A Managerial Analysis of Fiber Optic Communications

Introduction

A form of fiber-optic communication delivery in which an optical fiber is run directly onto the customers’ premises is called Fiber to the Premises (FTTP). This contrasts with other fiber-optic communication delivery strategies such as Fiber to the Node (FTTN), Fiber to the Curb (FTTC), or Hybrid Fiber-Coaxial (HFC), all of which depend upon more traditional methods such as copper wires or coaxial cable for “last mile” delivery (Fiber to the Premises, 2007).

While high-speed fiber-optic cables are more often used to provide the primary links, the “last mile” to each home still plays an important role in the quality of service and bringing high-speed broadband to an area that is largely dependent on this last-mile connection.

FTTP involves laying optical fiber from a central location (switch) to a termination point (the home or business), and could potentially deliver broadband at speeds of up to 100Mbps. The actual speed is determined by the size of the Passive Optical Network (PON). The technology is capable of transmitting data at speeds of up to 2.5Gbps; this amount is divided by the number of termination points on the PON to determine the actual bandwidth to each end point.

Replacing copper infrastructures with fiber to every home in an area is an expensive proposition, but the rewards could be great for telecom providers. An FTTP infrastructure would enable those providers to not only provide high-speed broadband; they could also expand into other areas such as cable programming. The Baby Bells have another incentive to roll out FTTP as well; the FCC requires them to share their copper wires with their competitors, but that requirement would not apply to new FTTP infrastructures. This ruling gives providers a major incentive to roll out FTTP, despite the large initial investment that is required.

Copper, the predominant connection to the home used today, has inherent limitations both in terms of length from home to switch, and amount of bandwidth that is provided. FTTP also has a great advantage over Digital Subscriber Line (DSL), which provides broadband over existing copper, because DSL infrastructures must have more central relay points due to distance limitations. DSL is limited to only a few thousand feet between the switch and the home; FTTP allows for up to 49.6 miles (80 kilometers) between the home and the central switch.

Cable broadband already has a head start, but FTTP offers some advantages, in that cable has a limited upstream bandwidth. FTTP, while still very new, holds great promise. It will enable providers to easily provide customers with a single bundle of services that comprise voice, data, and video. Ultimately, FTTP will deliver higher bandwidth to the home, and a wider range of services at an affordable price. While some FTTP projects focus on replacing existing copper cable, new “greenfield” areas such as new housing developments are likely to see FTTP from the very beginning (WiseGeek, 2007).

Fiber to the premises can be further categorized according to where the optical fiber ends:

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  FTTH (Fiber to the Home) is a form of fiber-optic communication delivery in which the optical signal reaches the end user’s living or office space; or

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  An optical signal is distributed from the central office over an optical distribution network (ODN). At the endpoints of this network, devices called optical network terminals (ONTs) convert the optical signal into an electrical signal. For FTTP architectures, these ONTs are located on private property. The signal usually travels electrically between the ONT and the end-users’ devices (Fiber to the Premises, 2007).

The Regional Bell Operating Carriers (RBOCs), AT&T/BellSouth and Verizon, that serve 123,000,000 of the 180,000,000 access lines (68%) in the U.S., to greater or lesser extents, are now in the process of rolling out FTTP (FTTP Equipment & Fiber Cable Requirements, 2007).