Tag: "technical"

Posted April 19, 2010 by christopher

Herman Wagter has published an informative article about the last-mile economics of fiber networks on Ars Technica.

A Utility Infrastructure Law commonly quoted by engineers says, "The closer you get to the home, the more investment is needed, averaged per home connected." This law applies to all parts of the physical network, like water pipes, sewage pipes, and electricity cables. What are the applicable numbers for telecom cables?

The large expense of building fiber networks has little to do with the technology:

In dense cities, the bill of materials is as low as 20 percent. The cost of labor per meter exceeds by far the cost of a fiber cable or a coaxial cable per meter. Deploying fiber or coax or copper wires would not make much of a difference. The phrase “it’s the backhoe, stupid” even applies in areas like Uganda.

This is why incumbents have such tremendous advantages and why policies predicated on encouraging facilities-based (as in, everyone builds their own network) have failed (and will continue to).

Given the fact that almost all costs in the access network are sunk, it is hard to envision two or more new fiber access networks being deployed in parallel to each home, leading to a stable competitive environment over time. (Unless the ISP’s or network's owners are allowed to divide the market and raise prices to compensate for the underutilization of the networks). If the medium is no longer limited and the access network is the expensive part of the investment, why duplicate the cables? We not do duplicate cables for electricity or other utilities either, for the same reasons.

As we tend toward a single fiber line (wireless is a complement for wired, not a substitute), who owns that line is tremendously important. Private companies want to monopolize the line to maximize their profits -- that is their job. Public ownership offers democratic accountability and a much greater potential for open access, creating robust competition in a sector almost entirely lacking it.

The second page of the article offers more in-depth analysis of various FTTH technologies that communities would be wise to understand before picking what model they want for their community.

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