Fiber Optics Takes the Long Way Home

Continued from page 1

By Jeff Hecht

December 31, 2003

Why, then, are the little guys with much shallower pockets not just talking about fiber to the home, but building it? One reason is what I saw when I visited Elie two decades ago-rural areas have been left behind. Elie residents had party-line telephones, shared by as many as ten families, and could pick up three faint television channels from Winnipeg, 50 kilometers away. The fiber brought private phone lines, a dozen video channels, and videotex-the state of the art in 1982. It linked the middle of nowhere to the rest of the world.

Canadian officials wanted to make rural life more attractive, and rural communities still feel that need. The biggest fiber-to-the-home project today is the Zipp Network being built by the Grant County Public Utility District in central Washington State. Formed more than 50 years ago to provide electric power, the utility first installed fibers to manage its electric service. Extending the fibers to homes creates "a broadband communications network that private industry is hesitant or cannot afford to provide," the utility's Web site explains. The fiber network also serves local businesses, giving them the fast Internet access that is rapidly becoming essential for any enterprise. These folks would still be waiting for the big phone and cable companies to get around to offering broadband.

Typically, public utilities start with a backbone network serving schools and public buildings, then expand it to serve homes and local businesses. The big guys talk about it-but the little guys deliver. Kutztown, PA, home to more than 5,000 people and Kutztown University, spent $4.6 million on a municipal fiber network to meet current and future needs. The Huxley Communications Cooperative, with 600 customers in Huxley, Iowa, is gradually replacing its copper cables with fiber as upgrades are needed. The list is growing. At the end of September, the nonprofit Fiber-to-the-Home Council counted 94 communities in 26 states with fibers already running direct to the homes of some customers. Many are small communities like Huxley and Kutztown, served by municipal or county agencies, local cooperatives, or independent telephone companies.

And more are on their way. Provo, Utah, is nearing approval of a $39.5 million bond proposal to run fibers to 32,000 homes and businesses. The separate Utah Telecommunication Open Infrastructure Agency (UTOPIA), a group of 18 cities with one-third of Utah's population, plans a network serving 249,000 homes and 37,000 businesses. Planners say they have little alternative because corporate bean counters won't invest in modern networks. The Fiber-to-the-Home Council list also includes many large developments, typically of upscale homes in the outer ring of affluent suburbs. To developers, fiber is an amenity that can lure customers. It's also relatively cheap, since construction accounts for much of network cost, and they already have the holes in the ground. So far it's a small trend, with some 64,700 homes now serviced by fiber, according to the Tulsa consulting firm Render Vanderslice and Associates. But it continues growing.

Those numbers are much smaller than the totals of broadband service by cable modem or DSL, but fiber has room to meet tomorrow's bandwidth demands. My cable modem lets me watch NASA Television on the Internet, but the images grow fuzzy if I expand them beyond two or three inches. It won't handle today's analog television, let alone tomorrow's high-definition digital TV. I don't know what else will come down the line tomorrow, but it's a safe bet it will consume bandwidth.

The big telephone and cable companies see the rural fiber trend and they don't like it. They want to wring the last drops of profit out of their old lines before spending anything more. If Salt Lake City, say, follows Grant County, then customers in Sunnyvale, Boston, and Manhattan might want fiber to their homes, too. In Utah, telecom and cable service providers Qwest and Comcast complained loudly the government-supported Provo and UTOPIA projects would cost the taxpayer too much. Translate that into English, and it means they don't want to spend the money to compete. Lobbyists got the Utah legislature to bar public utilities from retailing service, a policy earlier enacted in Washington and several other states. Wholesaling remains an option, so Provo City Power is negotiating with the same small retailer that provides service on Grant County's Zipp Network. Qwest still complains about the cost, obviously worried the public networks could lure away Qwest customers.

The fate of the Utah restrictions depends on another case now before the U.S. Supreme Court. The Telecommunications Act of 1996 says states may not restrict any "entity" from offering telecommunications services. SBC Communications and the Federal Communications Commission are challenging an appeals court ruling that Missouri municipalities are "entities" allowed to offer services. Other big phone companies have filed briefs supporting SBC. It's disturbing to see companies spending money on lawyers and lobbyists that could be better invested in providing services, and it's distressing to see the FCC supporting their stand.

The big companies seem much more concerned about making short-term profits to satisfy their stockholders than about making long-term investments to better serve their customers. It's true they overspent on expansion during the bubble, but Wall Street wanted that spending-and today's "surplus" fiber will provide tomorrow's needed bandwidth. And don't forget the vast sums spent during the past decade on mergers that boosted stock prices but did little or nothing for customers.

That record raises a very troubling question-are today's giant stockholder-owned communications companies incapable of the massive investment needed to build a new network? Are they limited to nickel-and-dime patches until aging infrastructure falls apart because managers don't dare to tell Wall Street they need to spend on long-term rebuilding? The mega-corporations that operate today's networks are not the same ones that built them. They know how to milk the old cash machine, but there is distressingly little evidence that they are capable of building a new one to meet tomorrow's needs. I hope they can prove me wrong.