shoes, and that likes to run, can cover 100's of homes per day. It is very hard to compete with that...

Yes we all get excited about new technology. But it works best when the changes you ask customers to make for the new technology are relatively incremental. Every project like Grant Co.'s, that goes for full fiber builds, (and there have been quite a few) has failed due to cost overruns and due to competition. It is interesting to note that no mention is made in the article of the fact that this municipality is competing with For-Profit companies using bonds supported by rate payers, and using fundamentally more costly technology to provide undifferentiated services. Does anyone really believe that successful Telcos and Cablecos would deliberately use technology that does not get them the most services revenue for each dollar spent providing them? Hmmmm....
fiber_r_us 12/4/2012 | 8:28:53 PM
re: Ethernet Operators Face Up-Front Costs >This requirement to have a single L2 switch is
>a HUGE limitation.

I didn't say it was a requirement.. just one option in building a network. Even as an option, why does this create a "HUGE limitation"?

>This directly contradicts your idea that there
>will be just a single L2 switch surrounded by L3
>devices - so using the word `Etherner' here is
>pure hype.

I don't understand this comment. Using Ethernet to interconnect Layer 2 and Layer 3 switches is the most dominant form of interconnect today. How is this "hype"?

>It usefull if you can build serious L2 network,
>and I suppose that a single L2 switch does not
>qualify as such.

In the situation of using a L2 switch in the middle of a bunch of L3 devices, 802.1p is useful by allowing the L2 switch to choose appropriate queues to place packets in order to ensure QOS. In this mode, the L3 devices would be required to set the 802.1p values based on whatever type of packet classification the L3 switch had done. Alternatively, a L2 switch could look deeper into the packet (such as the MPLS headers, IP TOS fields, or even IP TCP/UDP ports) in order to perform the required classification and prioritization.

My point was simply that 802.1p can be used in network designs to pass QOS information. I am not saying that it has to be done this way.



netskeptic 12/4/2012 | 8:28:56 PM
re: Ethernet Operators Face Up-Front Costs > This is all a matter of the degree in which
> layer 2 switches are utilized in building a
> scaleable network architecture. Having only one
> layer 2 switch in the middle of a bunch of
> layer 3 devices generally does not cause these
> problems:
> ...

This requirement to have a single L2 switch is a HUGE limitation.



> Most network designers are suggesting that the
> future of data networking is:
>
> 1) a prudent combination of Layer 2 and Layer 3
> switches

Yes.

> 2) interconnected with Ethernet of various
> speeds and distances

This directly contradicts your idea that there will be just a single L2 switch surrounded by L3 devices - so using the word `Etherner' here is pure hype.

> 3) running either pure IP or IP over MPLS

Yes.


> In this mode, 802.1p is useful to allow the
> layer 2 switches to prioritize packets in the
> appropriate queues.

It usefull if you can build serious L2 network, and I suppose that a single L2 switch does not qualify as such.

Thanks,

Netskeptic





Physical_Layer 12/4/2012 | 8:28:58 PM
re: Ethernet Operators Face Up-Front Costs I've heard several references to the fact that Ethernet optics cost less than SONET optics.

When I think of optics, I think of a DFB, FP or VCSEL laser (depending on optical transmission requirements), and I think of driver circuitry for those lasers, which usually are built into the optical laser module. I can't imagine these being much cheaper because they wouldn't be dependent on the layer 2 protocol, correct?

So I was hoping somebody could expand a bit on what makes Ethernet optics cheaper.

Thanks.
dorovskoy 12/4/2012 | 8:29:00 PM
re: Ethernet Operators Face Up-Front Costs > Besides - 14 bytes of header on 1500 bytes of
> data is only a 1% overhead. That isn't jack
even less for jumbo packets paradigm (14/9000=0.16%)
dorovskoy 12/4/2012 | 8:29:03 PM
re: Ethernet Operators Face Up-Front Costs I have an GA620T copper gigabit nic in my PC.
It works fine for me (600Mbps) and Netgear
promisses 100 meters max on unshielded twisted
pair cat 5 cable vs. fiber version 260 meters
(or 550 meters on 50/125 mk multimode fiber).
Is it so bad to compare with fiber to bring
gig conection to the userGÇÖs door ?
The utp cable/maintanece costs nothing vs. fiber.
Am I right?

fiber_r_us 12/4/2012 | 8:29:03 PM
re: Ethernet Operators Face Up-Front Costs >> I would say that one or both ends might still
>> be an L2 switch. I know that this kind of
>> contradicts my previous statement about using
>> Ethernet just as a link layer protocol.

>It brings us back to the original question how
>are you going to handle floods and spaning trees
>at 10/40/100 Gbps ?

This is all a matter of the degree in which layer 2 switches are utilized in building a scaleable network architecture. Having only one layer 2 switch in the middle of a bunch of layer 3 devices generally does not cause these problems:

1) Spanning tree is used to build topologies between multiple interconnected layer 2 devices (having only one switch does not qualify).

2) Flooding is for UNKNOWN MAC destination addresses. Layer 3 devices send packets often enough to ensure than MAC addresses would always be known in the layer 2 device (through thier learning mechanisms). Even if the layer 2 device had to flood an unknown packet, the layer 3 devices would ignore it.

3) I think you are also implying scalability issues associated with broadcast and multicast packets (which are flooded by the layer 2 switches by design). In the scenario with one switch, the broadcast/multicast load would be trivial.

Designing packet networks with large scale (hundreds or more) of interconnected layer 2 switches (without any layer 3 devices in the middle) would likely cause the problems with spanning tree and broadcast/multicast loads that "netskeptic" mentions. Even in this case, flooding of unknown MAC packets would not likely be a problem. In any event, such a layer 2 only design is a fundamentally poor approach, and I know of no sane networks that do this or are suggesting it.

Most network designers are suggesting that the future of data networking is:

1) a prudent combination of Layer 2 and Layer 3 switches

2) interconnected with Ethernet of various speeds and distances

3) running either pure IP or IP over MPLS

In this mode, 802.1p is useful to allow the layer 2 switches to prioritize packets in the appropriate queues.

OpticalValueLine 12/4/2012 | 8:29:05 PM
re: Ethernet Operators Face Up-Front Costs Sure, laying fiber is still very expensive. But it is a piece of cake compared with the house price in SV. In addition, people here are more bandwidth lovers. If this business does not work in SV, it won't work anywhere else. I personally think smart company should start from SV and smart people in SV should start to get the service. Imagine what an appeal when you sell your home with fiber ready! It is really insignificant to add 10k bucks on top of a millon.
netskeptic 12/4/2012 | 8:29:11 PM
re: Ethernet Operators Face Up-Front Costs >> If neither end of the link is terminated in
>> L2 switch: VPN is uncomparably better choice
>> than 802.1q, DiffServ is uncomparably better
>> choice than 802.1p and 802.1w is simply
>> irrelevant.

> The if statement is key there.

Yes, this is the key indeed.

> I would say that one or both ends might still
> be an L2 switch. I know that this kind of
> contradicts my previous statement about using
> Ethernet just as a link layer protocol.

It brings us back to the original question how are
you going to handle floods and spaning trees at
10/40/100 Gbps ?

> What I think will happen is that you have a L2
> switch at the head-end for several links. This
> is then fed into an IP router after the initial
> concentration of services. Then, at the home -
> if everything goes to IP and ethernet, you'll
> need a hub/switch in the home to handle the
> multiple devices in the home.

I suppose the the edge will be pure IP and IP only.

> Besides - 14 bytes of header on 1500 bytes of
> data is only a 1% overhead. That isn't jack
> when compared to something like SONET much less
> ATM.

IMHO, everything is OK in comparision to be carried away by own hype :).

Thanks,

Netskeptic

doco 12/4/2012 | 8:29:11 PM
re: Ethernet Operators Face Up-Front Costs > If neither end of the link is terminated in
> L2 switch: VPN is uncomparably better choice
> than 802.1q, DiffServ is uncomparably better
> choice than 802.1p and 802.1w is simply irrelevant.

The if statement is key there. I would say that one or both ends might still be an L2 switch. I know that this kind of contradicts my previous statement about using Ethernet just as a link layer protocol. What I think will happen is that you have a L2 switch at the head-end for several links. This is then fed into an IP router after the initial concentration of services. Then, at the home - if everything goes to IP and ethernet, you'll need a hub/switch in the home to handle the multiple devices in the home.

Besides - 14 bytes of header on 1500 bytes of data is only a 1% overhead. That isn't jack when compared to something like SONET much less ATM.
fiber_r_us 12/4/2012 | 8:29:12 PM
re: Ethernet Operators Face Up-Front Costs The carriers are willing to live with the Ethernet overhead as long as it is a cheaper solution. Volume of shipment makes Ethernet cheap. No other newer technology will surpass the volume of Ethernet unless that technology overtakes the PC and Server market space (and I don't see the Compaqs, Dells, and SUNs of the world rushing out to implement some new adapter technology). As long as Ethernet dominates in the Enterprise, it will reign as price/performance champion. This price/performance advantage is why carriers are beginning to adopt Ethernet. None of the technical arguments matter much; just as they didn't matter in Token Ring vs Ethernet, Beta vs VHS, Apple vs WinTel, etc... It is the market that decides; not the technology.
netskeptic 12/4/2012 | 8:29:13 PM
re: Ethernet Operators Face Up-Front Costs >>> I don't think Ethernet is being looked at as a
>>> wide/metro area network.

>> So, the dest MAC does not matter, source MAC
>> does not matter and protocol id does not matter
>> either, why would you (1) still call the thing
>> Ethernet, (2) waste 14 bytes ?

> IP is the converging layer(3), but a thin
> Ethernet layer (2) is still important. The one
> thing Ethernet does really well is transport
> packets. It provides 802.1Q (VLAN), 802.1p,
> 802.1w, etc features that IP alone does not
> have. You need to keep a thin Layer 2, either
> Ethernet or SONET, until these features are
> built into IP or the optical layer.

If neither end of the link is terminated in
L2 switch: VPN is uncomparably better choice than 802.1q, DiffServ is uncomparably better choice than 802.1p and 802.1w is simply irrelevant.

Thanks,

Netskeptic

DKP 12/4/2012 | 8:29:14 PM
re: Ethernet Operators Face Up-Front Costs > I don't think Ethernet is being looked at as a
> wide/metro area network.

> So, the dest MAC does not matter, source MAC
> does not matter and protocol id does not matter
> either, why would you (1) still call the thing
> Ethernet, (2) waste 14 bytes ?

IP is the converging layer(3), but a thin Ethernet layer (2) is still important. The one thing Ethernet does really well is transport packets. It provides 802.1Q (VLAN), 802.1p, 802.1w, etc features that IP alone does not have. You need to keep a thin Layer 2, either Ethernet or SONET, until these features are built into IP or the optical layer.
netskeptic 12/4/2012 | 8:29:15 PM
re: Ethernet Operators Face Up-Front Costs > I don't think Ethernet is being looked at as a
> wide/metro area network. It might be a link
> layer technology for those networks, but IP is
> being run over that to provide the network
> layer services.

So, the dest MAC does not matter, source MAC does not matter and protocol id does not matter either, why would you (1) still call the thing Ethernet, (2) waste 14 bytes ?

I suppose that the only reason is marketing hype, which IMHO makes a lot of alarm bells to ring.

Just call the thing CFP (Cheap Fiber Packets) and then we can discuss how much will it cost and are there any benefits in adding STS-N structure to it.


Thanks,

Netskeptic
doco 12/4/2012 | 8:29:19 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.

I would say that Ethernet ports (not just boxes) are relatively cheap. Look at the cost of GigE ports for a router vs. OC-12 ports. Or compare the cost of a couple of 100mb ports to OC-3 ports. You are talking a 10x price difference here.

I don't think Ethernet is being looked at as a wide/metro area network. It might be a link layer technology for those networks, but IP is being run over that to provide the network layer services.

DKP 12/4/2012 | 8:29:21 PM
re: Ethernet Operators Face Up-Front Costs
A few comments:

1. This is a pt-to-pt Gigabit Ethernet (GBE) Architecture. Currently GBE is still expensive. But watch the costs curves! GBE is only 3 years old. Don't bet against the price of Ethernet optics.

2. If you look from the 1970's to today, at no point did we ever anticipate correctly bandwidth demand. We have historically underestimated this.

3. Grant PUD is price insensitive, in a sense (ha). I wish that I were a utility re-seller right now;)

4. Here is an analogy for you. Coax penetrates 90%+ of homes in the US. Did that exists when you were in high-school? Nope. The entire country, all homes, were re-wired for CATV coax. What makes you think that fiber is more difficult? You lived through this! It happened in your lifetime, and it will happen again.

5. This architecture is pt-to-pt. A pt-to-multipoint passive gigabit Ethernet architecture is less expensive. The FTTC electronic switch box is $25K to $100K; that is one reason why the cost per user is high.

6. WWP has a good vision. They are betting on optical ethernet, and that is the best bet around right now. I think LightReading perhaps does not appreciate that FTTH trials like this do not reflect systems costs for volume deployments. When you talk about FTTH, you talk potentially about several million in volumes, and prices come down accordingly. FTTH architectures are just about on cost par with HFC, PacketCable, VDSL, etc right now. Check any other FTTH network solution - don't flag a GBE to the home as reflecting all FTTH architectures.



doco 12/4/2012 | 8:29:21 PM
re: Ethernet Operators Face Up-Front Costs > Jonathan Moore is cited in the article
>[....] The cost per customer is currently
> $3500 but will decrease to $2100 in 2 years.
[...]
> Marconi claims its FTTH DISCUS solution
> is $1100 per home.
> Next Level's VDSL solution claims its
> payback is 6 years.

I don't think that we are comparing apples to apples here. I think that the Marconi number is for just the equipment to hang on either end of the fiber and doesn't count fiber costs, much less installation costs. Is that $3500 number including either of those?

I can see that the cost of the raw fiber in the ground or strung on poles is about equal to raw copper today. The cost difference for FTTH (be it PON or Ethernet) is not the cable, and it is only slightly more for the install costs. The cost difference is for the electronics that get put on either end.

I see those equipment costs coming closer and closer once you throw data into the mix. For an HFC network you now have all the 2 way amplifiers, the CMTS and Cable modems. Those aren't free by any means. For DSL you have the DSLAM with it's required ATM switches, and the DSL modems.

I think that FTTH won't happen for the short term in areas that have copper today. But, anywhere someone is laying new cable anyway (be it green field, or competitive overbuild) the cost premium for fiber isn't that great and you can get more revenue for longer time period using it.

fk 12/4/2012 | 8:29:24 PM
re: Ethernet Operators Face Up-Front Costs I agree with you that FTTH is largely a pipe dream right now, but never is a long time. It is conceivable that in a decade or two we will see FTTH, but it's definitely not a near term thing. The people who are going to be willing to pay for the sorts of services that make laying fiber worthwhile in the near terms are businesses and possibly large concentrations of residents (like apartment buildings).
Fred Snarff 12/4/2012 | 8:29:28 PM
re: Ethernet Operators Face Up-Front Costs I would be thinking twice about these business plans as well. HALF of all customers need construction?? Wow. That's a big red flag. And the people they are signing right up now should be the low hanging fruit. $50-$60K plus to dig, trench, lay conduit, pull fiber, then light it. Construction costs can easily go much higher than that too. You're talking MINIMUM 90 days and more likely 6+ months to provision a customer. All for something like $2000/month. I hope the E-LECs (ethernet LECs) have a ton of cash in the bank.

There is only one type of customer that will go through that pain to get connectivity - a big one. Large corporations with a dedicated IT staff and lots of time to kill while waiting for that nightmare process.

And I don't even know why the people on this board are talking about this stuff to the home. Are you serious?! Never. That's science fiction. The only place that's happening now (or any time in the near future) is in some municipal-subsidized science project. I like the guy who spends $10K on his home electronics and thinks he represents some significant portion of the general population.

Fred

gladysnight 12/4/2012 | 8:29:29 PM
re: Ethernet Operators Face Up-Front Costs LightBetaing wrote:
" . . . Those who dare lay fiber now are sure to be the winners."

I think you're almost right, but I think it's more a case of those who can survive the process of laying fibre now are sure to (eventually) be winners . . . .
John Honovich 12/4/2012 | 8:29:35 PM
re: Ethernet Operators Face Up-Front Costs Grant County's project is interesting but I can't fail to note that comparative solutions are considerably less expensive while generating similiar revenue.

Jonathan Moore is cited in the article as claiming projected revenue of $75 to $80 a month per customer for providing Internet, phone and cable services. The cost per customer is currently $3500 but will decrease to $2100 in 2 years. At this rate, the deployment is projected to break even in 15 years.

Consider this:

Marconi claims its FTTH DISCUS solution is $1100 per home.

Next Level's VDSL solution claims its payback is 6 years.

Let's grant that Ethernet is a more viable long-term solution. But at what cost.

With these numbers, World Wide Packet's solution is anywhere from 2x to 3x expensive than comparable converged internet, telephone and voice solutions. Given that they want ethernet to deliver cable TV, I also wonder about Grant County's need to install IP set-top boxes at a few hundred apiece for each TV. Is this cost included?

That being said, I agree with the sentiments of LightBeating. When the bandwidth comes, new applications will certainly arise. The question still remains is it worth the extra cost this solution incurs.

For example, LightBeating mentions that for $2000, he would seriously consider paying $12 a month for 15 years. But the true economic cost must include the cost of capital. Make this $2000 an annuity payable for 15 years at 10% interest, and the cost increases to $20 a month.

On a grander scale, you could make the argument for Grant County. Use a less costly solution (such as Marconi)and the $120 M cost may decrease to $60 M (depending, of course, on the percentage of costs the optoelectronics counts for).

The foregone interest payments in the cheaper solution alone could save millions.

On the other hand, how much more in increased revenues or operational cost savings does grant county have to achieve to justify their investment in GigE? Will their operating costs decrease by 30%? Will the revenues for Internet access be 50% greater? It would seem that their must be some significant changes in operational revenues and cost for this to be viable. And, if higher revenues, (in contrast to the Palo Alto FTTH project) it would strike me as peculiar that residents of Grant county would be particularly price-insensitive to paying for higher bandwidth.

Finally, why not delay. A 15 yr payback period puts them at great risk of being surpased by future disruptive technologies. It's not merely the fiber, it's the equipment attached to it. Surely 10 years from now, tremendous advances will be made in first mile optoelectronics. Does this not put Grant County at a long-term strategic disadvantage? Perhaps this wouldn't matter because the barriers of entry will be too great for multiple fiber networks in rural Washington, but it does not seem to be a prudent plan for competitive markets.

I'd be very interested in hearing everyone's thoughts.
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
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
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.

Thanks,

Netskeptic


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?

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.
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.

LB
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?
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.

Thanks,

Netskeptic


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?
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