While there has been much talk about the convergence of voice, data, and video applications, the reality is that very few service providers have delivered this "triple play" of signals into the home in a unified fashion. All that is set to change as the "last mile" of fiber to the home (FTTH) is poised to bring explosive growth in the U.S.
I recently attended an Editor's Day put together by and hosted by Omron Corp. (whose product lines include fiber-optic switching components) at the company's North and South America group head office in Schaumburg, Ill. It's there I listened to a panel of FTTH market experts explain why fiber is ready to rock. The bottom line is that prices have plummeted and FTTH now makes economic sense. It has actually benefited from the depressed demand in the communications industry, with the cost of deploying fiber dropping from $38 to $40 a foot in the boom days to $1 to $3 per foot today.
Another huge potential growth driver for FTTH is the federal decision that allows regional Bell operating companies (RBOCs) to deploy fiber-optic networks without regard to the 1996 Telecom act requiring RBOCs to share their local infrastructures with competitors. Given that competitive incentive, BellSouth, Verizon, and SBC Communications have recently requested quotations from FTTH technology providers. The decline of traditional landline services is spurring these phone goliaths to offer new services based on convergence.
Other important drivers for a FTTH ramp-up include:
- Real-estate developers providing FTTH as an added value in new developments. Houston, Minneapolis, and Washington, D.C. are particularly hot markets;
- Smaller telcos offering the triple play of voice, data, and video as a competitive edge in their markets;
- Municipalities using the technology to help put their towns "on the map;"
- Utilities getting into FTTH to find new revenue streams (and/or add an interface for meter-reading and power control);
- Rural installations: Areas previously unserved by broadband are leapfrogging to FTTH. Optical networks have cost advantages because there is less bandwidth degradation over long distances.
In fact, growth is already starting to ramp. Mike Render of Render, Vanderslice & Associates, a well-known market research firm, says that over 120,000 homes now have the infrastructure for fiber connectivity. About one-third of these have actually connected the services. More than 60% of those homes are connected with triple-play service. It's a small number, but at a 300% compound annual growth rate, it's the fastest-growing segment of telecom. The prediction is that 315,000 homes will have infrastructure by year's end and around 800,000 homes by 2004. Approximately 30% of these installations are in new-home construction: The other 70% are overbuilds at existing homes.
So what are Americans going to do with all this bandwidth? Applications range from remote security to digital medicine, but I don't think one has to look any further than entertainment. The music industry is digesting what fatter pipes can mean to U.S. consumers, while the video industry is working to avoid the Napster nightmare. But movie makers must also get ready. A video that takes seven hours to download by cable modem takes just three minutes by FTTH! The potential for interactive video and connected gaming alone is certainly definition enough for "the next big thing," considering the potential for new Internet/TV/phone appliances on top of the home "triplexing" boxes to receive and split the triple-play signals at each home.
How big will the growth be? IDC, a major market intelligence and advisory firm for information technology and telecommunications, predicts that within five years, residential Internet traffic will grow from 72 petabits (that's 15 zeros) a day to 3105 Pbits/day (for a mind-boggling growth factor of 43) and business-based Pbits will move from 108 to 2070 (for its own impressive growth factor of 19 times). Now that's big-time growth!