Canadian fibre providers ‘blessed’ with shorter loop lines, analysts say

Closer multi-family homes and shorter “loop lines” allow fibre-to-the-node network providers in Canada to offer faster Internet speeds with fewer capital-intensive upgrades than comparable networks in the United States, industry analysts said. Fibre-to-the-node networks use slower, copper wires to complete “last mile” connections to homes and other buildings. That means Internet or Internet protocol TV (IPTV) subscribers who connect to the network further from the fibre “node” receive slower service than those closer to the node. The length of loop lines are important to carriers now as they roll out fibre-to-the-node networks and face rising demand for network capacity. Analysts said over the long-term, companies will be pressured to reduce their copper loop length or extend fibre links all the way to the dwelling, known as fibre-to-the-home. Since 2006, American telco AT&T Inc. has offered its U-verse services over a fibre-to-the-node network that passes about 30 million U.S. households. That network, which is available in 22 American states, offers advertised download speeds of up to 24 Mbps, according to AT&T’s website. Mike Render, president and principal of U.S. market research and consulting firm RVA L.L.C., said in a phone interview that AT&T and some smaller fibre-to-the-node providers in the United States commonly use loop lines that can run as long as 4 kilometres. “The less distance you have to travel over copper, the higher speeds you have to maintain,” he said. “It’s basically just a matter of physics where you have a loss over distance.” Ronald Gruia, a Toronto-based principal telecom analyst at U.S. consulting firm Frost & Sullivan, said in a phone interview that AT&T’s network was built to ensure that about 50 per cent of the homes it serves are close enough to a node to have access to the advertised top speeds. For the other half of the company’s U-verse customers, he said, access speeds vary depending on how far away they are from the node, how many homes the connecting loop line passes, and how those homes use the Internet service. “In Canada, we’re blessed, because our loop lines are much shorter, so we’re not faced with the same problems that AT&T would have,” he said. Gruia said Canadian homes tend to be less sprawled out than in the United States, improving fibre-to-the-node Internet speeds and the cost efficiency of building out such a network. Jeff Heynen, broadband access and video analyst at Infonetics Research, agreed in a phone interview that the abundance of large apartment buildings, condos, and other “multi-unit dwellings” in Canadian cities allow Canadian network operators to shorten their loop lengths. “Here in the U.S., we tend to be more single family, home-based, in general,” he said. In Canada, telcos BCE Inc., Telus Corp., and SaskTel are rolling out fibre-to-the-node networks to offer Internet and IPTV services. Bell, which in its last quarterly financial statement said its fibre network passed 2.4 million homes, is also building a fibre-to-the-home network in Quebec City, and MTS Allstream Inc. is rolling out fibre-to-the-home in some Manitoba markets outside of Winnipeg. David St. John, head of public and media relations for the nonprofit organization Fibre-to-the-Home Council Americas, said Bell subsidiary Bell Aliant, which is rolling out fibre-to-the-home in Eastern Canada, runs North America’s second-largest fibre-to-the-home network. Natasha Compton, a Bell Aliant spokeswoman, said in an emailed statement that the company’s FibreOP service now passes 574,000 homes and that the company is in the process of a $500 million network expansion to pass another 76,000 homes by the end of the year. Bob Varettoni, a spokesman for telco Verizon Communications Inc., told The Wire Report that the company has spent “more than $20 billion ” on its FiOS fibre-to-the-home network. That network passes 15 million U.S. homes, predominantly along the American East Coast. The company has stated it has no plans to extend its fibre network footprint any further and that is no longer accepting new DSL Internet subscribers. AT&T spokesman Mark Siegel said his company’s “investment in U-Verse was $10 billion over 5 years.” St. John said longer loop lines may appear to cut down on network expansion costs for fibre-to-the-node network operators in the short term, but will ultimately lead to more costly network upgrades as bandwidth requirements increase in the years to come. He said rising demand for bandwidth-heavy applications and Internet functions like online media applications and video streaming will lead to deteriorating service conditions for fibre-to-the-node customers on the far end of a loop line. As a result, he said, fibre-to-the-node operators will have to extend fibre nodes closer to the homes they service. This year, Cisco Systems Inc. predicted that global Internet traffic will rise from 180 exabytes in 2010 to 486 exabytes—or about 486 billion gigabytes—in 2013. Video will account for 91 per cent of that bandwidth consumption, the company predicted. “Bandwidth to the home is going to have to get bigger and better, year after year, moving forward,” St. John said. “Nobody’s going to make investments they don’t have to make. The question is what is going to compel that to happen.” Heynen said competition between telcos and cablecos and the offering of bundled services will also encourage Canadian telcos to extend fibre closer to subscribers’ homes. “You’ve got Rogers and Shaw , competitive cable operators who have already been aggressive with their DOCSIS 3 rollouts, with which you can push bandwidth to 50 Mbps, 100 Mbps and beyond,” he said. “So, from a competitive perspective, these really need to keep up, and fibre is the best way to do it.” In the U.S., Verizon came under fire for winding down the expansion of its fibre-to-the-home network and refusing new DSL Internet customers. Consumer groups said the company conceded its home broadband business to regional cablecos in many parts of the country. Last week, the U.S. Department of Justice approved a deal for Verizon to buy up the mobile spectrum holdings of four of the country’s largest cablecos to support its wireless business. The regulatory decision, related to Verizon's deal to swap AWS spectrum licences with T-Mobile USA Inc., added strict caveats requiring Verizon to sell off some of the cablecos' services and vice-versa. Gruia said Canadian telcos do not face the kind of cost pressures as those in the U.S., where Verizon conceded its wireline Internet business to the competing cablecos in some parts of the country. “The cost of buildouts here in Canada are going to be less capital intensive in comparison to the U.S., because here you do fibre-to-the-node, fibre-to-the-curb strategies, and spend less than Verizon had to spend for fibre-to-the-home,” he said. nkyonka@thewirereport.ca CORRECTION: A previous version of this story contained an inaccurate conversion of exabytes to gigabytes.

Canadian fibre providers ‘blessed’ with shorter loop lines, analysts say

News | August 30, 2012

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