Fiber: Coming Soon To A Home Near You

One of the biggest obstacles facing fiber optics technology — an Internet
medium that handles much more bandwidth than existing telephone-company
based copper wires — has been one of price.

But 2002 has seen a influx of fiber-to-the-home (FTTH) solutions from a
bevy of equipment makers, bringing prices down and making the pricey
technology manageable for not only incumbent telecom carriers, but
municipalities, upscale development communities and small independent

According to Geoff Wilbur, an analyst with KMI Research, the number of
vendors coming out with new FTTH products will signal a boom in the market
not seen to date. And as more companies compete and drive down prices, he
said, more network planners will be looking at using fiber instead of copper.

“The costs have been coming down over the years; it still may not be equal
enough compared to copper, but it’s close enough,” Wilbur said.

Wilbur said his firm believes FTTH will pass more than 2.6 million homes by
2006, a 63 percent compound annual growth rate. Fueling the drive are
rural Bells, developers and local governments who want to deliver a
high-speed Internet solution other telecoms are unable to provide (or will,
but at a premium price).

The Bristol, Va., Utilities company is one such local enterprise that’s
recently made the investment to supply residential and business FTTH
services in the community, delivering voice, data and video services.

According to Jim Kelley, telecommunications manager at the utility, 30-40
percent of the fiber is in the ground right now for its residential phase,
with 14 crews working to complete the project. Kelley expects the company
to deliver telephony services, handled by nearby MountaiNet Telephone
Company, on Nov. 1.

Powering the fiber is Alcatel’s 7340 fiber-to-the-user solution set — a
combination of optical line terminals (OLTs) at the NOC and optical network
terminals (ONTs) in the home. Each ONT is attached to the utilities
spliced fiber line and has four telephone jacks, a coaxial cable for video
and an Ethernet port.

“We were looking for a way to offer competitive telephone, Internet and
cable TV to each and everyone in the community,” Kelley said.

Competitive, in this case, means keeping the prices down and buying
lower-priced equipment for the network and at home. While the utility
company is in a better position to make an investment than, say, a
competitive local exchange carrier (CLEC) or local incumbent telephone
company, only recently did the organization purchase the FTTH equipment to
manage residential services.

Kelley also pointed to the non-tangible benefits of a fiber-enabled
community — the lure of new business.

“We also at looked it heavily as an economic development project,” he
said. “With the workforce in the high-tech industries, if we can bring
your high-tech company here with competitive high-speed services for the
company, as well as for the employees to have high-tech at home, we can use
that as a marketing tool.”

Two years ago, maybe even a year-and-a-half ago, low price FTTH equipment wouldn’t have
been as readily available as it is today. To date, only one company
holds the lion’s share of market share in FTTH equipment: Optical
Solutions, which analysts predict has a 75 percent market share in the
specialized equipment.

But as the popularity of FTTH grew in small communities and real estate
projects yearly, it attracted the attention of the networking equipment
giants. In addition to Alcatel — which debuted its FTTH line this year —
companies like Lucent Technologies , Fujitsu Network
Communications, Nortel Networks, Marconi and Siemens Networks have
come out with their own product lines.

That competition will drive prices down, as more and more companies come on
board and eat away at Optical Solutions.

“A couple of years ago, (Optical Solutions) had the lion’s share of a
market reaching only 600,000 homes,” Wilbur said. “Next year, they’ll
likely have a much smaller stake in a market that will grow by the millions.”

The key for these new equipment companies is accreditation. Optical
Solutions has been around for years and is a recognized, dependable
manufacturer. However, a big name like Alcatel carries its own kind of weight.

In the case of the Bristol, Va., utility contract Alcatel won (officials
announced Tuesday the deal was a multi-million dollar contract), they
essentially took the residential contract away from Optical Solutions,
which was already contracted to equip the commercial deployment at the
utilities company.

Jay Fausch, senior marketing director at Alcatel, said the contract is a
win for the company in the accreditation department.

“It’s a distinct validation for us,” he said. “We’re hopeful that, along
with the 7340 contract we signed with SBC [Communications ]
last week, this is the first of many more.”

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