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The April 3, 2005 Issue Provided by System Dynamics Inc.
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Fiber Update: "Controlling Your Broadband Destiny"

Fiber to the Home Comes of Age

Despite the public illusion that a new technology takes shape suddenly and soon has revolutionary impacts, the reality is quite different. Those of us who use services like Amazon or Travelocity may be surprised to know that on-line shopping and travel services were part of the original Prodigy business plan way back in 1982. Fiber to the home is another concept that has been floating around for a long time--waiting for the alignment of customer needs, competitive pressures and sensibly priced technology solutions.

With many towns--Jackson, Tennessee (see ), Loma Linda, CA and Provo, UT, to name a few--supporting fiber builds locally and Verizon now rolling out fiber in portions of 14 states, the momentum seems to have started.

Kim Kersey of JEA showing gateway for fiber to the home in Jackson, TN --> Click for larger pictureFor a new movement to gain momentum, it needs champions: leaders who are true believers with a strong drive to take action. Some of these leaders have long track records in deploying large-scale network technologies. Several had long backgrounds in cable, including Kim Kersey of Jackson Energy, Paul Venturella of iProvo and Jim Farmer, CTO of fiber solution vendor Wave7 Optics.

FOCUS: Fiber Optic Communities of the United States

FOCUS tries to build awarness of fiber communities and their benefits --> Click for larger pictureWe recently interviewed Max Kipfer, another cable veteran now championing fiber communities. As a result of his experiences helping some developers plan and implement their own fiber communications networks, Kipfer saw the need for a group which would "build awareness of fiber communities and give consumers a valuable resource for learning more about their fiber network and its capabilities." Six months ago he created Fiber Optic Communities of the United States (FOCUS), a non-profit organization designed to amplify his efforts and those of other fiber community leaders.

In our conversation, Kipfer emphasized that the primary goal of FOCUS--unlike other organizations which concentrate primarily on technology--is to help communities "take their broadband destiny in their own hands". He emphasized that does not mean that the organization is antagonistic to incumbent providers. In fact, one of the early projects Max participated in was the community of Brambleton in Virginia, where Verizon became the provider of their fiber-based services.

A Florida development where fiber to the home is one of the amenities. --> Click for larger pictureFOCUS currently has 38 members, comprised of both communities and vendors. The organization's by-laws insure that the communities have the controlling voice in the organization. Kipfer and the FOCUS organization believe "the customer is king;" service providers should not say "no" to customer requests, but simply tell them how much something will cost. The positioning of broadband fiber in this context is not as a great technology, but rather as a high-end amenity for community residents.

There are two broad models for community-based fiber--whether deployed by a developer for a new subdivision or by a government entity for a existing community. The retail model is similar to the traditional telephone and cable model: a single entity builds the infrastructure and provides services for the end user. In the wholesale model, the infrastructure is built and maintained by one entity, and the services--voice, data and video--are provided by one or more service providers who have their own relationships with the end user and pay a wholesale rate to the infrastructure provider.

Some fiber projects use a mixed model. For example, Jackson Energy is building the infrastructure and providing video services; other companies provide retail telephone and data services.

The UTOPIA Project

The UTOPIA project is a good example of the pure wholesale model. UTOPIA is a FOCUS member and the largest community-based fiber deployment in the US.

The UTOPIA consortiium has 14 member cities. --> Click for larger pictureFOCUS sponsors bi-monthly audio conferences designed around the interests of its members. We recently listened in as guests to a session featuring Paul Morris of UTOPIA. The call was supplemented by a presentation on the FOCUS website and followed by an extensive Q&A period. Much of the discussion was about how the UTOPIA project is structured and its realities. Here are a couple of samples of the Q&A.

Q: What was the biggest problem you faced? A: (from Paul) Educating people in the communities and the state.

Q: How is end user pricing set? A: UTOPIA provides the infrastructure and private providers set the terms and pricing for end-users and offer the end-user services. The private providers pay UTOPIA a wholesale rate, based on a per-service, per-subscriber wholesale cost. The wholesale pricing is success-based: when the service provider gets a paying subscriber they pay a wholesale rate which becomes lower as the volume of subscribers increases.

Guests are welcome to participate in one FOCUS audio conference and possibly more on an "as space is available" basis. More information on past and future sessions and membership can be found on the group's Website.

One Approach to Fiber Implementation: DynamicCity

To get a clearer view into the construction, operation and technology behind the UTOPIA project, we arranged a follow-up interview with DynamicCity, UTOPIA's primary provider. We spoke with Ben Gould, their CMO and Jeff Fishburn, CTO.

Dynamic City is in the business of building, financing and operating open service provider networks. Such networks exist in many parts of the world, with Scandinavia leading the way.

Gould explained that DynamicCity's networks are built on four principles:

  • Infrastructure is open and wholesale--there's a separation between fiber ownership and the service providers who use it
  • Carrier class
  • Provide highly scalable bandwidth
  • An open and vendor-independent architecture.

In the course of our discussion with Gould, it became clear that "open and vendor-independent architecture" meant a specific approach to fiber deployment: Ethernet over point-to-point fiber. We wondered why their approach excluded other fiber architectures, such as passive optical networking (PON) and analog video combined with ATM or Ethernet data over fiber. We arranged a follow-up talk with Jeff Fishburn, DynamicCity's CTO, to better understand why they were so particular about the specific fiber architecture.

Jeff suggested we "look at it through the eyes of a municipality." DynamicCity believes a municipality should lay down the physical infrastructure with a very long life. "A fifty-year deal is feasible. It's like when they build an airport. Our philosophy is to first design the outside plant fiber infrastructure--it's at least a twenty year investment. The electronics come later and will have a much shorter life--perhaps a five to seven year investment. We can always trade out the box to the house" as technology changes over time.

Jeff said the key advantage of Ethernet over point-to-point fiber is "today there are at least half a dozen interoperable products" meeting DynamicCity's "carrier class" standard; after the phone call he sent us a slide showing 22 companies making suitable Ethernet products. With any other approach, you're tied to a specific vendor for the electronics at both ends: "If I put in the Optical Solutions PON, I can't trade out the technology in the home without also replacing the core. Our philosophy is that no vendor can own both ends of the link."

Finally, we asked about the economics of an "all IP" solution over a more traditional approach using analog RF video today along with Ethernet. Jeff said "We've done the math -- looked at the CPE cost, coax cabling, IP set-top box, RF set-top box, and services. The cost of an IP-based solution is within 5% of basic RF video delivery. We're looking at competing against satellite which needs a set-top box for each TV.

"IP video has crossed over: an IP set-top box is now less expensive than an RF set-top box. With Ethernet and MPLS, all tagging and marking is on the edge of the network."

Finally, we asked about dedicating an Ethernet port to each subscriber home. "I've deployed OC-3 and lots of other shared facilities. It's an evolution--we're walking on a path. There's no sense to share the switch port. Today's switches cost less--a party line doesn't make sense any more. We're using single-mode fiber. We pick up two vendor's products, hook the boxes together, and the link light comes on."

For further reference:

  • See IntelligentCities 2002: The Rise of Community Broadbandfor more information on community broadband and the UTOPIA project.
  • The UTOPIA website has a good description of the Open Service Provider Network model created by DynamicCity. Other pages under "Business Case" describe the specifics of UTOPIA's projected revenues, costs, financing and break-even analysis.

( www.jaxenergy.com ) ( www.iprovo.net ) ( www.wave7optics.com ) ( www.communitiesinfocus.com ) ( www.utopianet.org ) ( www.dynamiccity.com )