Peering Through the RFOG
Once a specification makes it onto the drawing board it seems to become a de facto "big deal," regardless of the technology's actual deployment potential and revenue-generating opportunity for both cable operators and suppliers. The industry's CableHome debacle demonstrates the point nicely.
The latest technology to shoot straight to the top of the cable standards charts is RFOG, a catchy acronym for "RF (radio frequency) over glass." (See Fog Lifting on RFOG.)
Apparently, RFOO (RF over optical) and CablePOO (cable passive optical offering) didn't make the cut. It is probably best, as RFOG may equate nicely with the airborne vapor that reduces visibility.
So what does RFOG do for MSOs? Essentially, it enables them to run fiber drops, rather than coax, to the customer premises from their existing distribution networks. Then, MSOs can offer the exact same services they deliver today via coax, but with fiber-to-the-home (FTTH) instead. That's right: RFOG allows MSOs to deploy FTTH, but without adding any extra network capacity or new services. Yippee!
So, why does cable care about RFOG? Decision makers at the major MSOs have repeatedly stated their preference to install coax to the home for new network connections. Cox Communications Inc. proved the sentiment nicely by rebuilding its New Orleans system with HFC following Hurricane Katrina. Big MSOs say HFC is the most cost-efficient residential architecture and is sufficient for their service delivery needs for the foreseeable future. Period.
However, when it comes time to win deals with new housing developers, coax gets flack. MSOs talk about the wonders of hybrid fiber/coax (HFC) until they are blue in the face. Then home builders and developers echo the same reply: Consumers perceive FTTH to be a superior solution and are willing to pay more for a home with a fiber link. So, Joe MSO: no fiber, no deal.
What's an MSO to do? Blow the RFOG horn! It gives the developer what they want -- the ability to market their home as "fiber-connected" -- at the lowest possible capital and operational price points for MSOs. Vendors say a RFOG FTTH solution costs about 20 percent more than a robust HFC installation. On the upside, with fiber installed to the home, MSOs have residential fiber in place that can be leveraged for future service upgrades. Until then, the installed fiber may prove cheaper to operate and troubleshoot than coax.
So, how big of a market opportunity are we talking about? According to government data compiled by the National Association of Homebuilders, some 1.6 million new single-family homes are constructed in the U.S. each year. Only about half of those are over 2,400 square feet.
For the sake of discussion, let's assume three quarters of those larger homes are backed by developers demanding fiber. That equals 600,000 homes a year. It's a large enough number to grab the attention of MSOs, but not enough to create a mega-market opportunity for "RFOG vendors."
What does make sense, however, is for PON vendors to add RFOG extensions to their solutions. That way they can sell their products to telcos and competitive cable providers deploying PON in both greenfield and overbuild scenarios, as well as to traditional MSOs for premium new-build scenarios.
The approach may also enable MSOs deploying such solutions to leverage the PON elements on their transport networks to install fiber connections for business customers.
Interested in learning more about fiber access options for cable operators? Tune in to the upcoming Cable Digital News webinar "FiOS Fighters: Cable MSOs & FTTP" on April 23 at 12 p.m. ET.
—Michael Harris, Chief Analyst, Cable Digital News