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Fiber Optics Takes the Long Way Home

Despite decades of experiments, big telecom companies are moving ever so sluggishly to extend fiber optics to individual residences.
December 31, 2003

A strange chasm is opening up across the landscape of home telecommunications. On one side, bold visionaries are bringing the tremendous information-carrying capacity of optical fibers all the way to homes. On the other side, stodgy and stingy corporations are clinging to aging copper wires, claiming that homes don’t really need fiber’s bandwidth-and that fiber is too expensive anyway. The reluctance of the telecom companies bodes badly for the future.

An imbalance of innovation is a familiar story, but the distribution in this case is something new. Rural communities, normally the last folks to benefit from new technologies, are among the first to get fibers. So are new subdivisions on the outskirts of urban areas. An odd mix of public utilities, small telephone companies, and real estate developers are backing the new technology. Their resources are miniscule compared with those of the corporate behemoths that provide telephone and cable television service in urban and suburban America. Yet the giants are doing virtually nothing to bring fibers to homes-not even in established affluent communities that would seem likely targets for high-end versions of today’s broadband services. Worse, these companies are turning to lobbyists and lawyers to block smaller rural innovators from stringing their own fiber networks.

This is not, alas, a new phenomenon. Never in the quarter century that I have been writing about the business and technology of fiber optics have the established service providers shown much interest in bringing fibers to homes. While telephone and cable television companies spent like drunken sailors on fiber-optic backbone networks between their own facilities during the telecom bubble of the late 1990s, these outfits now insist that there’s no money to be made by stringing fibers to homes. It’s an attitude that has already left the United States far behind South Korea in broadband deployment. Efforts to block others from deploying fiber in rural areas raise some troubling questions about where the telecommunications industry is going.

The United States had telecommunications visionaries three decades ago, when John Fulenwider, then an engineer at GTE Laboratories in Massachusetts, first suggested stringing optical fiber to homes. It was part of a project to build “wired cities”-an idea that grew out of birth of cable television and Lyndon Johnson’s Great Society programs. The plan was to offer households a broad but vaguely defined family of services, including interactive television and perhaps video telephones. Fulenwider thought fiber could do the job better than copper coaxial cable. U.S. wired city experiments soon stalled, however, the victims of government budget cuts, public apathy, a slumping economy, and industry lethargy. Instead of telebanking, security monitoring, and electronic news services, we got a few dozen channels of one-way cable TV.

Outside of the United States, wired city projects fared better. Japan, for example, hooked up fibers to 150 homes in a “new town” in 1978. Canada ran fibers to 158 homes in rural Elie and Ste. Eustache, Manitoba, in 1981. France tried a bigger system later. The technology worked, and the French and Japanese systems offered some two-way video service. Yet those extras were expensive, and the only other innovation was a primitive information service called videotex-a Stone Age version of an Internet news and data feed that could barely squeeze 100 words on a screen-not enough to justify the steep cost of the new hardware.

Big U.S. companies have looked halfheartedly at the fiber-to-the-home idea several times since, but have never wavered from their early conviction that running fiber to individual residences would be too expensive. Instead, phone companies jury-rigged their aging networks of copper wires to carry data on so-called digital subscriber lines (DSL). Cable television companies upgraded their networks for two-way service, more channels, and cable modems. Both phone and cable companies use fibers to distribute signals to switching points within neighborhoods, but old-fashioned copper takes the signal from there to individual homes. Verizon is talking about running fibers by as many as one million customers in 2004, but read between the lines and it’s more of the same: pushing fibers further into the neighborhoods when they replace decaying copper cables. The company promises more bandwidth to homes eventually-but talk is cheap. As a Verizon customer, I’ll believe it when I see the truck outside my house.

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.

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