Another FTTH strategy: let customers own the last mile

Some telcos have already started to undertake the costly endeavour of extending fibre optic cable into customers’ homes (FTTH) to catch up, bandwidth-wise, with the cablecos. But for the carriers who haven’t begun the rollout yet, Canarie Inc., an Ottawa-based Internet development organization, offers an alternative to years of subscription fees as a way of recouping the cost: have the consumers lay the fibre themselves. "Everybody believes in competition in the private sector, it’s the way we reduce prices and introduce innovation," Canarie’s senior director of advanced networks Bill St. Arnaud said at the Voice 2.0: Beyond Telecom conference in Ottawa last week. "But how do we do that in the last mile? It’s unlikely we’re going to have five companies dig up the road and put in five different cable runs down your suburban street." However, if the homeowners own the last mile of fibre from their home to a community network and then a carrying point, they can choose from any number of service providers. To illustrate the situation consumers currently find themselves in, St. Arnaud said: "Imagine a world where everybody rented an apartment and didn’t own. That’s what telecom is like today." But that model is slowly changing. Condominium fibre – when an organization owns the fibre into its premises rather than "renting" it from a telco or cableco – has been around for years, but mostly in the enterprise space. St. Arnaud said the model started with the university community and was quickly adopted by various businesses. He mentioned Boeing, Colgate-Palmolive Inc., Nortel Networks, Cisco Systems Inc., Ford Motor Company and Bell Canada subsidiary CGI as companies that currently own their own fibre. As a business case, St. Arnaud pointed to a study by Ford which concluded that if you’re spending more than $7,000 a year on managed services from telcos, buying your own fibre is a cheaper proposition. And last week, Winnipeg’s Pembina Trails School Division unveiled its own fibre network that consists of 44 kilometres of cable. It is now the fastest fibre optic education network in Canada and could save the school division up to $200,000 a year if it is used to run a VoIP service. Look to loopcos for laying fibreThe companies that deliver and install the fibre, which Canarie calls loopcos, are mostly evolved utility companies. St. Arnaud pointed to Lexent Inc. in New York as an example of the classic loopco. Lexent started as an electrical utility company and realized that running fibre was something that was easily done and represented a better value proposition. While St. Arnaud said Bell Canada’s business is not digging up roads, that is exactly what the business of most loopcos is."They don’t understand telecom. They don’t understand IMS or VoIP," he continued. "But they do understand how to put pipes in the ground and sell fibre." Canarie is currently working with Société de Réseaux Dédiés Privés (SRDP), a Laval QC-based loopco that is building a condo fibre network across Ottawa. Canarie itself is paying a one-time fee of $112,000 for a couple of fibre strands across the city. "Typical ROI is about two to three years compared to buying a managed service," said St. Arnaud. "So it’s very compelling, particularly for large institutions. And because you own the last mile, you’re not restricted to who you can connect to." But how compelling of a proposition is customer-owned fibre for individual homeowners? From a service provider choice standpoint it’s very interesting because it breaks up the duopoly that currently exists with the cable companies and the telephone companies – the only two options because they are the only two that run cable into homes. The potential cost might be more of a deterrent though. One of the best examples of community fibre in the world right now is the city of Vesteras, Sweden, where Malarenergi, the local electrical utility, has had a 53% take-up rate in its FTTH initiative in spite of a $2,800 cost to homeowners. This, however, is a permanent investment that increases the value of a home – up to US$6,500 according to some estimates – and provides the benefits of owning your own fibre for as long as you own your home. The fact that Malarenergi won’t start building a network unless 60% of the residents in that area sign up for it also represents another obstacle in the way of community-owned fibre deployment. And while customer-owned fibre gives consumers more choices in terms of carriers, St. Arnaud thinks it would actually be advantageous to the incumbent telephone companies. "The cablecos right now are holding all the aces," he said. "They can deliver up to 100 Mbps to the home now and I think the telephone companies have a severe challenge; they have to make the big investment that the cablecos made in the ‘90s…It’s pretty tough when you’re an income trust, so a new business model is needed and we think this is one possible architecture that might be of interest to those companies to help really speed up the rollout of fibre to the home." If Canadian communities do get behind the customer-owned fibre model en masse, it would fundamentally change our communications landscape. "Take everything we know about telecom and reverse it. Put all the active control and management at the edge and keep the core as passive as possible," said St. Arnaud. "We’re seeing these kinds of developments start to happen in other places of the world, and we’re hoping to get Canada moving in this direction as well."

Another FTTH strategy: let customers own the last mile

News | October 27, 2006

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