Cost or consequences: Getting the most out of FTTH technology (Reality Check)

Cost: it stays on top of mind. Whether it’s pricing a project, estimating for the quarter or budgeting for the next year, cost looms large.

So when a survey of WISPs from Clearfield this year revealed that deploying in a cost-effective manner is important, it didn’t come as a huge surprise.

But how does this affect the end game? Should initial cost resistance be the only barrier to entry—or is this self-defeating in the long run?

Labor dominates the cost of deployment — running about 70% of an overall build cost. Methods are appropriate for large count fibers are often used across the entire network, which drives cost up. And although initial cost is on the mind of the new network builder, Total Cost of Ownership (TCO) is more important to consider when building a network that will last 20 years or more. Simplifying fiber installation and maintenance allows providers to reduce costs and turn up fiber networks faster.

For example, Wireless Internet Service Providers (WISPs) play a key role in providing broadband internet connectivity to rural areas that traditionally are too costly to serve other technologies. Usually, WISPs use point-to-multipoint wireless equipment in a fixed configuration to deliver data rates that exceed what existing telephone companies can provide by using digital subscriber line (DSL) technology.

However, WISPs are starting to deploy fiber-to-the-home (FTTH) technology. The reason? While initial deployment costs are higher for FTTH than for fixed wireless, FTTH supports much higher data rates and has a longer equipment lifespan with significantly lower opex costs. WISPs consistently find that FTTH investments provide a higher rate of return in comparison with fixed wireless over a 10-year period.

Advantages of FTTH include:

• Predictable market reach. With fiber, exactly what premises can receive service is already known.
• Longer life cycle (FTTH equipment depreciates at a rate that is four times slower than that of fixed wireless). Ripping and replacing is a painful, time-consuming and expensive process that must be done to continue upgrading. An investment that offers longevity is less disruptive and less costly over the long run.
• Higher broadband speeds (a minimum of 10 times more).
• Lower churn (WISPs deploying FTTH state that churn is an order of magnitude lower with FTTH).
• Asset value (as much as two times that of a fixed wireless provider or more, per financiers, due to longer asset life). Also, a company with a significant FTTP aspect can attract an additional pool of interest for investment in the form of more carrier-type players and investors who might not otherwise be interested.
• Avoiding risk of government intervention in spectrum issues.
• Avoiding the need to site and lease towers.
• Reliable fiber service that, unlike wireless options, is not impacted by weather conditions.
• Lower opex (fewer maintenance and service issues because FTTH providers don’t have to roll a truck to move equipment when, for example, a tree grows up, a new structure is built or an unlicensed spectrum band becomes too crowded).

WISPs encounter at least three types of deployment scenarios that are suited to FTTH:

1. Rural cities with populations of 5,000-20,000 if the telco currently offers only low broadband speeds.
2. Villages and small incorporated areas with populations below 5,000. FTTH may be an option if the village is larger or spread out, is relatively densely populated and if networks are not upgraded.
3. Winding rural routes with varying population density, which generally have low-speed DSL and do not have cable — particularly if the average population density is about 20 houses per mile.

But — an overbuild makes sense when a fixed wireless access point approaches capacity. Overbuilding with FTTH enables the WISP to reach customers it previously couldn’t due to terrain, foliage, and other issues. The take rate can increase up to 30%, and churn is eliminated.

A quality fiber network has advantages over wireless technologies especially in performance. Once a reliable provider is chosen, WISP customers don’t switch to a competitor…even if offered a lower price…because their experience on a fiber network is so much better. The internet is just too important and serves too many crucial functions in the home. Anyone who’s screamed at their computer when it fails to connect or their TV when service stops in the middle of a favorite program understands this.

FTTH is particularly well suited to the WISP in winding rural routes with an average population density of about 20 houses per mile. It’s also ideal for WISPs to deploy FTTH in an area that already has existing fixed wireless service when an access point reaches or exceeds capacity.

Maintenance and operations costs also factor into an FTTH decision, plus anticipated costs for technology upgrades. To have a system that works for decades, it’s important to protect the investment and future-proof it as much as possible…or suffer the cost consequences.

Kevin Morgan is Chair-Elect of the Fiber Broadband Association and Chief Marketing Officer of Clearfield, Inc., a supplier specialist in fiber management and connectivity platforms for communication service providers. He has vast experience in communications technology, fiber optic systems, and business product marketing. Morgan began his career at BellSouth (now AT&T) leading product evaluations of broadband technologies. Later, at ADTRAN, he led product management and marketing.