Utopia Consortium of Utah cities is building its own network. (Photos courtesy of Utopia Consortium)

...the largest incumbent with operations in 29 states, launched its drive in earnest last summer in targeted markets, beginning with Keller, Texas, near Dallas and Fort Worth. In 2004 it "passed" 1 million potential subscribers. In 2005 it plans to pass two million more scattered over 12 states. The "take rate," or how fast subscriptions come in, will govern the pace of investment. One analyst, KMI Research, forecasts that the rate will accelerate and the FTTP market for equipment, cable and apparatus will reach $3.2 billion in 2009.

Verizon plans to hire 3,000 to 5,000 new employees for the build-out by the end of 2005, but it declines to say how much it is spending.

Telecom analysts say that an agreement, about a year ago, among the biggest incumbents–Verizon, Bell South and SBC Communications–set the standards for last-mile connections and triggered the expansion.

The selection of technology winners is driving costs down and leading to standardized installation practices. Verizon runs fiber to a splitter box on the outside wall of homes and buildings and bridges to circuits of coaxial cable, copper wire and ethernet inside. Other incumbents are not going quite as far. They run fiber to neighborhood nodes and conventional lines or wireless from there. That still brings fiber close and significantly increases data speed.

Copper Versus Fiber

For the telecoms, there are several drivers, including lower maintenance costs, scalability and margin. Maintaining old copper is labor intensive. Upgrades are difficult, and analysts say the old copper systems are drowning companies in expense. And under the rules of deregulation, access to copper must be shared with the competition. But, by FCC ruling last year, access to fiber does not have to be shared. "We build it; we own it," says Telcordia analyst Ernie Gallo. "If we decide to lease it we can but we don’t have to. That’s why everybody is building."

Gallo says fiber-optic systems are also robust, almost infinitely upgradable and considerably cheaper to maintain. For the telecoms, making the transition to fiber is "a no-brainer," he says.

"The fiber is much more expensive to put in, but it lasts much longer, and there is no corrosion, no problem with moisture or RF (radio frequency) interference." Gallo says. Still, he adds, there are questions to resolve. "They’ve got to place all this cable. How do we build this out from the central office? How do I get it to the house? Directional drilling? Sewer or gas lines? Construction is going to be key to this."

The other powerful driver is demand. Communities all over the country have made it clear, through home-grown efforts to achieve broadband connectivity, that they want it and they want it now.

"Up until this year, when Verizon started its fiber-to-the-home roll-out, most of the development has been in rural areas or brand new developments by small, local carriers, public utilities and municipalities," says Robert Whitman, market development manager for global broadband with Corning Optical Fiber, Corning, N.Y. "For those folks the driver has been more economic development and serving the community," he says.

Wireless networks are one alternative technology attracting attention. Currently, more than 100 cities are planning or deploying them. Distributing data over power lines is another alternative that has many municipally owned power companies and investor-owned utilities trying to work out the case for BPL. Click here to view chart

Other local governments are simply building out the last mile the hard way. They are stringing fiber from trunk-line nodes to businesses and homes any way...