Professional Documents
Culture Documents
Po l i c y A s s e s s m e nt
by
Emy Tseng
at the
Signature of Author…………………………………………………………………………
MIT Technology and Policy Program
August 16, 2001
Certified By…………………………………………………………………………………
Sharon Gillett
Research Associate, Center for Technology, Policy and Industrial Development
Thesis Supervisor
Accepted By………………………………………………………………………………...
Daniel Hastings
Professor of Aeronautics and Astronautics
Director, Technology and Policy Program
Engineering Systems Division
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C o m p e t i t i o n i n Fi b e r t o t h e H o m e : A T e c h n o l o g y a n d
Po l i c y A s s e s s m e nt
by
Emy Tseng
Abstract
This thesis analyzes the effect of deployment of Fiber to the Home (FTTH)
networks on competition in residential communications services from a policy and
technology point of view. A Fiber to the Home network is a residential communications
infrastructure where fiber optic cables run all the way to the subscriber premises.
As fiber moves towards the home, it brings the promise of a flexible, future-proof,
full-service network platform with potentially unlimited capacity. Although Fiber to the
Home is just a technology, it has interesting implications for the dynamics of competition
in the local access market. This thesis examines the market, policy and technology
factors that will affect competition in the context of Fiber to the Home.
Policymakers should set consistent policy goals now regarding competition for
future local access networks. The development of FTTH technology is still in the early
stages, so fundamental technology choices are still being made. This situation presents
the opportunity to design future broadband networks that enable competition among
telecommunications service providers. Therefore, the political and technical decisions
made now can determine whether competition will exist over our future communications
systems.
This thesis was written with the support of many people. I would especially like
to thank my advisor and mentor Sharon Gillett for her guidance, advice and
encouragement.
I would also like to thank the entire team at MIT’s Internet & Telecoms
and Dave Clark. I thank my fellow ITC research assistants, Emma Smith and Sohil
During the process of gathering information for this thesis, I corresponded with a
number of industry experts who generously contributed their time and knowledge, in
particular David Gingold of Nortel Networks, Manuel Topete of the City of Palo Alto
Utilities, Jon Moore and Bob Davisson of the Grant County Public Utility Commission,
Finally, I thank Bobby Gorczyca for his generosity of spirit during these years of
transition.
5
Table of Contents
Abstract .......................................................................................................................... 3
Acknowledgements......................................................................................................... 4
Table of Contents............................................................................................................ 5
1. Introduction......................................................................................................... 7
1.1. Perspectives............................................................................................... 11
1.2. Thesis Overview ........................................................................................ 14
2. The Market........................................................................................................ 15
2.1. Overview of Local Access Networks ......................................................... 15
2.2. Why Fiber to the Home?............................................................................ 19
2.3. Status of Deployments ............................................................................... 23
2.4. Potential Providers..................................................................................... 24
2.4.1. Telephone companies: Incumbent Local Exchange Carriers (ILECs) and
Independent Telephone Providers...................................................................... 25
2.4.2. Cable TV Providers............................................................................ 27
2.4.3. Competitive Local Exchange Carriers (CLECs), Overbuilders and
Competitive Access Providers ........................................................................... 27
2.4.4. Utilities .............................................................................................. 29
2.4.5. Municipalities .................................................................................... 30
3. Policy and Regulation........................................................................................ 32
3.1. History....................................................................................................... 36
3.2. Telecommunications Act of 1996 .............................................................. 37
3.2.1. Provisions for Facilities Based Competition ....................................... 37
3.2.2. Provisions for Service Level Competition .......................................... 38
3.3. Current Broadband Access Policies ........................................................... 41
3.3.1. Status of DSL Regulation................................................................... 43
3.3.2. Status of Cable Modem Open Access................................................. 44
3.4. Competition Policies for Fiber to the Home ............................................... 46
3.4.1. Status Quo ......................................................................................... 48
3.4.2. Laissez-faire....................................................................................... 48
3.4.3. Unbundling ........................................................................................ 49
3.4.4. Raised Hammer Approach ................................................................. 50
3.4.5. Open Access ...................................................................................... 51
3.4.6. Public Investment in Infrastructure..................................................... 52
4. Technology ....................................................................................................... 53
4.1. Fiber Optic Technology ............................................................................. 54
4.2. Multiplexing .............................................................................................. 57
4.2.1. Space Division Multiplexing .............................................................. 58
4.2.2. Wave Division Multiplexing .............................................................. 59
4.2.3. Time Division Multiplexing ............................................................... 61
4.3. Architectures ............................................................................................. 62
4.3.1. Home Run.......................................................................................... 65
4.3.2. Active Star ......................................................................................... 65
4.3.3. Passive Star........................................................................................ 67
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4.3.4. WDM PON ........................................................................................ 69
4.4. Standards ................................................................................................... 71
4.4.1. Full Service Access Network ............................................................. 72
4.4.2. Ethernet in the First Mile.................................................................... 73
5. Case Studies ...................................................................................................... 75
5.1. Grant County ............................................................................................. 75
5.1.1. Project Status ..................................................................................... 78
5.1.2. Services ............................................................................................. 79
5.1.3. Network Architecture......................................................................... 80
5.2. Palo Alto ................................................................................................... 80
5.2.1. Project History ................................................................................... 81
5.2.2. Services ............................................................................................. 82
5.2.3. Network Architecture......................................................................... 82
5.3. Summary ................................................................................................... 83
6. Conclusions....................................................................................................... 85
6.1. Summary of Findings................................................................................. 85
6.1.1. Market ............................................................................................... 85
6.1.2. Technology ........................................................................................ 86
6.1.3. Policy................................................................................................. 87
6.1.4. Municipal Role .................................................................................. 89
6.2. Areas for Future Research.......................................................................... 90
6.3. Conclusion................................................................................................. 91
Glossary........................................................................................................................ 93
Bibliography ................................................................................................................. 95
Websites ..................................................................................................................... 100
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1. Introduction
This thesis analyzes the effect of deployment of Fiber to the Home (FTTH)
infrastructure where fiber optic cables run all the way to the subscriber premises. After
years of anticipation, various deployments of Fiber to the Home are finally emerging in
for the dynamics of competition in the local access market. Fiber to the Home networks
can provide many times more bandwidth than currently available with existing broadband
technologies. In addition, the networks have the ability to provide all communication
services- voice, video and Internet - from one network platform. As fiber moves towards
the home, it brings the promise of a flexible, future-proof, full-service network platform
most effective way to lower costs, increase services to consumers, and encourage
innovation. However, competition in local access is not starting from a level playing
field. Historically, the two primary local access networks, the telephone network and
cable TV network, were regulated as natural monopolies. For the most part, these
telephone companies and cable TV operators. The Telecommunications Act of 1996 was
local access market – facilities-based competition and service level competition. With
facilities-based competition, different companies deploy, own and operate their own
network infrastructure. Each company provides services such as phone, TV and Internet
television and telephone providers to enter each other's markets. The intention is that the
existing providers will upgrade their existing infrastructure facilities to support a full set
of services. The government also seeks to encourage new entrants such as electric
these new entrants don’t have legacy networks, they can build new facilities based on
emerging technologies such as Fiber to the Curb, Fiber to the Home, fixed wireless and
satellite.
and applications over the same network infrastructure. The government encourages
service level competition by requiring incumbent providers to share the use of their
existing networks with competitive service providers. The incumbents have significant
advantages over new entrants since they own and control the existing networks. Due to
the entrenched position of incumbents, the deregulatory process has actually involved
increased regulation in order to open these markets to competition. The intention is that
9
these requirements would enable the entrance of new competitors into residential
In the case of the telephone network, the 1996 Telecommunications Act imposed
telephone companies. These conditions enable new service providers to enter the local
telephone and DSL markets. However, the Act did not subject the cable operators to the
Policy battles over competition have shifted from the long distance market to the
local telephone market to the current controversy over broadband Internet access.1 The
advent of microwave transmission allowed new companies to enter the long distance
market and led to the breakup of AT&T. In the local telephone market, the emergence of
digital switching technology lowered the economies of scale in providing local telephone
1
See Chapter 15 in (Viscusi et al 2000) for an economic and historic analysis of the deregulation of the
U.S. long distance and local telephone markets.
10
services by making it economically possible to connect the local network to multiple
competition in the residential communications market. But the likely impact of the
technology is different for the two types of competition. FTTH may lead to less
opportunity for facilities based competition due to the high costs of deployment.
According to previous cost analyses, the high costs and economies of scale of deploying
build full service network platforms. If an incumbent provides all services (telephone,
video and data) over its own network, competitors have less incentive to build another
network.
On the other hand, the use of Fiber to the Home has the potential to lead to richer
service level competition. The flexibility and capacity of fiber enables the development
of new technologies that can compete with existing services. The high capacity of fiber
technology allows multiple providers of telephone, Internet and eventually video services
It is not possible to predict if robust facilities based competition will emerge. The
viability depends on many factors including the state of competing technologies such as
fixed wireless and on the technical demands of future applications. Facilities based
2
Reed 1991
11
Other communities will only support the deployment of one broadband facility.
technology towards the support of service level competition over future networks and to
set a consistent policy framework now. Regulatory uncertainty in itself can inhibit
to support the goal of service level competition. Just as technology impacts policy,
policy impacts technology. The development of FTTH technology is still in the early
stages -- fundamental technology choices are still being made. These choices can
determine how easily these networks can be opened to competition. The political and
technical decisions made now can determine whether competition and free and open
1 . 1 . Perspectives
This thesis examines the market, policy and technical factors that will affect
competition in the context of Fiber to the Home. In analyzing these issues, this thesis
explores the following questions: What is the current status of FTTH deployments?
Who are possible network providers and what are the their motivations in deploying
FTTH? How might current competition policy be applied to the regulation of FTTH
networks? What should the role of municipalities be in the deployment of FTTH? What
12
is the current state of FTTH technology and how well do these technology options
competition policy
analyzed in the context of the worldwide trend to deregulate all infrastructure industries:
between the evolution of technology and policy that culminated in the passage of the
the possible effects of the policies enacted by the 1996 telecommunications act (Shaw
broadband Internet access, especially over the cable TV network. This issue is
requirements on the cable operators will enable innovation (Lemley and Lessig 2001, Bar
and Cohen 1999) and the open exchange of ideas (Benkler 2000). Opponents of open
access fear these requirements may inhibit investment in new infrastructure (Speta 2000).
To date the most comprehensive study on Fiber to the Home has been (Reed,
1990), which presents an engineering cost analysis of deploying Fiber to the Home. Reed
13
found that economies of scale exist, but not economies of scope in providing advanced
video services along with telephone service. He concluded that FTTH would lead to
limited facilities-based competition but policy could be used to shape and encourage
competition at the service level. In the ten years since Reed’s work was published, the
choices in Fiber to the Home architectures and technology have not changed much,
changes in the local access market. Telephone companies are now allowed to enter the
video market (a major recommendation of Reed's book). Also, Internet access has
Most of the technical literature on Fiber to the Home has focused on passive
optical networking (PON) technology (Feldman et al. 1998, Gillepsie 1997). FTTH is
evaluated in the context of residential broadband architectures in (Abe 2000) and in the
context of fiber optic technology in (Ramaswami and Sivarajan 1998). However, FTTH
architectures using Ethernet over an active star topology have emerged as a possible
This thesis brings together information from news of various deployments and
industry analyses of broadband access (Keough and Willer 2000, Sanford C. Bernstein &
was gathered using interviews of fiber optic equipment vendors and current FTTH
network providers
1 . 2 . Thesis Overview
This thesis examines the future of competition in residential communications with
the advance of Fiber to the Home. The scope of this analysis is the U.S. This issue must
be understood in the context of the potential FTTH market, local access policy and FTTH
technology. Chapter 2 presents the current status of Fiber to the Home deployments and
examines the possible network providers and their incentives to invest in FTTH. Chapter
communications market. It analyzes how these policies may be applied to Fiber to the
Home. Chapter 4 discusses the various FTTH architectures and technologies being
proposed from the perspective of how they might support open access. Chapter 5
investigates the possible municipal role in deploying new infrastructure and presents two
case studies of municipal FTTH deployments in Palo Alto, CA and Grant County, WA.
2. The Market
In order to reduce maintenance costs, increase capacity and support new services
such as broadband Internet access, cable TV and telephone providers have been
deploying fiber optic networks closer to the subscriber. Fiber advocates conclude that the
logical result of this evolution is to install fiber all the way to the customer
premises—right to businesses and homes.3 Fiber to the Home can be considered the
This chapter examines the market context for Fiber to the Home. It explores the
likelihood of widespread deployment of Fiber to the Home networks and how that might
take place. In order to assess the possible migration path to FTTH, this chapter considers
the current status of the local access networks. It analyzes the factors that are driving the
deployment of FTTH, presents the current status of FTTH deployments and discusses the
viability of further deployment. And finally, it assesses possible network providers and
subscriber premises to the carrier premise. The carrier premise is the point at which
service providers interconnect with the local access network. In this thesis, the term
“meet point” is used to refer to this point in the network. The meet point is also known as
3
St. Arnaud 2000
4
Abe 2000, Residential Broadband
16
the local switch, the central office, and the head end, depending on the type of network.
The local access network is also often known as “the last mile” and “the local loop.”
Currently, the local access infrastructure consists mainly of the cable TV and
telephone networks. For the most part, these networks are owned and operated by the
competitors have emerged offering services using their own infrastructure. Digital
broadcast satellite (DBS) has emerged as a competitor to cable television. And in some
In the past, the cable TV and telephone networks supported specific applications –
broadcast television and plain old telephone service (POTS). In both residential and
broadband access to the Internet. The following table shows the bandwidth capabilities
The most commonly deployed broadband Internet technologies are cable modem
and Digital Subscriber Line (DSL) technologies. Cable companies have deployed Hybrid
Fiber Coax (HFC) networks to provide high-speed Internet access. An HFC network is a
cable TV network that has been upgraded with fiber optic cable installed from the
provider premises to a neighborhood fiber node. In this system, coaxial cable extends
from the node to individual businesses and homes, and each node typically serves about
type of DSL technology that provides more downstream than upstream bandwidth.
Also, both incumbent and competitive companies have been deploying newer
wire-line technologies such as Fiber to the Curb and Fiber to the Home. The deployment
5
Sources include: Bernstein and McKinsey & Company, Inc; Hoak , Breedlove and Wesnecki, Inc.; CIBC
World Markets and the Full Service Access Network Standard.
18
of fiber deeper into the network reduces maintenance costs and improves data
fiber extends to a fiber node deployed close to homes and businesses. Coaxial or twisted-
pair copper cable is used to carry data from the fiber node into the buildings. Telephone
companies are deploying fiber to digital loop carriers (DLC) located in the
neighborhoods. Cable companies are also deploying FTTC, where each fiber node
typically serves 25 to 200 homes. The capacity of the network is increased because the
architecture.
With FTTH networks, fiber extends all the way to homes. As fiber gets deployed
deeper into the network, FTTC architectures can be used as an evolutionary step towards
FTTH.
facility. Fixed wireless uses microwave technologies to transmit data from points close
to homes and businesses. It is attractive because companies can avoid the large expense
of laying wires to every home. There are concerns about technical issues, such as line of
sight, and regulatory issues, such as building roof rights and spectrum availability.
alternatives, the current lack of available spectrum may limit its capability. Despite these
Satellite systems transmit data to and from satellites orbiting the earth. However,
satellite systems offer limited upstream bandwidth. It is too early to predict whether
6
Tompkins et al. 2000
19
these wireless technologies present true competition to wire-line technologies. This will
applications.
proof” their infrastructure. With technology moving so fast, the future demands on the
network are uncertain. Yet Fiber to the Home networks can accommodate future
applications and bandwidth demand more easily than other network architectures. The
capital costs of deploying local access networks are very high. Therefore, incumbents
and new entrants wish to build networks that have the capability, or ready upgrade
capability, to meet the bandwidth and application demands for the next ten to even
twenty years.
their extensive capacity and flexibility. Fiber optic cable has a much higher potential
bandwidth capacity (especially upstream) than other transmission media. The rise of
Internet usage is already driving an increase in demand for bandwidth in the residential
market. Although current broadband access technologies such as DSL and cable modem
are sufficient for applications such as Web surfing and email, one can foresee increasing
demand for bandwidth outstripping the supply. The Internet enables bandwidth-intensive
applications such as streaming media, video on demand, video telephony and peer-to-
peer applications. In turn, these applications drive up demand, especially for upstream
bandwidth.
20
Another promising aspect of fiber is that it can provide almost unlimited capacity
through the use of Wave Division Multiplexing (WDM) technology. WDM technology
wavelengths. Currently this technology is used only in long haul backbone networks.
However, this technology may eventually be used in local access networks as optical and
electronic equipment evolves and becomes less costly. Providers can increase network
capacity by replacing equipment, an easier option than replacing the transmission lines.
Over the past ten years, backbone and metropolitan area networks have been
upgraded in order to increase capacity. As the rest of the network capacity has increased,
the local loop has become the bottleneck in providing bandwidth to users.
An all fiber network would provide the greatest bandwidth and relieve this bottleneck.
and data services as well as new services as they are developed. “Transmission
The existing cable TV and telephone networks were designed to support specific
applications: plain old telephone service (POTS) and broadcast television. The
7
Romero 2001
8
Reed 1991, p. 1
21
means the network can accommodate but not be limited by older applications and
technologies.
physical layer of the infrastructure in a way that is analogous to how the Internet
Past applications, such as analog cable TV and phone, can be supported on the same
network as enhanced digital services, such as video over IP, voice over IP, digital TV,
While convergence has been promised for a long time, FTTH networks provide the
conduits that are finally large enough for this development to occur.
Fiber to the Home has been proposed for years.10 FTTH technology has been
around for a decade or longer but has not been deployed sooner because of the significant
expense involved in rebuilding the entire last mile of the network. So far there has not
been enough economic justification for using it to replace the existing infrastructure.
9
Olufs 1999, p. 102
10
Tompkins et al. 2000; Eiger et al. 1989; Sirbu and Reed 1988
22
Although optical equipment prices have dropped considerably in the past five years, the
equipment is still relatively expensive compared to cable modem and DSL. Only
recently have applications emerged that demand broadband access, and it is unclear how
much consumers would be willing to pay for services that would take advantage of the
further capabilities of Fiber to the Home. Therefore, the viability of FTTH has always
The speed with which the current wires, switches, and computers that
make up the information infrastructure will be replaced by newer
technology is severely constrained by costs. Carriers are not sure what
application will be popular with the majority of the nation’s households,
and so the technology needed to deliver it is uncertain. This means the
movement to new technologies is going to be fairly slow and incremental,
moving forward as carriers believe they are in a position to make money
from particular applications.11
It is not yet possible to predict exactly when widespread deployment of Fiber the
Home will happen. And there is no one right answer for the method of Fiber the Home
deployment. It will depend upon the incentives of different providers and the
circumstances and regions where the networks will be deployed. However, telephone
companies, utilities and municipalities are presently considering FTTH because of its
integrated services.
11
Olufs 1999, p. 110
23
Only a handful of FTTH networks have actually been deployed in the United
States 12, and most of these deployments are in the trial stage. Examples are shown in
table 2.2.
home for the consumer premise equipment as well as the equipment installed in the meet
point.13 Note that total costs vary depending on how many subscribers share the provider
equipment—the fewer the homes, the greater the cost per home.
Even as the costs of optical equipment decline, the cost of deployment remain a
barrier to FTTH. The majority of these costs come from the actual physical deployment
of the network – the installation costs. Deployment costs vary greatly according to
12
Bernhard 2000; Tompkins et al. 2000
13
Keough and Willer 2000; Lopez et al. 2000
24
whether the fiber is being installed on existing aerial poles, buried in existing conduits, or
deployed in new conduits that require the digging of trenches, which is particularly
expensive. Cost estimates of fiber installation range from around $25,000 to $125,00014
per mile to as much as $350,000 to 750,000.15 One analysis estimates that labor costs
Fiber the Home will be deployed in new developments far sooner then in existing
neighborhoods. In fact, the costs of deployment are so high that Fiber to the Home is
being used in limited circumstances. For the most part, Fiber to the Home will be
deployed where the provider can avoid trenching—for example, in new builds, where
trenches are already being dug for other utilities, and in areas where access to aerial plant
is available. Telephone companies are also incrementally deploying Fiber to the Home to
telephone operators as well as new entrants such as competitive local exchange carriers,
over builders, utilities and municipalities. Motivations and strategies vary greatly among
the different possible providers. The incumbent providers will probably develop very
14
St. Arnaud 2001, p. 14
15
Jungjohann, Bezoza and Schafer 2001, p.33
16
Jungjohann et al. 2001, p.32
25
In contrast, the new entrants do not have legacy infrastructure to contend with,
since they are building the network from scratch. Their network installation costs do not
differ significantly whether they are deploying copper or coaxial cables or fiber.
However, the private competitive providers are limited by time and capital constraints
such as Return on Investment, cost of obtaining the first customer, etc. They also cannot
expect to have the same penetration rates as the incumbents. Consequently, their network
costs are shared amongst fewer subscribers and a lower revenue stream.
competitive companies. They can often amortize their capital investments over a longer
period of time, say ten or even twenty years. However, they usually do not have
face political opposition that would prevent them from offering telecommunications
services.
infrastructure with Fiber to the Home. Fiber requires less maintenance than twisted pair
copper, thereby lowering the network’s lifetime operational costs. In greenfield sites, it
can be cheaper to install fiber than copper networks.17 Additionally, FTTH gives
telephone companies the ability to provide services that are not well supported by the
current network. Twisted pair copper has less capacity than coaxial cable and fiber.
17
Hardy 2001
26
Distance limitations between the central office and the subscriber have also limited the
Also, the current phone networks do not support video transmission. Deploying
FTTH would allow phone companies to compete with cable television using their own
infrastructure. For years telephone companies have been interested in entering the video
market. The companies’ interest in providing full services over fiber networks has
motivated some ILECs and equipment providers to form the Full Service Access
Network (FSAN) standards body. However, it is unclear when phone companies may
deliver advanced services such as video even where fiber is deployed, since there are
For now, the telephone companies are targeting new developments because of the
deployed FTTH trial networks. Bell South has a trial serving 400 homes in a suburb of
Atlanta, and Verizon is running a FTTH trial in an undisclosed location on the East
Coast. Also, as the old infrastructure needs repair, telephone companies are
Independent telephone companies (often in rural areas) have been more inclined
to adopt Fiber to the Home technology than the ILECs. For example, Rye Telephone
Company in Colorado and Huntel Engineering offer cable TV, telephone and Internet
companies are allowed to provide both cable TV and telephone in the same
18
Huntel Engineering http://www.huntelengineering.com and Rye Telephone Company http://
www.fone.net/soco/guide/colocity/rtc/home.html
27
communities.19 Such companies also have the advantage of being unencumbered by the
home. Coaxial cable has enough potential capacity for most applications, and HFC
networks are capable of supporting full services: video, telephone and data. Capacity
constraints come from the way in which the HFC network is shared among users. Cable
television companies are taking a gradual approach to deploying fiber closer to the
subscriber. Cable companies such as AT&T are migrating their HFC systems to Fiber to
the Curb to allow fewer subscribers to share the network. In fact, some systems have as
few as 25 users per fiber node. Fiber to the Curb allows them to utilize the current head
network becomes more expensive than deploying fiber all the way, or if FTTH offers
providers just deploy the network and provide maintenance. A company called
19
Telecommunications Act of 1996, Section 652(d)(1).
28
FiberHood in Palo Alto plans to build FTTH networks and offer basic data transmission
to service providers. The network providers may partner with other companies because
of regulatory issues, such as securing rights-of-way, cable licensing and CLEC status.
Other companies provide a full set of services over the network. These services
include telephone and cable TV, as well as advanced services such as high-speed
Internet, neighborhood Intranet and video on demand. These providers often target
greenfield sites. For example, companies such as ClearWorks.net and ViaLight offer
these types of services to new developments, teaming up with a real estate developer to
provide the network to homes in a private development. Usually the developer gives
them some kind of guarantee for the number of homes that will hook up to the network.
In some cases, they may get exclusive rights for a period of time. In this way they gain
providing a third wire into the home. Most of these companies are deploying HFC
systems even though network installation costs do not differ significantly whether they
are deploying coaxial cables or fiber. However, the total cost of Fiber to the Home is still
too expensive for most of these providers. One exception is Western Integrated
Networks (WINFirst), which has obtained cable licenses in various cities in Texas and
California. Their plan is to build a combined HFC and FTTH network where coaxial
cable carries the television signals and fiber carries data and voice into the home.
expect to have a low penetration rate relative to the incumbent telephone and cable
29
companies. RCN is the most successful, with up to 25% penetration rate.20 FTTH will
2.4.4. Utilities
Because of deregulation of the power industry, utilities (especially electric) are
looking to broaden their business strategy into telecommunications, especially since they
often have much of the infrastructure already in place. In fact, many of these
organizations have already deployed fiber networks connecting their own facilities.
Some lease dark fiber to other organizations and businesses. Some utilities want to build
out their networks to individual homes and businesses to support applications such as
automated metering. Since these applications do not take much bandwidth, they can use
Utilities are more likely to deploy Fiber to the Home networks than other
competitive providers. For one thing, they already have staff with the expertise in the
deployment and maintenance of fiber networks. They have access to the poles and
rights-of-way. They have relationships with existing customers and also have billing
they may partner with another company to offer telecommunications services. For
example, overbuilders may partner with electrical utilities in order to obtain rights-of-
way. RCN’s partnership with Boston Edison is an example of this type of partnership.
20
Source: Hoak, Breedlove and Wesnecki, Inc.
30
2.4.5. Municipalities
Various municipalities—such as Grant County, Washington; Palo Alto,
California; and Chicago, Illinois—are building Fiber to the Home networks in their
pure profit. They do so with the hope of attracting residents and businesses to their
municipalities, especially in rural communities, lack advanced services and feel they
cannot rely on the private sector to provide them. These communities have a vested
interest providing choice for their citizens, and therefore are interested in promoting
Communities with existing publicly owned and operated utilities are more likely
Plus, municipalities can have longer return on investment expectations than private
companies. They can raise money through municipal bonds or other public funding, and
do not need to rely solely on revenue from the network to pay for the infrastructure.
Many municipalities have deployed municipal fiber networks that connect public
buildings such as schools, hospitals and government buildings. They can support the
Municipalities may deploy Fiber to the Home networks, thus extending the networks into
the local loop themselves and partner with private companies to provide the services.
companies, which then would build out the network to individual homes and businesses.
31
For example, Palo Alto leases capacity on the companies city utilities municipal fiber
ring.21 Some companies such as Yipes and HomeFiber used this capacity to build all
21
Examples include Yipes, HomeFiber, Fiberhood
32
3. Policy and Regulation
This chapter examines policy alternatives for fostering competition in the
residential communications market with the advent of Fiber to the Home technology.
current broadband architectures – DSL and cable modem -- and analyzes how these
regulations may or may not pertain to the development of Fiber to the Home networks.
been and continues to be the subject of great debate among policymakers, academics,
companies deploy, own and operate their own network infrastructure. With service level
competition, different companies provide competing services and applications over the
One view is this: that real competition and choice are going to come to
consumers solely by virtue of major technology-differentiated offerings
[facilities-based competition]… And if you are relatively comfortable that
broadband data centered services are the future, bar none; that the residual
place of analog infrastructure to copper wire infrastructure, etc., are
33
Although Chairman Powell was referring to the current debate about competition
in the broadband Internet Access markets, specifically the issue of “open access”, similar
debates occurred throughout the process of deregulating the long distance and local
telephone markets. Note that the term open access is often used specifically in the
context of the broadband Internet Access over the cable TV network, however, here the
term is used more generally to refer to competitors’ right of access to incumbent network
infrastructure.
The following issues lie at the heart of these debates: Should the network
providers, that is the owners of physical infrastructure, be required to offer access to their
networks to unaffiliated and competitive service providers and under what conditions?
How much control should the network providers have over the content and services that
22
From FCC Chairman Michael Powell’s address to the Forrester Research Telecom Forum in Washington
DC, May 21, 2001.
34
run over the network? To what extent should the government step in and limit this
control?
of more networks and to let the market play itself out. They fear that regulation may
competition discourage any imposition of requirements that may lessen the incentive to
invest.
multiple companies (or other organizations) deploying their own facilities and competing
for subscribers. However, the incumbent monopolists already largely control the local
over their networks in some communities, this scenario may be economically unfeasible
services. The incumbent network providers should be required to share their networks
with competitors. They argue that allowing infrastructure owners to extend this control
35
to the service and ultimately content markets threatens consumer welfare, innovation and
diversity of content.
There is concern that network providers may use their control over the
network sharing requirements will preserve the benefits of competition for consumers.
They point to the high level of competition in dialup Internet services that provided
consumers with choices in service, content and price. This competition resulted from the
They fear network providers may use their control over the infrastructure to stifle
potentially competitive services and applications.23 They claim that imposing network-
sharing requirements on the cable operators will enable continued innovation. They point
to the tremendous innovation that occurred due to the open architecture of the Internet.
At worst, the network providers could design the network infrastructure in such a way
that favors their own current business interests, thereby inhibiting future innovation in
The third concern is that vertically integrated providers will be able to restrict and
control the content that goes across the network in favor of their own media content. An
advantage of the Internet was that residential communications could move from a
broadcast model where few entities control and generate information to a “many to
23
For example, Excite@Home imposed time limits on video streaming.
24
Lemley and Lessig 2001; Bar and Cohen 1999
36
many” model encouraging the open exchange of ideas and diversity of viewpoints.25 If
facilities owners were allowed to control content, there would be the potential for the
3 . 1 . History
Over the past thirty years, the U.S. government has been deregulating the
Historically, these markets have been regulated as natural monopolies. In the U.S.,
environment, and new technological developments, governments have shifted their policy
competition include lower costs, greater consumer choice and availability of services, and
The shift in policy started in 1972, when the U. S. Department of Justice filed an
antitrust suit against AT&T that resulted in the 1984 breakup of AT&T. Prior to the
breakup, AT&T owned and operated the telephone network and had a monopoly over the
local and long distance telephone service markets. This breakup brought competition into
the long distance market. However, the local telephone and cable TV markets continued
25
Benkler 2000
26
See (Graham 2001) for a discussion of the worldwide deregulation and privatization of infrastructure
markets.
37
to be monopolies. The Regional Bell Operating Companies (RBOCs), the local phone
companies that were formed from the breakup of AT&T, still had a monopoly over the
provision of local telephone services. Cable television operators had a monopoly over
granted these companies exclusive franchises to own and operate the cable TV network
in their communities.
focused on opening them to competition. The policy shift culminated in the passage of
1996 Act represents the most significant piece of legislation concerning the
telecommunications industry since the Telecommunications Act of 1934. The 1996 Act
local access infrastructures for cable TV, local telephone and advanced data services.
The Act allows telephone and cable TV companies to enter each other's markets. The
Act removed the cross-ownership restrictions between telephone and cable television
38
companies that had been established in 197027 and continued in the Cable
Communications Policy of 1986.28 Section 302 of the Act allows telephone companies to
provide video services29 with the restriction that the company doesn't have greater than a
The Act permits cable companies to offer telephone service over their cable
networks. Section 303 restricts the power of local authorities to regulate a cable
company providing telephone service. The local franchising regulators cannot restrict or
The Act also enables public utility companies to enter the local telephone and
In general, the Act attempts to remove barriers to entry that state and local
in the local telephone market by allowing competitive providers to offer services over the
existing local telephone networks. These networks are usually owned and operated by
27
21 FCC 2d 307, 325 (1970)
28
Cable Communications Policy Act of 1984
29
Telecommunications Act of 1996 Section 302
30
Telecommunications Act of 1996 Section 652(a)
31
Telecommunications Act of 1996, Section 303
32
Telecommunications Act of 1996, Section 253(a)
39
the incumbent telephone providers, the Incumbent Local Exchange Carriers (ILECs).
These services can include local telephone as well as advanced services such as DSL.
The incentive for the incumbent providers to open their markets is that once the local
telephone market is deemed competitive, they are allowed to enter the long distance
market.
Section 251 of the Act establishes the rules of “interconnection, unbundling and
resale” that mandate the conditions under which companies share the telephone network.
providers must open up their networks to competitors. The Act gives competitors two
options to offer services over the incumbent’s network. A competitor can partially build
out their network and then use parts of the incumbent network in order to provide
Exchange Carriers (CLECs) can access and lease parts of the telephone networks in order
to provide services. The FCC determines the points at which (CLECs) have network
telecommunications services;
(3) local circuit switching (except for larger customers in major urban markets);
33
Telecommunications Act of 1996, Section 251(c)(3)
34
The network elements are specified in the “The First Report & Order In the Matter of Implementation of
the Local Competition Provisions in the Telecommunications Act of 1996.” First Report & Order (FCC
96-325)
40
(4) dedicated and shared transport;
The prices at which the CLECs can lease the UNEs are regulated. Each state’s
Public Utility Commission (PUC) determines prices based on costs in their state.35
Competitors can also lease wholesale services from the incumbent networks and
incumbent LEC: “to offer for resale at wholesale rates any telecommunications service
that the carrier provides at retail to subscribers who are not telecommunications carriers.”
The wholesale rates are also regulated and determined by the state PUCs.
The 1996 Act continues the regulatory separation between telephone and cable
television systems. Historically, this distinction arose because of the difference between
the types of services offered over the two networks: “cable service” vs.
specified by the user, of information of the user's choosing, without change in the form or
content of the information as sent and received."36 Therefore, telephone systems are
subject to the rules of common carriage and cannot discriminate among content carried
over its network. In contrast, cable service is defined to be a type of broadcasting – “the
35
The federal government dictates that these prices be based on a cost model known as Total Element
Long-Run Incremental Cost
36
47 U.S.C. S 153(43).
41
the rules of common carriage and are under no legal obligation to open their networks to
access over the phone network (DSL) vs. the cable TV network (cable modem service).
Telephone network providers must open their networks so that competitors can provide
DSL services. DSL service is subject to the rules of interconnection, unbundling and
collocation that apply to the telephone system. On the other hand, cable modem service
is regulated under cable TV rules, so cable providers are not under any regulatory
obligation to open their networks to competing Internet Service Providers (ISPs). The
advent of broadband Internet access services has raised questions about the viability of
modem service. Also, broadband Internet access does not fit neatly into the category of
37
See (Pool 1983) for the historical distinctions between the rules of common carriage and broadcasting.
38
Berresford 1999, p. 115
42
In recent years, the fate of competition in the broadband Internet access
sustainable? Does it make sense? If not, should policymakers loosen the regulations for
At this point, most open access opponents have come to accept open access in
principle. They agree with the open access advocates that consumers should have a
choice of Internet service providers over both types of broadband Internet infrastructure.40
However, they argue that competition from other broadband technologies such as DSL
and wireless will drive cable providers to open their networks to independent ISPs
In recent years, the FCC, the main arbiter of these matters, has continued to take
very different regulatory approaches towards DSL – where they’ve enforced more
restrictions on the ILECs -- versus cable modem service -- where they have held off from
39
Pool 1983 p.166
40
Even H.R. 1542 which is considered anti open access regulation states that “Internet users should have
choice among competing Internet service providers… Internet service providers should have the right to
interconnect with high speed data networks in order to provide service to Internet users.”
43
regulations set forth in section 251 of the 1996 Telecommunications Act.41 In September
of 1999, the FCC refined further the interconnection and unbundling rules as they apply
portions of loops, and dark fiber optic loops and transport.”42 However, they declined to
require the unbundling of packet switches and digital subscriber line access multiplexers
(DSLAMs). In the same month, the FCC also issued an order requiring ILECs to
implement “line-sharing” which allows competitors to share the high frequency portion
of the telephone line.43 This allows consumers to get DSL service from a company other
that would exempt DSL and other advanced high-speed services from unbundling
regulations. The most recent is a bill called the “Internet Freedom and Broadband
Deployment Act of 2001” H.R. 1542 sponsored by Rep. Billy Tauzin (R-LA) and Rep.
John Dingell (D-MI) that would repeal the rules of unbundling and resale for high speed
data services such as DSL. Under this bill, the FCC would not be able to require ILECs
to “provide unbundled access to any network elements used in the provision of any high
41
The FCC specified the implementation of these rules in the “The First Report & Order In the Matter of
Implementation of the Local Competition Provisions in the Telecommunications Act of 1996”, CC Docket
No. 96-98
42
FCC. “The First Report & Order In the Matter of Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996”
43
FCC. “Deployment Of Wireline Services Offering Advanced Telecommunications Capability And
Implementation Of The Local Competition Provisions Of The Telecommunications Act Of 1996.” FCC-
99-355 Third Report And Order In CC Docket No. 98-147 Fourth Report And Order In CC Docket No. 96-
98
44
speed data service … or offer for resale at wholesale rates any high speed data service.”
However it is unlikely this bill will pass given the unfavorable opinion from the House
of cable modem service. The FCC has refrained from enacting any type of general
regulation enforcing open access. The FCC has come out in favor of competition of ISPs
over the cable TV infrastructure.45 However, they prefer a market-based solution to the
open access issue. In December of 1999, FCC Chairman William Kennard stated that
open access is what consumers want, and that he "wants to be able to point to lots of
protocols, open boundaries, and open pricing" as the best way to create this market-based
solution.47
However, the FCC has shown a willingness to seek regulatory action if they feel
Warner and AOL, the FCC and FTC imposed open access as a condition of the merger.
This condition states that the customer must be able to select services from unaffiliated
44
Reuters News Service 2001
45
At least under former FCC chairman William Kennard
46
From address of Chairman of FCC William Kennard at the WESTERN SHOW, California Cable
Television Association, December 16, 1999.
47
Kennard 1999
45
One of the most significant events in the open access policy debate was the ruling
of the Ninth District Court of Appeals in the matter of the AT&T vs. City of Portland.48
The court sided with AT&T and ruled that local governments do not have the authority to
impose conditions on providers of broadband cable Internet access. However, the Court
found that broadband Internet access was a “telecommunications service” rather than a
The ruling distinguishes between two elements used for the provision of Internet
access: “a "pipeline" (raw data transport over cable network or telephone lines) and the
Internet service transmitted through that pipeline.”49 It was the “pipeline” that was
service are subject to rules of common carriage that govern telecommunications carriers.
This ruling expanded considerably the FCC’s regulatory powers over broadband Internet
access.
In September of 2000, partially in response to the result of the Ninth Circuit Court
decision, the FCC issued a Notice of Inquiry50 on the regulatory issues surrounding cable
modem service. However, the FCC has not acted further on this issue. Current FCC
Chairman Michael Powell has not publicly issued an opinion as to how the FCC will
48
AT&T, et al. v. City of Portland, U.S. Court of Appeals, 9th Circuit, Appeal No. 99-35609.
49
AT&T, et al. v. City of Portland.
50
FCC. “Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities." Notice
of Inquiry. FCC 00-355, GN Docket No. 00-185.
46
3.4. Competition Policies for Fiber to the Home
This section analyzes some of the alternatives for encouraging competition in
Fiber to the Home in the context of the regulatory issues described previously. This
section looks at the likely impact FTTH technology will have on competition: both
facilities based and service level. Given these possible effects, this section then considers
several possible policy models that the government can apply to enable competition in
communications market in different ways. The high capital costs and economies of scale
make it unlikely that the adoption of Fiber to the Home will further facilities-based
competition in most local access markets. Earlier cost analyses on the deployment of
FTTH indicate limited competition among network providers, at least for wire-line
green field scenario, one company could provide the network and services to new homes
operators would gradually migrate their networks to all fiber as demand outgrows the
51
Reed 1991
52
McAdams 2000
53
Reed 1991 p. 202-203
47
capabilities of the current infrastructure and network providers capitalize on the ability to
companies to build full service network platforms, the initial deployer of Fiber to the
all services (telephone, video and data) over its own network, there is less incentive for a
On the other hand, the flexibility and capacity of Fiber to the Home can lead to
technologies that can compete with existing services. For example, the development of
switched digital video55 and video telephony offer alternatives to current cable TV and
telephone offerings. Also, the high capacity of fiber gives multiple providers of
telephone, Internet and eventually video services more room to share a single network.
Furthermore, Fiber to the Home can lead to more diversity of content because of
the increase in upstream bandwidth. This capacity can remove the justification for the
“spectrum scarcity” constraints that have dictated regulation for the broadcast industry.
With the use of the Internet as the platform, this upstream capacity gives individuals and
54
It is unclear whether there are economies of scope in the provision of phone, video and Internet services
over FTTH. David Reed's analysis in 1990 concluded that economies of scope did not exist for the
switched video and voice services. A current cost and economic analysis would have to be performed
before one could conclude that economies of scope exist between voice, video, and data services.
However, the ability to bundle services is at least a significant marketing advantage.
55
Also known as Video over IP. See (Abe 2000) pp.334-336 for a description of Switched Digital Video.
48
Therefore, residential communications could move from a broadcast model where few
Given these possible effects of FTTH on competition, which policy models best
enable competition in the local access market? The policy models considered hereare:
the status quo; “laissez-faire”, which would involve removing any current network
sharing requirements; the "raised hammer" approach, which uses the threat of regulation
to try to open up markets; unbudling, ; “open access” regulation, and public investment
in infrastructure.
and fiber-optic technology. As fiber gets deployed deeper into the network, the
networks are becoming more similar, both in the transmission media and the
services they support. Any potential differences in local access regulation should
3.4.2. Laissez-faire
With the “laissez-faire” approach, the government would remove the network
sharing requirements from the incumbent providers for the deployment of Fiber to the
56
Benkler 2000
57
See (Perucci and Cimatoribus 1997) for a discussion of when asymmetric regulation should be applied.
49
involvement in the market. Some proponents of this approach believe that as full
faire is unlikely to increase competition in the local access market. There is a strong
these companies will extend their market power into the services and content markets. A
few vertically integrated companies could gain control over all communications services
entering the home. The consumer would be left with little choice for their services:
voice, video, and Internet access provisions. Also, these companies would be able to
control the market for new services as they emerge, or design the networks in a way that
benefits their own service offerings, thereby posing a threat to future innovation.
3.4.3. Unbundling
The unbundling requirements that currently apply to the telephone network are
FTTH. Unbundling FTTH networks will require definition of new unbundled network
exist, and no dominant technology has emerged, making it difficult to define the network
elements much less deciding which should be unbundled. It will also be difficult to set
50
costs, since the network costs will vary with changing technology. It is also possible that
restrictions.
The problem with unbundling is that this process focuses too much on the
evolve, enforcement of this policy will become even more complex and require continued
cable access broadband. Policymakers are using the threat of regulation to try to open up
markets. The policymakers tell companies that they should open up their networks to
service level competitors, but that it is up to them to work out the arrangements. If
market competition does not develop, the regulators will impose regulation to open the
network. There are several issues with this approach. For one thing, this approach leads
Secondly, if competition does not develop, any policy would have to be enforced
monopoly. Also, technical protocols and industry standards can determine the
ease with which multiple service providers can share a common network. In the
cable open access debate, a criticism of requiring open access was that the current
51
standard (DOCSIS) and design of the cable network did not readily support
sharing by multiple service providers.58 If open access had been required, the
cable broadband access could have been initially designed to support multiple
service providers
companies to create standards and design an open FTTH network architecture that
There has been much discussion about what open access is. As Lemley and
Lessig put it, “open access is simply shorthand for a set of competitive objectives.”59 In
the context of the cable open access debate, these objectives are summarized as:
However, how do these stated objectives translate into actual policy? In the
ruling61 mentioned earlier, the Ninth Circuit Court took an important step towards
defining an open access policy. The ruling made an important distinction between the
data pipeline and the services transmitted through that pipeline. In an open access policy
58
Laubach 2000
59
Lemley and Lessig 2001, p. 969
60
Fusco 2000
61
AT&T et al. v. City of Portland
52
The implementation of “open access” requires the owners of the physical infrastructure to
The issues at the heart of the open access debate are access and control. How
much control should the network provider have over the services and content that is
transmitted across its network? How much access should service providers have to the
network? Chapter 4 explores the technical implications of these issues in the context of
These local governments are building competitive alternatives to the incumbent telephone
infrastructure.
4. Technology
The aim of this chapter is to present a framework of different Fiber to the Home
technologies from the perspective of “open access”, that is how the network may be
shared among multiple service providers. The framework includes the network
The ability to share the network can be designed into the technology protocols
and standards. When evaluating these different technology options, there exist trade-offs
between the support of open access and factors such as cost, total capacity, ability to
support certain services, ease of migration from existing networks and maturity of the
different Fiber to the Home architectures, nor does it attempt to present the optimal open
access solution for each design. Rather, it highlights the technical issues raised when
In the past, local access networks were optimized for a particular type of
application with the assumption of one provider. The telephone network was designed to
support direct point-to-point connections in order to handle voice traffic. The cable TV
network was designed as a shared network in order to broadcast television signals. When
new services such as DSL or cable modem were developed, the technological
In contrast, Fiber to the Home can be designed from the start as a general-purpose
and flexible network platform. These networks are expected to handle voice, video and
54
data services as well as new and evolving applications. Different choices and
compromises can be made so that services and service providers can effectively share the
network. The use of fiber optics through the whole network enables a vast array of
technical options. The number of options complicates the task of describing, comparing
FTTH technology is still being refined and developed -- optimal architectures and
technologies are still being debated. A dominant technology for Fiber to the Home has
not yet emerged. The current technical and market literature about Fiber to the Home has
focused on the network architecture and data protocols. The current debate is largely
focused on Ethernet over Active Star, Asynchronous Transfer Mode (ATM) over Passive
Optical Network (PON) and Ethernet over PON architectures. The use of Dense
Wavelength Division Multiplexing (DWDM) over PON is being considered for future
However, the architecture and protocols do not capture the full extent of
how and where to multiplex the data determines how upstream and downstream traffic
and traffic from different subscribers, providers and different services share the network.
Therefore, the issue of open access should be considered in the context of how traffic is
optical fiber and a receiver. The transmitter and receiver contain both electrical and
55
optical components. The optical transmitter takes information such as voice, video or
data in electrical form, modulates it and uses a light source, such as a light emitting diode
(LED) or laser to convert electrical signals into optical form (light). The optical signal is
The information is delivered through the optical fiber over one or more
wavelengths, also referred to as carriers. One light source is used per wavelength. Lasers
typically operate at wavelengths of 1310 nanometers (nm) or 1550 nm, depending on the
number of wavelengths driven over the fiber. There are two types of fiber: multimode
and single mode. Single mode fiber has a longer range and higher capacity then
multimode fiber because it is less subject to attenuation and dispersion of the optical
The receiver contains a photo-detector that recognizes the signal. The receiver
then demodulates and converts the optical signal back into an electrical form. Depending
on the type of data, the signal may be converted further into the original format (often
receiver.
terminator (OLT) and an optical networking unit (ONU). The OLT resides in the carrier
aggregation point, referred to in this thesis as the meet point. “Meet point” is meant as a
general term to describe the carrier premise or hub located in each community. The meet
point is where service providers interconnect with the local access network. In telephone
62
See (Mynbaev and Scheiner 2001) Chapter 3, p.42-82 for a discussion of optical fiber and the
differences between single mode and multimode fiber.
56
systems, the meet point is the central office. In cable television networks, the meet point
is known as the head end. The meet point may also be a carrier neutral collocation point.
The Optical Line Terminator (OLT) resides in the meet point and connects the
service providers’ transport network(s) with the local access network. The OLT
multiplexes and converts the service providers’ traffic and transmits optical signals on the
local network. The OLT receives and de-multiplexes the upstream subscriber traffic
from the local access network. It implements MAC protocols for media access
arbitration in coordination with the ONUs. The OLT is equivalent to the Cable Modem
Terminal Server (CMTS) in an HFC network and the DSL Access Multiplexer (DSLAM)
in a DSL network.63
The Optical Networking Unit (ONU) resides in the subscriber premise. It may be
attached to the outside of the house or reside inside the house (typically in the garage or
basement). The ONU provides the connection between the access network and the home
network. Home networks usually consist of twisted copper pair and/or coax wiring. The
ONU receives and de-multiplexes the providers’ downstream traffic. The ONU converts
the subscriber’s upstream traffic and transmits it on the local access network. The ONU
may multiplex data from multiple sources in the home (voice, Internet traffic) onto the
fiber link. Sometimes the ONU performs only the optical functions and the higher-level
similar to a cable modem used in HFC networks or a DSL modem. Other times, both
63
Abe 2000, Residential Broadband, p.217
57
4.2. Multiplexing
Multiplexing is a technique in which information from different sources is
combined for transmission onto one communications line or in the case of fiber, onto a
single wavelength. A multiplexer combines data signals at the transmitting end of the
receiving end.
Table 4.1 shows examples of how multiplexing is used to share different types of
data traffic in Fiber to the Home systems. This list is not meant to be exhaustive, but
show how current designs of FTTH use different multiplexing techniques. The
techniques
64
This terminology is defined in (Ramaswami and Sivarajan 1998).
58
Sources of Data Traffic
Two Way Subscribers Services: Providers
Multiplexing Options Transmission Voice, Video
and Data
Space Division Wire per Home Run Coax for Video & Home Run
Multiplexing upstream and architecture Fiber for Data & architecture,
downstream Voice Providers’
Own
Facilities
Wave Coarse _ per upstream _ for Video and _
Division WDM and downstream for Data & Voice
Multiplexing Dense WDM PON: _ _ per service _ per
(WDM) WDM per subscriber provider:
“Spectrum
Unbundling”
Fixed Time Fixed TDMA channel TDMA
Division per upstream and channel per
downstream subscriber
Multiplexing (upstream)
(TDM) Statistical ATM, Voice over IP, QoS: ATM or
IP Switched Digital MPLS,
Video, Source-Based
Voice over ATM, Routing,
Video over ATM Tunneling,
Ethernet
VLAN
Table 4.1 Multiplexing Methods Used in FTTH
-- each data signal is sent over a separate wire or fiber. For example, some Fiber to the
Home systems deploy two fibers to each subscriber premise as shown in figure 4.1. One
fiber is used to transmit downstream traffic and one to transmit upstream traffic. Some
systems deploy both coaxial cable and fiber using the coaxial cable to transmit analog
cable TV and the fiber to transmit data and telephone traffic. See figure 4.2.
59
on a single physical link. The data signals are combined onto an optical fiber, with a
separate light wavelength carrying its own signal. This is also known as frequency
to four wavelengths over a single fiber. Some systems use two separate wavelengths for
transmitting traffic in different directions (see figure 4.3) or for transmitting different
Figure 4. 4 Coarse Wave Division Multiplexing (CWDM): Wavelength per Type of Service
Dense Wavelength Division Multiplexing (DWDM) combines many (at least four
or more) individual wavelengths of light over a single fiber link. In a Fiber to the Home
system, a wavelength may carry traffic belonging to a particular subscriber (see figure
4.5) or service provider (see figure 4.6). Currently DWDM technology multiplexes up to
Therefore potentially up to 200 Gbps (billion bits per second) can be delivered a second
by the optical fiber with each wavelength carrying 2.5 Gbps. DWDM is used
metropolitan area networks. For the foreseeable future (5 years or more), DWDM will
probably not be used within local access networks because of its costs.65 Currently there
is not enough traffic to justify DWDM within the local access network. The cost of the
DWDM equipment is shared over only a few subscribers (up to 64 currently) rather than
65
Feldman et al.. 1998
61
Figure 4. 6 Dense WDM (DWDM): Wavelength per Provider a.k.a. “Spectrum Unbundling”
timeslots for the different signals. The signal is broken up into many timeslots, each
having a very short duration. See figure 4.7. Fixed TDM pre-assigns the timeslots so
bandwidth is allocated to each channel regardless of whether the station has data to
only to active input channels, a more efficient use of available bandwidth. The ATM
Figure 4. 7 Time Division Multiplexing: Statistical TDM for Downstream and Fixed TDMA for
Upstream
4.3. Architectures
The different styles of multiplexing combined with the network components to
create fiber network architectures. The architectures being used for Fiber to the Home
networks can be divided into two main categories: Home Run and Star architectures.
As shown in figure 4.8, the Home Run architecture has a separate fiber that is
deployed all the way from the meet point to each subscriber premise. This architecture is
and the subscriber premises as shown in figure 4.9. The Star architecture is also known
63
as a Double Star. The feeder link connects the meet point and the remote node while the
distribution links connects the remote node with the subscriber premises. Network traffic
cost-effective than the Home Run architecture since there is more sharing of network
components.
transceiver, the architecture is referred to as an Active Star. If the remote node contains
only passive devices, such as a power splitter/coupler or an optical router, the architecture
The FTTH architectures differ to the degree that network resources are shared
dedicated per subscriber, per provider or may be shared among all the subscribers. The
more the network is shared, the more responsibility and control the network provider has
over the management and allocation of network resources. Likewise, this implies that the
64
more the network is dedicated, the more responsibility and control the service providers
and ultimately, the subscribers have over their network traffic. Therefore, the network
architecture affects how service level competition, i.e. open access, could be supported by
the local access network at the meet point. Depending on the network architecture, the
providers could install their own equipment to connect to the fiber network, or would
access the network through some shared switch or router.66 This switch or router directs
subscriber traffic to and from their designated service provider(s). Some method is
must be routed from the service provider’s network through the local access network to
the service provider’s subscribers. Likewise, upstream traffic must be routed from the
subscriber through the local access network to the subscriber’s chosen service
provider(s).
However, open access involves more than data transport. When sharing the
network amongst different providers, issues of control, network management and quality
of service (QoS) arise.67 These issues include: How do the different providers arbitrate
usage of network resources among their subscribers? “Whose customers get how much
access to the network resources and when? Who sets the policies under which the traffic
shares capacity?”68
network resources among the different service providers and their subscribers. Ideally,
the activities of one provider’s subscribers should not unduly affect the subscribers of
other providers. The more a network is shared the greater the need to arbitrate access.
The following sections describe the possible Fiber to the Home network
architectures in the context of the support of open access. The architectures currently
being considered include the Home Run, Active Star, Passive Star, and eventually, Wave
subscriber. Since each subscriber has a dedicated link, there is no issue with contention
for resources in the network. The Home Run architecture has the least degree of network
meet point, the service providers can deploy their own OLT’s that would serve only their
subscribers. Alternatively, they could share one OLT and the switch that directs
subscribers’ traffic to and from their designated providers. In the first case, each
subscriber’s fiber cable would cross connect directly with the provider’s equipment,
probably through an optical patch panel. 69 In the second case, the providers’ network
69
This scenario is described in greater detail in (St. Arnaud 2001).
66
on the feeder link, but a dedicated signal is transmitted on the distribution link to each
subscriber. Therefore, the feeder link is shared, but the distribution links are not. The
designated for a given subscriber goes only to that subscriber. Sharing of the network
The meet point transmits the data signal in optical form to the remote node. The
remote node contains active optical and electronic components. They include optical
the remote node, the signal is received and converted from optical to electronic form.
The switch directs the signal to the appropriate subscriber. The signal is converted back
to optical form and transmitted on the distribution link to the subscriber ONU. The
upstream signal is sent from the subscriber to the remote node where it is multiplexed by
70
Frigo 1996
67
connections to their subscribers, like an Ethernet or ATM connection. In the meet point,
the shared switch would use Ethernet or ATM switching to direct subscriber traffic to a
designated service provider. A connection may have bandwidth allocated for it, say a
10Mbps Ethernet connection. The service provider would control how the bandwidth is
used. However, the network provider would control the allocation of resources over the
feeder link. Contention for bandwidth can occur since subscriber traffic is aggregated
over this part of the network. The network providers can address this by over-
provisioning the feeder link or by implementing Quality of Service (QoS) over this
section.
subscribers receive a common signal. The downstream and upstream data channels are
shared among the subscribers through the whole network-- all subscribers receive the
same downstream signal, and all subscribers must contend for access to the same
upstream data channel. Sharing of resources extends throughout the entire network. The
logical architecture is similar to an HFC cable network – a logical bus. This architecture
gives the network provider the most amount of control – their control over the allocation
In a Passive Star network, the remote node contains a power splitter and coupler
as shown in figure 4.11. The power splitter is a passive device that replicates the
wavelength across the distribution links. Therefore, the data signal remains in optical
68
form all the way from the meet me point to the subscriber premise. No optical-to-
ranges from 4-64. This number is known as the splitting ratio. The architecture is also
or more wavelengths. At the remote node, the power splitter broadcasts, or replicates and
sends the wavelength(s) across the distribution links, to the subscriber ONUs. Each ONU
selects out the data specific to the subscriber based on time slots or some other MAC
layer protocol.
The ONUs multiplex the upstream traffic onto a wavelength using fixed time
division multiplexing or some other media access protocol. The upstream traffic may be
71
Feldman et al. 1998
69
multiplexed onto the same wavelength as the downstream traffic or may be allocated a
separate wavelength. The traffic from the different ONUs is combined in the remote
node using a passive coupler. Depending on the access method, a fixed amount of
Open access would be implemented very similarly to the cable network.72 Open
logical link between the service provider and the subscriber) or specialized routing
methods where packets are routed based on information other than the destination
address.
This architecture requires Quality of Service (QoS) mechanisms be put into place
to ensure efficient resource management among the various providers and their
providers as well as services. The network provider would ultimately have control over
used in local access networks to transmit data across many different wavelengths.
Although the physical fiber in the feeder is shared in a DWM PON, traffic is isolated on
separate wavelengths. Therefore, it resembles the Home Run architecture in that traffic is
kept separate throughout the network. However, it also resembles the Passive Star
72
See (O’Donnell 2000; Tseng, Latham et al. 2000) for more information about technical implementations
of open access for the cable network.
70
architecture since the physical fiber in the feeder link is shared and there are no active
components in the field. WDM PON is considered to be the “end game” of Fiber to the
Home architectures.
send signals across different wavelengths. In the remote node, an optical switch selects
out one or more associated wavelengths and transmits them to the subscriber ONU73 74 as
bandwidth among the subscribers is not an issue. When wavelengths are allocated to
73
This device is also known as a waveguide grating router, an arrayed waveguide grating multiplexer, or an
optical phased array. See (Feldman et al. 1998) and (Ramaswami and Sivarajan 1998).
74
Feldman et al. 1998
71
the provider’s subscribers could share that provider’s designated wavelength(s). In this
case, the service provider has control over the arbitration of bandwidth and network
becomes more complicated. With the wavelength per subscriber model, signals from the
With wavelengths per provider, the receiver at the subscriber premises would need to be
wavelengths.
access networks. The required optical switch/routers are still in the developmental
stages. DWDM transceivers are still used almost exclusively in long haul backbone
networks.
4.4. Standards
Standards committees such as the IEEE and industry consortiums such as the Full
Service Access Network (FSAN) group have been developing standards and protocols for
FTTH.
75
Spectrum unbundling was discussed as a way to provide open access over the cable network; however,
the cable network does not have enough spectrum to make this feasible.
72
culminated in a standard for ATM over PON, known as the Full Service Access Network
(FSAN). Companies are interested in PON because of its perceived lower maintenance
costs due to the use of passive components in the field.76 However, the ATM protocol is
interest in the deployment of FTTH using the Fast and Gigabit Ethernet standards.77 78
Ethernet is a standard widely used in businesses for corporate local area networks.
Advocates point to the wide availability and lower costs of Ethernet components.
vendors formed an industry consortium called the Full-Service Access Network (FSAN).
They developed standards for the delivery of voice, video and data services using various
types of local access networks including DSL, Fiber to the Curb and Fiber to the Home
systems. The FTTC and FTTH standards are described in the document ITU G.983
optical network (PON). The standard currently supports 4-32 subscribers per node.
Bandwidth is shared amongst all the subscribers for a node. The downstream bandwidth
can be either 155 Mbps or 622 Mbps depending on the ATM switch. The downstream
76
Gillepsie 1997
77
Cheriton and Bechtolsheim 2000
78
St.Arnaud 2000
79
Companies included British Telecom, BellSouth, Verizon, SBC, NTT, etc.
80
See the FSAN website at http://www.fsanet.net/ for more information
73
signal is broadcast to all the subscribers and the bandwidth is dynamically allocated
The upstream bandwidth is 155 Mbps. The subscriber ONU multiplexes the
upstream signal in coordination with the OLT using time division multiplexing. For
example, depending on network contention, each subscriber gets at least 1/32 of the
provide capacity for video over ATM services. However, because of concerns over the
efficiency of video over ATM, the latest standard allows video to be provided in analog
(EFM)81 was formed to look at the use of the Ethernet protocol in local access networks.
Participants include various equipment vendors and network providers. The study group
is looking at the use of Ethernet in various systems including DSL, Fiber to the Curb and
Fiber to the Home systems. The FTTH architectures being considered include Ethernet
These systems would support transmission speeds of 10 Mbps, 100 Mbps (the
Fast Ethernet standard) and eventually 1000 megabits per second (Gigabit Ethernet). The
10/100BaseF.
81
See the EFM working group website at http://www.ieee802.org/3/efm/index.html for more information.
74
Note that the use of Ethernet in FTTH includes Ethernet’s “packaging”, that is the
headers and frames, but not the media access method. Devices compete for transmission
access in Ethernet local area networks using the Carrier Sense Multiple Access with
Collision Detection (CSMA/CD) protocol. However, FTTH and other local access
systems span distances greater than the CSMA/CD protocol was designed for. Any
potential EFM standard needs to address the MAC protocol issue. The DOCSIS standard
5. Case Studies
Since the passage of the Telecommunications Act of 1996, a number of state and
public partnerships and direct government investment.82 The publicly built infrastructure
ranges from statewide, fiber backbone networks to municipal fiber rings to local access
area and to ensure access to advanced telecommunications services for their citizens.
Governments in rural areas are especially concerned with the latter. They do not foresee
private investment in telecommunications services for their region, and therefore choose
to make the investment themselves, since they do not have the same return on investment
In the United States, a few communities such as Grant County, Washington; Palo
Alto, California; and Chicago, Illinois, are serving as early adopters for Fiber to the
Home technology and are pursuing plans to deploy Fiber to the Home networks. This
5 . 1 . Grant County
The Grant County Public Utility District has deployed a trial Fiber to the Home
network serving 100 homes and 30 businesses in the city of Ephrata, Washington. The
82
Strover and Berquist 1999
76
project is called ZIPP and includes deployment of a municipal fiber network as well as an
all-fiber local access network. The utility deploys and operates the ZIPP fiber network,
while independent service providers provide Internet access, voice and video over the
network. The municipally owned utility plans to roll out the network to the rest of the
homes and businesses in the county over the next three to five years. The network serves
the Columbia River.83 The Grant County PUD is a municipally owned public electric
utility that was started in the 1950s. It is a major electricity generating utility with two
large hydroelectric dams on the Columbia River as well as two small generating plants.
Electricity is sold on a nonprofit, retail basis to Grant County residents and wholesale to
The utility was motivated to build the fiber network for several reasons. They
infrastructure. With the advent of energy deregulation, the GCPUD wanted to explore
services. Initially, the utility considered becoming a CLEC. However, Moore came to
the conclusion that their strength was in providing infrastructure, not services, and that
83
As of 2000, the total population was 74,698 in a land area of 2,676.4 square miles. For 1999, the median
household income is estimated to be $30,289, while the median household income estimate for Washington
State is $50,152. Data from the U.S. Census Bureau: 2000 Population for Grant County, Washington
(http://www.census.gov visited April 25, 2001) and Office of Financial Management 2000 Population
Trends for Washington State September 2000 (http://www.ofm.wa.gov visited April 25, 2001).
77
In 1998, the utility initiated plans to deploy a fiber network connecting the electric
generating plants, power substations and office buildings together. The network enables
the utility to monitor its power substations and electric plants. They saw it would take
little extra effort to extend this network into a fiber ring once these points were
connected. Once the fiber ring was built, excess capacity could be offered to other
In 1999, the Washington state legislature passed a bill, Senate Bill 6675, that
beyond what is needed for specific utility purposes. The bill allows these organizations to
In 1999, the GCPUD proposed extending the fiber network out to individual
homes and businesses. The utility could use the network to offer advanced services such
as automated metering and monitoring and then lease the excess capacity to
were frustrated with the lack of advanced telecommunications services offered by the
existing incumbent cable TV providers, Northland Cable and USA Media as well as
telephone company US West. Cable modem and DSL broadband Internet access was not
available, and even dial-up access was limited mostly to 28.8 kbps. In addition, cable
to consumers in large cities, however, were skeptical what incumbent companies would
offer them. In fact, some residents in this area still do not have basic wireline telephone
service. With this in mind, the utility commission approved the project in late 1999. In
78
August of 2000, the utility started operating the network on a trial basis, serving 100
The FTTH network connects to the ZIPP municipal fiber ring. This in turn
connects through the Northwest Open Access Network (NoaNET) to a major Internet
organization that licenses fiber optic cables from the Bonneville Power Administration
(BPA) to form a fiber backbone network for use by community-owned electric and water
utilities. The BPA is a federal utility that operates 29 federal dams located in the Pacific
utility started by deploying the network only to homes that ordered the services. It turned
out, though, that the splicing and resealing process was too expensive, so they decided to
gradually go ahead and deploy the network to all homes for a given stage of deployment.
The network is installed to the power meter located on the outside of the house. To
activate services, the utility installs the customer gateway equipment at the home.
Turnaround time for installation is about 24 hours for the current trial.
As of June 2000, the network passed 3,700 homes and businesses. The plan is to
deploy the network to 8,000 homes and businesses by the end of this year and complete
coverage to all sites (approximately 40,000) in the next three to five years.
Financing for the current project comes from the utility’s capital budget. The first
stage of the project has cost around $12 million. The total cost of the project is estimated
to be $130 million over the next three to five years. The utility estimates that $35 to 40
79
million of the cost will be borne directly by the utility and that revenues will cover the
5.1.2. Services
Consumers pay the utility a one-time connection fee of $300 and an ongoing
monthly fee of $40 to use the network. The utility deploys and manages the network and
independent service providers provide the Internet access, voice and video services over
the network.
The subscribers choose their own service providers. In the current trial, the
choice of services includes symmetric broadband Internet access of 100MB and phone
service through Voice over IP. The customers have a choice of four Internet Service
Providers for symmetric broadband Internet access at 100MB, with monthly fees ranging
• Northwest Internet87 $25 per month for residential service and $50 for
commercial service
A CLEC named Northwest Telephone provides voice service for $15 per month88 using
Voice over IP technology. A video service provider named MyRio has agreed to provide
85
http://www.gemsi.com
86
http://www.qosi.net
87
http://www.nwi.net
88
http://www.nw-tel.com
80
digital TV service with 120 channels and video-on-demand on a trial basis starting this
summer.89
The service providers contract with the county to provide services over the
network. The companies have the option to lease “excess dark or lit fiber”90 and
bandwidth capacity. The utility provides service providers with Ethernet data “pipes” of
Ethernet protocol. The network equipment includes Cisco routers and CPE and
switching equipment provided by World Wide Packets91. Two strands of fiber connect
each customer site to a community hub—one fiber for each direction of traffic. Currently
each hub serves 48 customers. However, the planned limit is 198 with future versions of
The network is designed to support open access through Ethernet Virtual Local
Area Networks (VLANs). For each service, the provider sets up an Ethernet VLAN
between itself and its subscribers. The cost is approximately $1,000 per subscriber for
Home network to 70 homes in the Community Center section of Palo Alto. They started
deploying the network in March 2001. The network is expected to go into operation in
89
http://www.myrio.com
90
http://www.gcpud.org
91
http://www.worldwidepackets.com
81
the fall of 2001. The CPAU is a publicly owned municipal utility that provides
electricity, gas and water services and already owns and operates a fiber backbone that
connects to the Palo Alto Internet Exchange (PAIX)92 one of the top Internet
interconnection points in the world. The municipal fiber ring was completed in 1998.
The CPAU leases dark fiber on the network to local businesses and telecommunications
providers.
group of citizens proposed the plan and designed the network architecture. In the spring
of 1999, the Palo Alto City Council approved the five-year trial. The trial network would
initially serve 100 homes and would be rolled out in stages to other homes in Palo Alto.
The initial technical design was an Ethernet over Active Star architecture very similar to
the architecture Grant County uses. Initially, the only service offered was to be Internet
access of 10 to 100 Mbps. Although companies would eventually be able to use the
network to offer other services. The city planned to fund most of the project from
consumer fees. These fees were $1,200 for installation and around $80 to $110 per
month for ongoing services. The estimated costs were $400,000 for initial deployment to
100 homes.
Over the next year, the city issued two requests for proposal (RFP) with the
requirement that the network deployment and service provision be provided by separate
companies. They also required that the network follow the technical specifications
92
http://www.paix.net
82
outlined in the RFP. One company would deploy and maintain the FTTH network and
then other companies would provide services on top of this network. However, the RFPs
did not attract enough bidders for either service or network providers. The companies
considering network provision estimated the true cost of deployment to be $1.4 million.
The sole ISP who bid has subsequently gone out of business.
At that point, the city officials decided to scale down the project to a limited one-
year trial of 70 homes to evaluate the economic feasibility. In December 2000, the city
council approved the new plans. The city decided to pay for the project itself and not
charge the trial participants. They scrapped the architectural requirements and opened the
proposal to other technology options. Then, the utility decided to deploy the trial network
using its own staff and evaluated different equipment providers. They eventually chose
5.2.2. Services
In the current trial, the planned services include Internet access of 7 Mbps
downstream and 4.5 Mbps upstream, telephone and cable TV service. As of May 2001,
Marconi. One fiber is used to carry both upstream and downstream traffic. According to
Manuel Topete, Project Coordinator for the FTTH project, a key factor in choosing this
technology was the support for video service. The technology can provide cable TV and
DBS service broadcast over the same network. The video services are provided on a
94
http://www.marconi.com
83
separate wavelength from the telephone and data services. However, for the current trial,
they plan to offer only one ISP and telephone service provider. The network does not
currently support multiple ISPs. If the trial continues beyond this one year time period,
CPAU are considering adding the routing equipment that would be needed to support
open access.
5.3. Summary
From just two cases, it is hard to generalize the role of municipalities in deploying
FTTH networks. However, the experiences of the two communities point to the
Both projects are managed by existing municipal utilities who have certain advantages in
They have the technical expertise and experience in deploying and managing a fiber
network. Both the CPAU and GCPUD had already built municipal fiber rings for use by
government and businesses. The success of these “second mile” projects led to the
proposed development of the “first mile” infrastructure. They were also able to leverage
existing public telecommunications infrastructure. In both Palo Alto and Grant County,
the existing municipal fiber networks provided the “second mile” infrastructure. In both
cases, the local networks connected all the way through to the major Internet Points of
They could also take advantage of the existing organizational structure. Billing
and operations systems exist. They have relationships with residential consumers --
barriers. The issue with building a Fiber to the Home or any local access network is that
it requires a large amount of capital. Palo Alto is a wealthy community, and even they
are requiring assistance from the equipment provider to fund their network. Grant
County has been in the enviable position of having revenue from the provision of
electricity to other Western states. But most communities do not have these types of
resources.
companies - especially the incumbent phone and cable TV operators who see government
Despite these difficulties, one can foresee an important role for municipalities in
can help promote innovation in both infrastructure and services. The communities that
have the financial resources to build FTTH networks have the opportunity to become
centers for innovation. Their networks can serve as platforms for the next generation of
experiment with different local access technologies, not only in Fiber to the Home, but
95
Certain states, like Missouri and Texas, have prohibited local governments from providing
telecommunications services.
85
6. Conclusions
This thesis examined the future of competition in the context of the potential
FTTH market, FTTH technology and policy for local access networks.
6 . 1 . Summary of Findings
The following sections summarizes the main findings of this thesis:
6.1.1. Market
The FTTH market is still uncertain. Although FTTH deployments are finally
FTTH will occur. The barriers to adoption are mainly economic due to uncertain demand
The migration from the current telephone and cable TV networks to Fiber to the
Home will happen gradually. The deployment of hybrid fiber architectures (HFC, Fiber
to the Neighborhood, Fiber to the Curb) can be seen as evolutionary steps towards the
deployment Fiber to the Home. Early adopters of Fiber to the Home technology include
to compete in the video market95 or when some disruptive application emerges that
95
This scenario requires economies of scope among phone, video and data provision over FTTH.
86
The market is currently in a chicken and egg situation. Current broadband
networks (DSL and cable modem) support current applications such as web surfing and
email. However, one can foresee how emerging applications, including peer-to-peer
applications and streaming video, will require the higher capacity of future broadband
networks such as Fiber to the Home. These applications cannot become mass market
until there is widespread deployment of broadband networks that can support them.
However, the industry will not deploy these networks until the applications that require
them become widely used. This situation has happened before. In the past ten years, it
took the widespread acceptance of the Internet, in particular applications like the Web, to
6.1.2. Technology
Fiber to the Home technology is still in flux; no dominant architecture has yet
emerged. Technical options exist for implementing open access, network sharing by
multiple service providers, in each of the FTTH network architectures now being
considered. Thus, the ability to support service level competition can be designed into
The architectures vary to the extent that network resources are divided among
dedicated per subscriber, per provider or may be shared among all the subscribers. This
degree of sharing affects the ease of implementing and enforcing open access. The less
the network is shared, the easier it is to implement open access since the traffic from one
provider can be more easily isolated from the other. The more the network is shared, the
87
more control the network provider has over the data traffic, which makes it harder to
enforce open access. Government should not dictate specific technologies, however, a
clear policy goal of open access can influence the design of FTTH networks. The design
of an open FTTH network platform can facilitate future service level competition.
6.1.3. Policy
The primary goal of the deregulation of the telecommunications markets has been
to further competition. This thesis analyzed various options for competition policy in the
context of Fiber to the Home. In chapter 3, this analysis considers the following policy
options: the status quo policy regime, “raised hammer” approach, unbundling, and laissez
faire. However, for various reasons, this thesis finds that these approaches are not
The current regulatory asymmetry between the cable and telephone networks is
increasingly untenable due to the convergence of services brought about by Internet and
fiber-optic technology. The unbundling rules that apply to the telephone network are
approach taken towards the cable broadband is reactive rather than proactive: the
However, the problem is that if competition does not develop, any policy would have to
restricting the effectiveness of the policy. And due to the entrenched position of the
competition policy: the development of a consistent open access policy and direct
policy for Fiber to the Home based on the guidelines set by the Ninth Circuit Court
ruling.97 The goal of open access regulation would be to ensure that the provider of the
physical infrastructure doesn't use its control over the network to restrict choice and
competition of services and content.98 Thus, this policy would distinguish between data
pipeline (i.e. data transport) from the services that are transmitted through the pipeline.
Service providers would be given nondiscriminatory access to the pipeline to offer their
own services.
The policy goals regarding service level competition should be set while Fiber to
the Home technology is still being developed. Once these requirements are defined,
Fiber to the Home technology can be designed in such a way that increases the
96
Reed 1991 p. 204
97
AT&T, et al. v. City of Portland.
98
See (Werbach 2000) for a discussion of open access in the context of a layered approach to
telecommunications policy.
89
Policy should state the overall requirements and let the network and service
providers work out the implementation details among themselves (with government
depending on the Fiber to the Home technology. It could be the actual fiber connection, a
more flexible in the face of changing technology and avoids much of the complexities of
Grant County, WA. This analysis suggests two ways that municipalities can foster
competition in the local loop. Municipalities can build the local access networks
services than private companies, these networks can be used to try different technical
implementations and business models for open access. For example, the Grant County
network was designed specifically to support competition in voice, data and video
services by providing Ethernet pipelines to the service providers. The experience of Palo
Alto suggests that the choice of business models is as important as the choice of
(the connection between the local access networks to the core backbone networks). In
both Palo Alto and Grant County, the FTTH projects leverage existing publicly built
90
networks to connect to the Internet backbone. If municipalities deploy “second mile”
infrastructure and make this infrastructure available to private network providers, they
may encourage the deployment of competitive local access networks. This represents a
promising alternative, since many municipalities will not be able to afford to implement
• How does the government implement an effective competition policy regime for
This thesis advocates the development of an open access policy for competition.
However, given the vested interests of the incumbent network providers, implementation
of such a policy will not be straightforward. Effective policy will require the resolutions
of issues such as enforcement and dispute resolution between the network and service
providers. Another issue is the scope of these policy requirements: Should network-
sharing requirements pertain only to the incumbent providers? How might these policies
• What are the economics of Fiber to the Home? How do the costs, capabilities and
supported services compare among the various Fiber to the Home technologies?
This thesis highlighted the differences between the various Fiber to the Home
technologies in the context of open access. Other current analyses focus on the costs and
analysis of Fiber to the Home technologies would be of value to both potential FTTH
91
network providers and policymakers. It would shed light about the future feasibility of
investigate how the Internet affects the potential FTTH market -- by changing economies
of scope and/or enabling substitutes for services – since earlier detailed analyses were
This thesis looked specifically at two cases of the municipal deployment of all
fiber local access networks. A more general analysis is needed to assess the benefits of
the municipalities in developing second mile infrastructure. Another issue is the potential
federal role in developing this infrastructure – either through federal investment or the
6.3. Conclusion
The main conclusions of this thesis are:
local access networks now. The current inconsistencies in competition policy have lead
to great uncertainty in the local access market. The market wants certainty; uncertainty
itself inhibits investment. If the decision is to ensure service level competition, industry
can plan their business and design the technology accordingly. Therefore, competition
With Fiber to the Home, there is currently the opportunity to design future
broadband networks in way that supports service level competition. Fiber to the Home
technology is still being developed -- fundamental technology choices are still being
made. Technical protocols and industry standards can determine the ease with which
multiple service providers can share a common network. If competition amongst service
providers is to be a policy goal, this goal can and should be codified in the standards and
Glossary
Bell Operating Company (BOC): a local telephone company formerly owned by AT&T.
Common Carrier: an entity that provides a public communications conduit without regard
to content.
Local Exchange Carrier: any company that is engaged in the provision of telephone
services.
Statistical Time Division Multiplexing (TDM): a technique in which multiple signals are
sent over a single wire (or carrier) using dynamically assigned time slots for the different
signals. Bandwidth is allocated only to active input channels, making better use of
available bandwidth and allowing more devices to be connected.
Switch: Network device that filters and forwards data contained in frames based on the
destination address of each frame. The switch operates at the data link layer of the OSI
model.
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Websites
Benton REA’s PowerNET
http://www.bentonrea.com
Clearworks.net
http://www.clearworks.net
FiberHood
http://www.fiberhood.com
Gemnet
http://www.gemsi.com
Huntel Engineering
http://www.huntelengineering.com
Marconi
http://www.marconi.com
Myrio
http://www.myrio.com
Northwest Internet
http://www.nwi.net
Northwest Telecom
http://www.nw-tel.com/
Optical Solutions
http://www.opticalsolutions.com
http://www.paix.net
Quicksilver
http://www.qosi.net
Vialight
Vialight http://www.vialight.com