October 2012, Vol. 67 No. 10
Editor's Log
Editor's Log: Growing Up Fiber
It wasn’t that long ago that those involved in the fiber communications realm were considered dreamers. Shortly after the fiber back-bone build-out bust of 2000-2001, fiber trunk lines were everywhere but rarely utilized. The U.S. was awash in dark fiber systems, waiting for not just business, but individuals as well, to embrace fiber to the premises – at a high cost. Most consider that cost to connect fiber to homes and business as just too high and the return too low to make a working business model. It would take decades for fiber to become in vogue enough to justify lighting up the dark fiber, justify build-out costs and truly provide fiber to the premise.
It did take some time, but only one decade. Today, fiber to the premises is not only cost-justifiable – it is demanded by an increasingly large number of communities around the country.
Of course, we must recognize that modern communications companies are a business. With increasingly fewer exceptions, they are no longer just telephone companies or cable companies trying to also be your internet provider over archaic and overburdened copper wire systems. The differences between such companies have become so blurred as to essentially be inconsequential. But their business models of agonizingly slow build-outs of fiber systems – and finding attractive and economic justification for connecting to homes and businesses– is out of touch and as archaic as their copper wire systems they cling too.
Of the majors, about the only true difference is that AT&T and Verizon can offer bundles that include wireless/cell phones – though they rarely make an attractive bundling offer (they perceive that they don’t have to). Nevertheless, the reluctance of majors to invest in infrastructure build-outs has actually started to work against them as it is estimated there are now more than 1,000 FTTP providers in the U.S. – and the number is growing.
At the recent FTTH Conference, several sessions related success stories about communities of all sizes (including some very small towns) taking the fiber plunge to build and operate their own systems. Notably, most of the time these communities have earned back the investment quickly and have become profit centers.
The fact that they do this – and have success — in the face of stiff competition from mega-sized companies and local vendors further demonstrates the real and perceived needs and advantages of individual citizens, existing businesses and potential future companies and organizations – especially when evaluating an area for economic development. Fiber service has become an essential segment of private and business life at the local community level. Even better for citizens, these municipal roll-outs have forced established local and national companies to realize they have to compete again – they are no longer monopolies. Citizens and businesses in such areas have suddenly found better prices and enhanced services readily available from more than one vendor.
Yet, we struggle. Verizon has famously rolled out its fiber service over the past few years. However, when this project is complete, still only a fraction of their total service area will be capable of getting fiber to the premises. And the sections of the country they are bypassing in order to hit more lucrative, denser and larger population areas are, with increased frequency, deciding not to wait on Verizon to “someday” backtrack to their towns. They are forming their own municipal fiber programs.
AT&T will hopefully soon realize fiber is here to stay and finally start building out their network. Their hybrid service, U-verse, has done well – and generally works efficiently – but the system lacks the benefits and capabilities of true fiber to the premises such as speed. U-verse was the great experiment and proving ground for AT&T. They have learned how to be a competitive entertainment company as well as a phone and data provider. Perhaps most importantly, they have relearned the meaning of true customer service, so many times forgotten in the days of traditional telephone service. But it is time to take that knowledge and apply it to the modern market dynamic.
Reduce access and monthly costs, connect homes at cheap rates (or even free) and your subscribers will come in droves. This model is continually being proven around the country. Take rates for homes being passed by fiber has climbed to 46 percent and an extremely high percentage are retained. When scores of communities around the country are receiving 50 mbps download speeds at less cost than majors are charging for 8 mbps, yet demonstrating high profit margins, the time has come to abandoned the old “who is going to pay for the fiber connections” mentality. Start concentrating on signing up as many customers as you can while offering outstanding service and options at reasonable (and still profitable) rates and help put America at the forefront of technology. It is a profitable and prosperous business model that benefits all.
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