Holy Grail: Fiber to the Home

As every Internet surfer knows, broadband is good, broader band is better

The broadest broadband, of course, is optical fiber, the only medium capable of moving data at multigigabit-per-second speeds. It's fiber that will ferry us into a future of thousands of television channels, videoconference telephony, movies on demand, distance learning, telemedicine, and a digital record of every sight and sound around us.

We've known this for two decades. Yet only rarely is an existing residential connection being refurbished with fiber. That will soon change--in fact, the pace of fiber installation is expected to pick up dramatically in the next few years.

This past summer the three largest U.S. telecommunications providers, Verizon, SBC, and BellSouth, agreed on a common set of standards for residential fiber-optic networks. That congruity is expected to lower costs and unleash a tidal wave of spending--Verizon alone reportedly has plans to embark on a 10- to 15-year US $20 billion to $40 billion upgrade of its fiber-to-the-premises networks.

The reason? Competition from cable companies, who already have more than three million customers in the United States getting telephone service as well as television over their cables. While coaxial cable can't match the gigabit potential of fiber in the long run, it's more than enough for the short term. Comcast Corp., in Philadelphia, the largest U.S. cable provider, is already upgrading some customers to a 3-Mb/s Internet service--roughly six times the speed of the phone companies' garden-variety digital subscriber line (DSL). That's in addition to the hundreds of television channels traveling down the same pipe.

One place to see telecom companies fight back is Iowa, a state where tiny telephone companies are the rule instead of the exception. Take the Huxley Communications Cooperative. Just a few years ago, the company, which provides telephone, cable television, and Internet access to one region of the state, upgraded the copper and coax of the eponymous town of Huxley,spending about $800 per home. But last year, it went with fiber all the way to the premises of every single customer in two neighboring towns, Slater and Kelley, despite an average cost of $2000.

The network upgrade has increased revenues, due to new cable and high-speed Internet accounts. It has also lowered maintenance costs. Yet an investment in fiber can still take as many as five additional years to be paid back. That's because, however puny, 1-Mb/s DSL or digital cable connections meet most customers' current needs--the gigabytes-of-content future is at least a few years away. Savvy telecom consumers aren't eager to spend more on the new connections without compelling applications running through them.

So a high-speed infrastructure is one thing, and high-speed service is another. Though the residents of Slater and Kelley now have the latest in pipes, their service is, for now, limited by their provider to classic DSL speeds. Still, as they say in Iowa, if you build it, the applications will come.

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