# Presentation: 259092

## Whatever happened to Fiber to the Home ?

- AT&T Labs - Research
- Middletown, NJ, USA
**njf@research.att.com**

**Whatever happened to ****Fiber to the Home ?**

- Thanks to ...
- K. Reichmann, P. Iannone, A. Saleh, T. Darcie, P. Magill,  M. Malek, R. Richardson

## Disclaimer !!! 

- This is a ‘fiber advocate’ researcher’s viewpoint.  I am not ...
-  an economist,
-  a public policy expert, or
-  a spokesman for AT&T’s corporate strategy or position.
- This work is adapted from an invited talk given at the Optical Fiber Communications Conference (OFC) on 3/26/03.
- N.J. Frigo, K.C. Reichmann, and P.P. Iannone, “Whatever Happened to Fiber to the Home?”  OFC, Paper TuR1, Atlanta, GA (2003).

## FTTH alternatives  (e.g.,  Paul Shumate’s OFC Course) 

**FTTH alternatives  (e.g.,  Paul Shumate’s OFC Course)**** **

**Single star**

**Active double star**

**Passive Optical Network**

**Fiber to the curb**

**Hybrid Fiber-Coax**

**Single star, radio drop**

**PON, radio drop**

## Capital intensive access economics

**Capital intensive access economics**

- $

- 	    Take Rate
- (R = customers / homes passed)

- 100%

- 0%

**Fixed **
**costs**

- Cost = Fixed + R * Variable

- Cost  (≤ Revenue)

- Slope = avg cost

- Slope = avg cost

## Fiber ?

- Web,
- Information

- Broadcast TV

- Phone

- 1-way, high BW

- 2-way, low BW

- Interactive

- VOD

- Games,
- Photos

- Satellite
-  TV

- Wireless

- Coax

**Fiber ?**

- MSO

- CLEC

- ILEC

**Application**

**Category**

**Infrastructure**

**Provider**

**The landscape ...**

- What role can fiber play ?

- Twisted pair

## What is the relationship between service characteristics and the network ?
How are the various services valued by the consumer ?
What are the costs for the architectures needed to carry the services ?

- How are the various services valued by the consumer ?
- What are the costs for the architectures needed to carry the services ?

**Considerations for FTTH architectures**

## TAKE-AWAY:  Bit-Rate isn’t everything ...

-   The character of the services is much more important !
-  Bursty vs. Circuit (peak vs. avg vs. minimum, etc.)
-  Broadcast vs. Individual
-  Latency
-  One-way vs. Two-way
-  Rate symmetry/asymmetry
-  et cetera ...
-  Fiber has to compete with existing facilities (each having evolved to optimize its own services) for future services, each having unknown rates and characteristics.

## Bursty vs Circuit Services (shared channel)

- B

- t

**30**
**Mb/s**

**10**
**Mb/s**

**500****  ****‘10 Mb/s’ surfers**** sharing **
**                 ****a 30 Mb/s channel**
**                 ****(40 kb/s average)**

**detail**

- B

- t

**30**
**Mb/s**

**4 **** ****‘10 Mb/s circuits’**** sharing **
**                 ****a 30 Mb/s channel**

**“****avg rate”**

**“****equivalent circuit rate*********”**

- Shared media handle bursty services better than circuit services

**“****avg rate”**

- What can we hope for?

- *N. K. Shankaranaryanan, ATT Labs -- Research

- Perception time

## Broadcast vs. Individual:  the ‘visionary 100 Mb/s for all’ 

**Distribution office         for 10,000 people**

- 20 TV channels,
- or 3 DOCSIS

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- Information in = Information out

- Law of Information flux:  if no source of intelligence at office ...

- Your cable already has more than this ( > 2  Gb/s) !

## 1012 b/s = 1 Tb/s

**Distribution office         for 10,000 people**

- 1012 b/s = 1 Tb/s

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- 100 Mbps

- Throughput of a nation to serve 10,000 people !

**^**

- 108 b/s  x 104 = 1012 b/s

## Service characteristics

**BW**

**2 Way**

**Bufferability**

**1 Way**

**Service characteristics**

## Passive Optical Network types

**Power Splitting**

**WDM**

*electrical*

-  Users share power (Rate)
-  Users share bandwidth
-  Systems available today

**Power Splitting, WDM**

-  Users share power
-  ’s for users or services

-  Dedicated  per user
-  Low loss, high BW
-  Optics expensive

**WDM**

-  Dedicated  per user
-  Additional broadcast overlay(s)

**Passive Optical Network types**

- Optics can handle any service need

## What is the relationship between service characteristics and the network ?
How are the various services valued by the consumer ?
What are the costs for the architectures needed to carry the services ?

- How are the various services valued by the consumer ?
- What are the costs for the architectures needed to carry the services ?

**Considerations for FTTH architectures**

## Cost in p$ per bit

 Telephony: 

 web browsing 
video rental
TV (viewed)
TV (to home)

-  **Telephony:**
-  **web browsing**
**video rental**
**TV (viewed)**
**TV (to home)**

**Values of services ...**

- (One p$ = 10-12  $)

## What is the relationship between service characteristics and the network ?
How are the various services valued by the consumer ?
What are the costs for the architectures needed to carry the services ?

- How are the various services valued by the consumer ?
- What are the costs for the architectures needed to carry the services ?

**Considerations for FTTH architectures**

## Costs for fiber ... example build 

- Fixed and variable costs per subscriber

-  5760 homes passed
-   35% take rate
-   Includes fiber, passives, enclosures, labor, etc.
-   Excludes ROW costs, fees, etc.
-   Excludes actives, content, services

- Source:  Corning Cable Systems

**Fixed**

**Variable**

## Implications ...  

- Variable = $609/sub

- Fixed = $821/hhp

- Average = $2950/sub for R= 0.35

- Average cost = $609 + $821 / R  =  $2250

- Source:  Corning Cable Systems

- Internal AT&T Research estimate (Nov 1997)
-     Average cost = $450 + $840 / R  =  $2130  (2003 dollars)

- $ 1430/sub (100%)

## How much can we afford ?  

**How much can we afford ?****  **

-   Assume 15% of revenue applied to loan (85% to run business)
-   Assume long term, low interest loan
-   Pay only interest (no principal) on fiber loan (re-borrow at end of term)
-   Calculate:       revenue stream              capex supported by revenue

- Best case:  can spend up to 36 month’s revenue on plant

**(0.15)**

**(0.05)**

## How much can we afford ?  

**How much can we afford ?****  **

- Corrections:
-   ROW expenses, etc., moves blue line up
-   Financing constraints moves horizontal lines down

- Variable = $609/sub

- Fixed = $821/hhp

**Add revenue lines as an overlay ...**

## How much can we afford ?  

**How much can we afford ?****  **

- Corrections:
-   ROW expenses, etc., moves blue line up
-   Financing constraints moves horizontal lines down
-   **Optical gear**** ****moves blue line up and increases curve**

- Uneconomical (rev < fiber cost)

**$120/mo supports $4320 avg cost**

**$80/mo supports $2880 avg cost**

- Variable = $609/sub

- Fixed = $821/hhp

## How much can we afford ?  

**How much can we afford ?****  **

- Corrections:
-   ROW expenses, etc., moves blue line up
-   Financing constraints moves horizontal lines down
-   **Optical gear**** ****moves blue line up and increases curve**

- Profitable

- unlit fiber

- terminals, etc

## FTTH needs as many services as possible
“Triple Play” essential (move revenues up on chart)
FTTH needs as many customers as possible
 High take rate (move right on chart to lower avg cost)
FTTH       Monopoly, both technically and economically
FTTH can’t make sensible business cases, except in monopoly or niche situations (capital intensive)

- “Triple Play” essential (move revenues up on chart)
- FTTH needs as many customers as possible
-  High take rate (move right on chart to lower avg cost)
- FTTH       Monopoly, both technically and economically
- FTTH can’t make sensible business cases, except in monopoly or niche situations (capital intensive)

**Inescapable messages: for today ...****  **

## Killer App
Application, requiring fiber (e.g. upstream BW), so compelling that it commands large revenues
Have to overcome “chicken vs. egg” issue
Best chance is a “golden egg” which just barely works on today’s infrastructure ... circuit based.
Bandwidth alone (e.g. HDTV) will not do it
Data (e.g. low avg rate web surfing) will not do it
“Telepresence” ? Work at home ? (upstream BW) 
Growth of Ethernet appliances ? (Digital video cam)

- Application, requiring fiber (e.g. upstream BW), so compelling that it commands large revenues
- Have to overcome “chicken vs. egg” issue
- Best chance is a “golden egg” which just barely works on today’s infrastructure ... circuit based.
- Bandwidth alone (e.g. HDTV) will not do it
- Data (e.g. low avg rate web surfing) will not do it
- “Telepresence” ? Work at home ? (upstream BW)
- Growth of Ethernet appliances ? (Digital video cam)

**What can change the outlook (1) ?****  **

## Change our view of facility/service competition, natural monopolies, regulations, etc

**What can change the outlook (2) ?****  **

- This goes against the grain ...
-     Politically: requires regulation, legislation
-     Technically: different characteristics for services
-     Economically: different cost structures for services

- service

- network

- infrastructure

**voice**

**video 1**

**video 2**

**video 2**

**video 1**

**voice**

**Fiber **
**infrastructure**

## Change the business model by decoupling fiber and communication gear ... e.g., municipalities

**What can change the outlook (3)?****  **

- infrastructure

- fiber

- gear

-  Separates risks (fiber, gear) to natural owners
-  Permits innovations in service delivery
-  Requires regulation, legislation

-  Separates risks (fiber, gear) to natural owners
-  Permits innovations in service delivery
-  Requires regulation, legislation
-  Introduces technical issues (maint, upgrades, ...)

## Existence Proof:   SPLIT-Net (ATT Labs ca. 1997)

**• **

**• **

**• **

** **

** **

** **

** **

**• **

**• **

**• **

**W **

**G **

**R**

**3 km **

**Feeder**

**Remote **

**Node**

**Existence Proof:   SPLIT-Net (ATT Labs ca. 1997)**

**	****TDM PON**
**	****Multiple Video Services**
**	****High-speed Point-to-point**

**e.g. OFC ’97, PD 2.4**
**       ****OFC ’98, FD6**

## A social good (vs. foreseeable demands)
An economic good (vs. stranded capital)
An egg (such as electricity was) from which multiple generations of chickens will emerge (vs. a technical and political football)

- An economic good (vs. stranded capital)
- An egg (such as electricity was) from which multiple generations of chickens will emerge (vs. a technical and political football)

**Should anyone care about FTTH?****  **

## Inability to make a business case (except for monopoly and niche markets) has stymied FTTH. 
Absence of upstream BW demand in current and near-term services reduces technical need for FTTH.
Appearance of FTTH would create a natural monopoly which would subsume all other services over time. 
Infrastructure / services decoupling would lead to “utility monopoly” but would enable and promote future service development and competition.

- Absence of upstream BW demand in current and near-term services reduces technical need for FTTH.
- Appearance of FTTH would create a natural monopoly which would subsume all other services over time.
- Infrastructure / services decoupling would lead to “utility monopoly” but would enable and promote future service development and competition.

**Conclusion:  What *****did *****(will) happen to FTTH?**