Unbundling provides impetus to lay fiber
The sound of a telcoTV starter pistol could be heard in the innocuous sounding "Review of the Sec. 251 Unbundling Obligations of Incumbent Local Exchange Carriers," issued in mid-October by the FCC.
Regional telephone companies had been waiting for relief from Sec. 251 of the Telecom Act of 1996. Sure enough, in a matter of days, Verizon and SBC announced plans to speed up building fiber networks into neighborhoods and, in Verizon's case, to the home itself.
The Telecom Act had required local phone companies to provide access to parts of their networks to competitors at low rates. Mandated sharing made it possible for competitors to spring up without having to string their own wires.
But the phone companies successfully argued that broadband should be regulated differently than voice service. With cable and satellite already reaching the home by coax or dish offering TV and broadband, the phone companies asserted there was already competition and therefore no need for them to share new fiber networks.
The commission agreed.
"Deep fiber networks offer consumers a 'triple play' of voice, video and data services and an alternative to cable," said FCC Chairman Michael Powell. "By limiting the unbundling obligations of incumbents when they roll out deep fiber networks to residential consumers, we restore the marketplace incentives of carriers to invest in new networks."
In fact, the phone companies were starting to feel the heat on their local phone service due to competition from cellphones and voice-over-IP (VoIP), with local revenues declining 7 percent a year over the past three years. And cable companies have just begun to offer local phone service.
But phone companies are hoping to get in the cable companies' collective face by rolling out television over the fiber networks. With their newer technology, telcos have up to 10 times more bandwidth than cable can offer.
There are three flavors of fiber-optic network installations: fiber-to-cable, fiber-to-the-curb and fiber-to-the-home.
Fiber-to-cable is what digital cable has deployed. It's a mixed network of fiber-optic and coax cable yielding up to 10 Mbps and capable of providing 500 channels, HDTV, VOD, broadband Internet access and phone service.
Fiber-to-the-curb is what SBC is installing. Called "Project Lightspeed," it is aimed at serving 18 million homes by 2007 with fiber-optic lines to a neighborhood hub, then uses upgraded wiring to bring it into the home.
With bandwidth of 25 Mbps, in addition to what cable provides, fiber-to-curb offers faster data service and interactive possibilities such as the ability to choose camera angles.
"Project Lightspeed provides a number of important advantages, including superior speed to market with exciting, market-changing services," said Lea Ann Champion, SBC IP operations and services senior executive vice president. "And it allows us to leapfrog today's U.S. telephone and cable TV networks." SBC also announced a 10-year $400 million deal with Microsoft to deploy Microsoft's IPTV software in SBC set-tops.
Fiber-to-the-home is the top-of-the-line buildout that Verizon is already deploying in parts of Texas, Florida and California. Additional rollouts aiming to serve 2 million homes by next year have also been announced for six northeastern states.
By extending fiber right into the home, Verizon will offer bandwidth of up to 30 Mbps. The company said that amount of bandwidth would allow a home to simultaneously view several HDTV channels on-demand, to play games online, download from the Internet and talk on the phone.
"Building fiber into homes and businesses today essentially future-proofs our network," said Mark Wegleitner, senior vice president and chief technology officer for Verizon. "It allows us to offer future high-bandwidth applications that aren't even in existence today, without having to upgrade the fiber."
Wegleitner said that later, by upgrading hardware inside the home and on the network itself, the fiber being installed to the house now could deliver in excess of 100 Mbps.
None of this is cheap to do. A Carnegie Mellon University study pegs the cost per home served from $300 to more than $2,000.
This led some local phone companies to sit this round out. Qwest pioneered telcoTV systems a decade ago in Colorado and Arizona, losing lots of money in the process. The company plans to only install fiber in new housing developments, where it can avoid the cost of tearing up streets and sidewalks. Qwest is placing its bets on WiMax to serve existing communities.
Two final steps are programming and marketing. Will these telcoTV efforts match cable and satellite TV services in programming offered?
"We actually view that as table-stakes, you've got to have that," said Mark Marchand, Verizon's director of media relations. "We're actually looking beyond that... we're ultimately going to be looking at applications that you just can't get today."
On the marketing side, press accounts of telcoTV's newest forays were full of naysayers, who noted that history showed phone companies have tried and failed at these kind of new services before.
"'Successful marketing' and 'phone companies' in the same sentence is kind of an oxymoron," said one cable channel executive in an article in "The Wall Street Journal."
But with regulatory help from the FCC and cable and others eating into their local telephone service cash-cow, phone companies have extra incentive to get it right this time.
Unbundling provides impetus to lay fiber