from: IP Business Magazine [1]

Fiber's Open Spaces

By Martin Vilaboy

There may be up to 360 providers currently offering fiber to the home in the U.S., but Verizon, it’s estimated, accounts for about two thirds of the 2.14 million U.S homes now connected to fiber. It’s safe to assume, however, that not many of the homes Verizon is passing reside in rural areas, as suburban and urban regions with higher concentrations of office locations are likely to produce lower hanging fruit.

The resulting wide open spaces being left behind by the former Bell company create a landscape that’s all too familiar to rural telcos, and it appears these rural carriers are increasingly optimistic about their abilities to protect those territories.

Two years ago, only about 12 percent of rural telcos were utilizing fiber to the home (FTTH) and/or fiber to the curb (FTTC) to offer broadband to customers. Last year, that number had grown to 28 percent. It now stands at 32 percent, according to surveys of members of the National Telecommunications Cooperative Association, and the vast majority of survey respondents (84 percent) already utilize fiber fed nodes to extend the reach of their digital subscriber line service

NTCA Survey Respondent’s Customer Base
Avg. residential lines 5,326
Avg. business lines 1 691
Median residential lines 2,859
Median business lines 633
Source: NTCA

Granted, the numbers of actual homes passed remains small. Among the 47 percent of survey respondents with a short-term fiber deployment strategy, just 9 percent expect to provide FTTC and 12 percent plan to offer FTTH to at least 25 percent of their customers by the end of this year. Meanwhile, 47 percent of survey respondents with a short-term strategy expect to offer fiber to the node to more than 75 percent of their customers by the end of 2007.

Moving forward, however, 52 percent of rural telco respondents plan to offer fiber to the node to more than 75 percent of their customers by yearend 2009, while 6 percent and 9 percent, respectively, plan to offer FTTC and FTTH to that same percentage of their customer base.

The forces behind demand for fiber within rural markets mirror those at work around the rest of the nation, namely bigger Internet pipes filled with video. According to the NTCA survey, 80 percent of rural telco subscribers have access to 1 Mbps service, while 48 percent can get 3 Mbps service and 40 percent greater than 3 Mbps. And take rates for 1 Mbps and 3 Mbps service each grew by 50 percent in the past year (to 9 percent and 6 percent, respectively), while the take rate for services in excess of 3 Mbps rose to 4 percent, a one-year increase of 300 percent, says NTCA.

Currently, 99 percent of responding rural telcos offer broadband to some portion of their customer base. And with respect to respondents’ standing in the community as the telecommunications provider of choice, “97 percent consider broadband deployment very important,” says NTCA.

Meanwhile, nearly two-thirds of rural telcos presently offer video service—the vast majority under a cable franchise. And among those respondents not currently offering video, 17 percent plan to do so by the end of this year, 31 percent by yearend 2008, and 6 percent by yearend 2009. The remaining 45 percent currently have no plans to delve into video.

Also in line with what incumbent providers face elsewhere, rural telcos have defensive reasons for deploying fiber, as well. “The prospect of cable companies developing the capability to offer voice service is causing respondents some discomfort,” says NTCA. More than half of NTCA members, for example, are very or somewhat concerned about cable players further encroaching on their territories, say survey results.

Overall, the typical respondent is forced to compete with one national ISP, two satellite broadband providers, two wireless ISPs and one cable company, says NTCA.

Not surprisingly, cost remains the key component of rural telcos’ fiber plans; 82 percent of NTCA members cite it as a significant barrier to widespread deployment. On the other hand, a full 90 percent are hopeful of seeing modest to significant benefits versus the cost of deployment three years from now.

Ah, optimism. IP