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How Gigabit Services Are Redefining the Economics of Fiber Access [Rural Telecommunications](Rural Telecommunications Via Acquire Media NewsEdge) nfew months ago, NTCA issued its yearly "Broadband/Intemet Availability Survey Report'' for 2013. Among the facts and figures shared were some interesting data points on fiber: 1. 29% of respondents' broadband customers were served via fiber to the home (FTTH)- almost half of the total number of broadband customers served via DSL or cable modem. 2. Of those respondents deploying fiber, 41% served at least 50% with FITH, while nearly an equal amount serve 20% of their customers or less. 3. Of those respondents deploying fiber, 61% plan to serve at least 50% with FTTH by year-end 2016. These numbers represent great progress in deploying fiber access among RLECs. By cross referencing the numbers, Calix estimates that roughly one-third (or approximately 300 NTCA members) have fully embraced fiber (serving at least 50% of their subscribers with fiber). As impressive as this progress has been, that still means that over 600 NTCA members are still trying to justify building out fiber to the majority of their communities. When these members shared their barriers to fiber deployment, 92% cited "deployment costs" as the major factor, 80% cited "regulatory uncertainty, " and 52% cited Tong loops." Given what we've seen from gigabit services deployments in 2014, these barriers are rapidly disappearing. Many service providers came to realize that by committing themselves to offering gigabit speeds to their subscribers, adoption results in their networks became dramatically different than historical models: 1. Take rates for broadband services leaped to record levels (up to 80%+) as service providers captured nearly 90% of net broadband additions in their communities 2. These increases in take rates carried over into adjacent DSL areas-a phenomenon called the "Halo Effect" -as the promise of future gigabit service upgrade attracted ALL potential subscribers. 3. Broadband service chum rates dropped to almost negligible levels as the customer experience over these gigabit networks improved significantly and competitive differentiation was clear. 4. New revenue generating services like home network management and security became easy to add, launch and deploy on these networks. These uplifts in service adoption, chum and new revenue streams have a disproportionate effect on the bottom line of the FTTH business model-they allow the model to reach profitability faster. Many Calix gigabit services customers are seeing their payback periods reduced to three years or less-a far cry from FTTH business models of a few years ago that might take a decade to see a return on their investment. Examples of this shift in the economic model for fiber access are all around us. CenturyLink was so happy with the success of it gigabit pilot in Omaha, Neb., it recently announced its expansion into 16 additional cities. TDS continues to expand its gig deployment markets in the Northeast. In fact, Calix has turned up over three dozen gigabit network deployments to date, primarily in rural markets. These examples have one thing in common-they leveraged gigabit services to capture the imagination of subscribers, and saw that interest change the perception of the new gigabit service provider to be the broadband market leader in their communities. Gigabit services have changed the economic case for FTTH forever. So to those claiming "deployment costs" as an inhibitor to FITH deployment, or "regulatory uncertainty" or "long loops"-we highly encourage you to redo your business case with gigabit in mind. With more subscribers, and higher and more stable revenue streams flowing in, it's never been easier to justify a FTTH investment. So recheck those FTTH network deployment models. You'll be glad you did! * Calix * Geoff Burke * 707-766-3000 * Geoff.burke@ calix.com * 1035 N. McDowell Blvd., Petaluma, CA 94954 (c) 2014 National Telephone Cooperative |