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Different This Time?

It’s not as if no one has tried fibering homes before. Skeptics point to earlier field trials that have failed to find much of a home market for fiber’s tremendous bandwidth. Japan’s Ministry for International Trade and Industry sponsored the first, which began service to about 150 homes in 1978. The experiment consumed a staggering $80 million over several years, but-along with similar trials in Canada and France-failed to identify compelling new services that would justify the high cost of installing fiber.

A decade ago, BellSouth and several other U.S. phone companies thought they had found a high-bandwidth activity that consumers would pay for: video on demand. Dozens of homes were fibered in trial systems around the country, but the spark never caught: The level of consumer interest was deemed insufficient to justify the purchase of costly video servers and fiber equipment. Cable companies quickly countered by adding more channels and pay-per-view services to their existing coaxial cables. But a funny thing has happened since the last time fiber was reeled out to domiciles: the Internet. The explosive growth of the World Wide Web has suddenly made millions of people crave bandwidth-a commodity that they scarcely knew existed a few years before.

For the coming decade, fiber-watchers in the United States will want to focus their attention on the southeast. BellSouth-the phone company that serves the region-“is leading the charge in North America” for fibering the home, says Richard Mack, vice president of KMI, a Newport, R.I.-based market research firm. The interest in new technology reflects the rapid growth of its service area. Most new communities want buried utilities, and it is far cheaper to lay extra fibers for future expansion now than to return years later to dig up streets and yards to replace obsolete cables.

Dunwoody residents will continue to receive voice telephone service over existing copper lines, and customers will be offered two new services over fiber. One is DSL-grade data transmission for $50 to $60 a month. The second is a video service offering 120 digital and 70 analog channels. Next year, the company expects such fiber systems to become standard for large new subdivisions. By then, customers with fiber connections in their homes could install the equipment themselves. “We don’t have to roll a truck at all,” says Dan Spears, research director at BellSouth Science & Technology.

BellSouth admits that the Dunwoody fiber system is costing more to install than copper, but says the goal is to gain experience with the technology. As the cost of fiber to the home comes down, BellSouth “will deploy it in new build situations as we’re now deploying fiber to the curb,” says Dave Kettler, vice president of BellSouth Science & Technology.

Scattered groundswells of interest in home fiber connections are appearing in affluent U.S. towns. In Concord, Mass., the Concord Communications Infrastructure Committee, a town advisory panel, has suggested the town build its own digital fiber network to homes. Cable modems have yet to reach the town, many homes are outside the reach of DSL, and both have limited room for expansion, complains Marc Daigle, an engineer and member of the committee.

Palo Alto’s city council has already approved spending $380,000 to build a fiber network serving nearly 700 homes in an older area near the city center. Residents will get connections at 10 or 100 megabits per second. They will pay about 70 percent of the cost, including monthly charges plus installation fees of $1,200 or $2,400, depending on data rate. More than 70 people signed up before the city had set a firm price, says Manuel Topete, who is managing the fiber system for the city’s utility department.

The system will offer data transmission at otherwise unobtainable speed. “The trial is all based on Internet delivery,” says Michael Eager, a Palo Alto consultant active in the project. “I don’t think people would have been significantly interested if we were just talking about 500 channels of television.”

Optical Solutions also has found strong interest. The company has sold fiber-to-the-home equipment to a dozen carriers in seven states, says president Asim Saber-plus the order from Futureway in Concorde, Ontario, for hardware to serve 20,000 homes in five Toronto suburbs. Founded in 1994, Optical Solutions accelerated its growth from 13 employees in late 1998 to 65 a year later; Saber expects a head count of 120 by later this spring. Last year Optical Solutions, which is betting its future on fiber to the home, also landed a $16 million investment in a private placement.

Futureway represents a new but promising market for Optical Solutions-new phone companies competing for business by offering high-end services unavailable from the big established companies. Similar ventures are starting to pop up elsewhere. In December, WideOpenWest of Littleton, Colo., announced plans to build fiber-to-the-curb systems in the Denver and Portland, Ore., areas. Optical Solutions’ other customers are independent phone companies seeking to offer broadband services in rural areas. Rye Telephone of Colorado City, Colo., is installing fiber to 500 homes in a sprawling 80-square-kilometer community called Hatchet Ranch. DSL can’t handle those distances, and cable companies typically avoid such sprawling areas.

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