Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

The FTTH Prism

VIEWS: 210 PAGES: 58

									                                                     The FTTH Prism
                   Vol.5 No.2                                                                                                  February 2008

                                                                  OFC/NFOEC 2008 Issue


                                                             FTTH vs. FTTx
The Split Heard Round The Telecom World...…........................2
David Chaffee, FTTH Prism


Verizon's FiOS vs. AT&T's U-verse: Overview
Mitch Shapiro, Independent Consultant...............................................................................................………….….3


FiOS is Scoring Big
Brian Whitton, Joseph Finn, Verizon...............................................................................................……………...15


The Case for U-verse...............................................................................................……….20
Staff


Independent Telco FTTH-FTTx Discussion...............................…..21
Bob Udell, Consolidated
Frank Berry, NTELOS

                                                                          Columns
The Presidential Candidates and Broadband....….....................…26
Jim Baller, Casey Lide, Baller-Herbst


When the H in FTTH Goes Bust................................................................……31
Diane Kruse, Zoomyco


Gonna Get Ya!................................................................................................................…….……35
James O. “Jim” Farmer, Wave 7 Optics


When I'm 64: Getting to 1x64 Split Architectures..................40
David Kozischek, Ted Messmer, Costas Saravanos, Mark Turner, Corning


Bend-Capable Fibers Best Chosen By Application............…47
John George, Andrew Oliviero, Pete Weimann, OFS


Network Neutrality: The Con......................................................................……...51
Timm Bechter, Waddell, Reed


PON or P2P? How About PON And P2P.......................................……55
Russ Sharer, Occam Networks
The Split Heard Round The Telecom World
David Chaffee, Editor, FTTH Prism

        Not everyone in the FTTH community is aware that there was a smoldering, behind-the-scenes
debate among Board members of the FTTH Council that pitted those purists who only wanted the
Council to advocate FTTH against those who also wanted FTTx embraced. The rift arose following the
issuance of the Triennial Review Order regarding how broad the interpretation should be when
allowing an exemption against open carriage for those who were building FTTH lines. In other words,
should other types of FTTx be given exclusivity ownership over their own network when a carrier said
it was going to bring fiber to U.S. citizens. More specifically, Verizon was already in because it was
actually building an FTTH network, while AT&T was not, because it was only going to the
neighborhood with its fiber.

        This debate in many ways was an outpouring of the difference in direction that Verizon and
AT&T had decided to take. They originally worked together with BellSouth on an RFP to vendors with
the intent on building FTTH networks. GPON, an FTTH architecture, was in the title of the RFP.
However from this RFP came the two distinct architectures they are developing now: Verizon's FTTP
FiOS and AT&T's FTTN U-Verse Lightspeed.

       As someone who has covered the fiber optics industry since 1982, I was delighted to hear about
Verizon's FTTP plans. It was an industry dream come true, the culmination of a technology, if you will,
completion of the final, enormous leg of the public network with fiber, the ultimate broadband
futureproofing. FTTH even has been almost romanticized for many years, with zealots calling it “the
Holy Grail” of our industry. It was turning the final corner.

        Why, from the same RFP, did AT&T decide to go to an entirely different architecture? It is a
question that has been asked and debated in fiber optics and telecom circles ever since. We sometimes
wonder what the broadband landscape in America would be like with two huge telecom behemoths
frantically installing FTTH instead of one. But they were, and are, destined to go their own separate
paths, and one of them was not FTTH.

        It was easy, therefore, to be antagonistic toward AT&T. How could this once proud company,
which helped to create fiber optics for goodness sakes, “cheap out” and not go all the way to the home
with fiber, as its sister Verizon was doing? Wouldn't such a move restore America to fiber optics
greatness, just as when four carriers in the 1980s had decided to build long-haul fiber optics networks
across the breadth of the continental United States? Wasn't this the natural plan?

       Despite a lot of wishing it would come true, it was clear that AT&T was going to stay the course
with U-Verse. And, after the initial euphoria that Verizon was in fact going to bring fiber to people's
homes and apartments, the issue has broken down into dollars and cents.

        To be fair to AT&T, there are sound reasons not to go to FTTH, or FTTP as the two call it. For
one thing, the cost to build is far higher for FiOS. For another, it was supposed to take longer, although
that has not fully been determined yet.
        As with most economics, there are various ways of
looking at FTTH vs. FTTN. We believe most people familiar
with fiber optics would argue that the ultimate solution is
FTTH, and some of these overriding points are included in
Mitch Shapiro's well-crafted “externalities” in our lead article.
It would be hard to disagree with the premise that broadband is
increasing rapidly and that we will need a larger pipe. The
question is whether it is more economical to do the whole job
now, as carriers like Verizon and NTELOS are doing, or do an
important upgrade now and finish the job later, as AT&T and
Consolidated are doing.

       There are strong, compelling arguments for both, as we
believe you will see in reading through the coming pages.

Ed. Note: We constructed the FTTH vs. FTTN forum as follows:
The initial section pitting Verizon vs. AT&T entails three
papers. Independent consultant Mitch Shapiro provides an
overview of the issue, comparing the performances of the two
architectures largely in economic terms. Verizon's Brian
Whitton and Joseph Finn then provide the Verizon point of
view. Despite repeated requests, AT&T decided not to
contribute, so we put together an advocacy paper on their
behalf to round out the debate. In section two, we offer a
spirited discussion including leading independent telcos
NTELOS and Consolidated. NTELOS is building an FTTH architecture, while Consolidated is offering
FTTN.


FiOS vs. U-Verse: The Broadband Swords of
America's Telco Titans
By Mitch Shapiro, Independent Consultant

        By 2004, it had become clear that Verizon and AT&T had chosen very different network
upgrade paths in response to cable’s assault on their core voice business and advantage in terms of
broadband data rates. While these strategies were partly a reflection of the status of the two
companies’ legacy networks, they also reflected different perceptions of potential risks and rewards on
the part of company executives.

        This article reviews and compares the relative strengths and weaknesses of these two strategies,
their results to date and, briefly, Wall Street’s view of their relative merits, as reflected in the two
companies’ stock prices. A key theme of the analysis is that, while Verizon is investing substantially
more dollars for every home it passes with FiOS, AT&T’s U-verse faces greater risk of missed
timetables and budget targets, as well as greater technical, operational and marketing challenges that
could hamper its ability to compete with cable operators and return to a healthy growth mode in the
residential market.
                                 FiOS Strategy and Challenges
        On the face of it, Verizon’s fiber-to-the-premise FiOS strategy seems to entail the greater
financial risk, since it requires much greater per-home capital investment. And though the pace of
Verizon’s FiOS deployment and penetration have so far remained pretty well on track with projections,
it remains to be seen whether the company will reach the targets it laid out for 2010 in a September 27,
2006 FiOS briefing. These included 35-40 percent penetration of homes marketed for FiOS Internet
(which it said would translate into a 55 percent broadband markets share) and 20-25 percent
penetration for FiOS TV (which it said would correspond to a 26% market share).


                                    Cost Per FiOS Connection

                $6,000


                $5,000


                $4,000

                                                                                     Gross
                $3,000
                                                                                     Net

                $2,000


                $1,000


                  $-
                           20%         30%        40%         50%        60%
                                               Penetration


                   Source: Analysis of data from Verizon 9/27/06 FiOS briefing

       Though FTTP is arguably the most technically and competitively robust network strategy, its
high cost “to pass” and “to connect,” means its return on investment is highly sensitive to how well it
performs in terms of penetration and ARPU (average revenue per unit.)

        The “penetration” sensitivity of FiOS is reflected in the graph above, which uses data provided
in Verizon’s 9/06 FiOS briefing to compare total gross and net per-connection costs at five different
penetration levels. Whereas these costs are a painful $5,663 and $4,298, respectively, at 20 percent
penetration, they are a more manageable $3,191 and $2,508 at the 40 percent penetration rate targeted
by Verizon in its presentation. Should FiOS reach 60 percent penetration, its gross per-connection cost
would drop to $2,366, while its net cost would be only $1,911 per connection.

        Another key piece of the FiOS payback puzzle is how much incremental revenue Verizon can
generate from each FiOS-connected home, and at what margin. In its 9/06 presentation, the company
included the following graph, which shows its expected return on investment at several different levels
of “incremental monthly EBITDA.”
       During the presentation, Verizon CFO Doreen Toben explained that this ROI graph reflected the
EBITDA impacts of incremental FiOS revenue and network expense savings, as well as cash tax
depreciation benefits. Her comments also suggested that the graph’s ROIs assumed that FiOS'
penetration would reach the targets cited above.

        Referring to the potential revenue and cost savings, Toben said that “if you put that all together,
$39 is a very reasonable number to get, from a cash perspective, per sub.” She described herself as
“very comfortable that the return is easily in those kinds of ranges of 10 percent, 11percent, 12
percent,” which she noted is “well over [Verizon’s] cost of capital.”

        In a report that Pike & Fischer published last summer, I estimated simple payback periods for
Verizon's FiOS investment based on combinations of penetration, incremental revenues and margins.
The combinations of revenue and margin considered in the analysis yielded incremental monthly
EBITDA values ranging from approximately $27 to $42, which roughly corresponds to the range
reflected in Toben's graphs. The FiOS penetrations considered ranged from 20 percent to 60 percent,
with 40 percent treated as a baseline, since it most closely corresponds to the penetration target laid out
in Verizon's 2006 briefing.

      At 40 percent penetration, the analysis calculated a payback period of five years, with a
$42/month incremental EBITDA, increasing to 7.7 years if FiOS only generates $27/mo in incremental
EBITDA. The most optimistic 60 percent penetration/$42 incremental EBITDA scenario cuts the
payback period to less than four years, while the most pessimistic 20 percent penetration/$27
incremental EBITDA scenario extends it out to more than 13 years.

       These numbers highlight the high fixed per-home and per-connection costs at risk in Verizon’s
FiOS strategy, and the fact that FiOS per-customer costs will rise to painfully high levels if the service
achieves disappointing penetration levels. And—as reflected in the graph’s “20 percent-$27”
scenario—they also suggest that, if this low penetration is combined with weak ARPU levels (e.g.,
from relatively low triple-play penetration and/or intense price competition), FiOS payback could take
10 years or more.

        The potential payoff of its large investment in FiOS is tied to the fact that it gives Verizon the
technical capabilities to outperform cable (and also AT&T) in terms of capacity and services, to the
extent it can use the FiOS platform to deliver unique, high-value services and customer satisfaction.

        One obvious way Verizon can pursue this goal is to deliver industry-leading data rates, which it
is already doing (see table below comparing data rates offered by FiOS and U-verse).

                               Data Rates Offered by FiOS and U-verse

                            FiOS Internet                    U-verse Internet
                            5-10 Mbps/2Mbps                  1.5 Mbps/1 Mbps
                            15-20Mbps/2-5Mbps                3 Mbps/1 Mbps
                            15-20 Mbps/15-20Mbps             6 Mbps/1 Mbps
                            30-50 Mbps/15-20 Mbps            10/1.5 Mbps (‘08)
        Raw data rates are not the only benefit of FiOS, however and, in and of themselves may be
insufficient to achieve Verizon’s penetration, ARPU, EBITDA and ROI targets. As the company’s 2006
FiOS briefing made clear, it also aims to introduce—and, as needed, internally develop--value-added
services, especially those that leverage the unique performance advantages of the FiOS network. For
example, during that briefing, Verizon Telecom President Virginia Ruesterholz cited gaming, security,
storage and innovative advertising as areas of opportunity for FiOS-enabled revenue expansion.

         Since launching FiOS, Verizon has introduced an Interactive Media Guide designed to integrate
broadcast, VOD (including movie poster art and trailers) and DVR content, as well as “personal media”
stored on customers’ PCs or other devices, including cellphones. FiOS also now features a multi-room
DVR and free Media Manager software that turns the device into a “Home Media DVR” that allows
customers to display slide shows and listen to music stored on their home PCs. Verizon has also
introduced interactive-TV applications, called Widgets, that offer information such as local weather and
traffic reports.

         In terms of the technical elements involved in introducing new services, FiOS is unique from
both current cable offerings and AT&T’s fully-IP-based, U-verse service in that it was launched as a
hybrid that features QAM-based broadcast TV channels similar to cable’s, but delivers VOD and
advanced services using IP technology. This strategy has allowed it to make a relatively low-risk entry
into the TV market while phasing in IP applications as the technology matures. As discussed below,
this differs from AT&T, whose U-verse service is heavily dependent on the performance of IP video
technologies and its interaction with a range of other relatively new technologies, including advanced
DSL modulation schemes and still-relatively-new MPEG-4 video compression.

        During Verizon’s 9/27/06 FiOS briefing, Shadman Zafar, senior vice president for architecture
and services, highlighted interactive advertising as a revenue-generating application that could leverage
FiOS’ ability to layer an IP application on top of a QAM broadcast stream. Verizon is also moving to
integrate web content on the FiOS platform, having struck a deal with online video service Revver to
distribute selected user-generated content from the Revver site on both the Verizon Wireless V CAST
mobile service and the FiOS TV platform.

         The critical importance to Verizon of being able to deliver enhanced FiOS functionality in a
timely, efficient and user-friendly manner is suggested by a September 14, 2006 Wall Street Journal
article that discussed how the company has become more directly involved in FiOS software
development. According to the article, this involvement included software related to the IMG and
“convergence” applications and was prompted at least in part by “delays and technical glitches with
Microsoft’s technology,” as well as concerns that it “tended to be too big and bulky to run in the [set-
top] hardware provided by Motorola.”


                                U-verse Strategy and Challenges
         AT&T’s network upgrade strategy has the obvious virtue relative to FiOS of putting much fewer
investment dollars at risk for every home “passed” by its Lightspeed fiber-to-the-node (FTTN)
network. At the same time, however, this strategy involves technology, execution and competitive risks
that, in key respects, are significantly greater than those facing FiOS.

       Whereas the remaining questions about the wisdom of Verizon’s FiOS investment are tied
mainly to whether it will reach its penetration and ARPU targets, more fundamental execution issues
remain at play with regard to U-verse, including whether it will be able to provide enough customers
the type, range, quality, speed and reliability of service—and in a timely enough manner--to become a
strong competitor across the 30 million-home footprint currently targeted by AT&T.

       Elements of the U-verse risk profile include continued reliance on legacy copper in the last
“half-mile,” coupled with the complex integration of multiple technologies that, individually and
especially in combination, are relatively unproven on a mass scale. These include distance-sensitive
VDSL, Microsoft’s IPTV platform, MPEG-4 compression and pair-bonding. These execution
challenges have already delayed key U-verse milestones by roughly a year, while also increasing per-
home costs substantially beyond AT&T’s initial estimates.

       Its important to note that U-verse deployment delays are occurring in an increasingly
competitive and fast-changing market that is moving rapidly to bandwidth-intensive HDTV as the
video standard, and in the face of cable’s aggressive VoIP rollout and impending rollout of DOCSIS 3.0
technology, which will enable much faster broadband data rates. It's also worth remembering that
“time-to-market” was one of the key advantages touted by AT&T when it first announced its FTTN-
based U-verse strategy.

       U-verse’s technical and execution risks make it more competitively vulnerable than FiOS in key
respects. For example, while Verizon would no doubt prefer GPON systems to be ready for
commercial deployment ASAP, its existing BPON platform is sufficient to achieve technology and
service leadership relative to cable. In contrast, one or more significant delays in a key enabling
technology has the potential to seriously impair U-verse’s ability to compete with cable—in both video
and broadband.

        This difference is reflected in the fact that Verizon’s FiOS deployment and take rates have
remained pretty much on schedule, while U-verse is a year or more behind schedule, with no definitive
signs that further delays are not on the horizon. It is also reflected in the fact that U-verse data rates are
already falling behind those offered by cable competitors, even before the latter deploy DOCSIS 3.0.

                                  Timetables Slip, Costs Increase
       Back in 2004, AT&T’s U-verse targets included a commercial U-verse launch by the end of
2005 and 18 million homes passed by the end of 2007, at a cost of roughly $4.5 billion, or $250 per
home passed.

       AT&T ended up missing its launch deadline, with San Antonio, its first commercial launch,
kicking off in mid-2006, and U-verse service being available to just 30,000 homes by the end of Q3 06.
Limited launches followed in Houston in late November and nine additional markets in the final weeks
of 2006.

       By the time AT&T released its 2005 10K, it had pushed back the date for passing 18 million
homes to year end 2008. According to its 2006 10K, it had spent $1.5 billion on U-verse that year and
was planning to spend another $3.1 billion in 2007-2008 (not including “additional success-based
customer acquisition” spending). It also had boosted its 2008 target to 19 million homes passed.

       In its 1Q 07 10Q, AT&T revised its targeted 2006-2008 spending upward from $4.6 billion to
$5.5-$6.0 billion, while cutting its year end 2008 target back to 18 million. This translates into a per-
passing cost of $305-$333, 22-33 percent higher than its original $250 estimate. The company
attributed the cost increase to “expansion of programming and
features of video offering & additional network conditioning.”
Since programming-related costs seem unlikely to add very
significantly to per-passing deployment costs, it seems likely that
the bulk of the cost increase came from “additional network
conditioning.”

        Though only anecdotal, my own experience may be
revealing in this regard. A number of months ago I’d encountered
a contract technician prepping pedestal connections on my block
to make sure they could support U-verse. A few months later,
another tech had returned to repeat the job, explaining to me that
it had not been done properly the first time. To the extent this
incident reflects unexpected inefficiencies in the broader process
of U-verse-related network conditioning, it’s not too hard to
imagine that it could add significantly to the project’s costs.

        In its 3Q07 10Q, AT&T increased its three-year cost
estimate range yet again, to $6.0-$6.5 billion, while also cutting
its homes-passed target to 17 million. Together, these changes
appeared to push the per-passing cost to $353-$382. But in a
mid-December analyst conference, when it announced plans to
pass 30 million homes by 2010, AT&T said its per-home
deployment cost would “remain in the low-$300 range.” This,
along with comments made by AT&T executives, suggests that
the numbers cited in the 3Q 07 10Q did not really signify an
additional cost increase, but instead reflected a shift of 2006-2008
capital to pre-launch spending in the BellSouth region. This, in
turn, resulted in an upward shift in spending accompanied by a
downward shift in the number of homes in the legacy-AT&T
region that would be passed by the end of this year.

        AT&T’s current projection of per-passing costs seems
likely to be in the $320 range, which is in the “low-$300 range”
cited in its December presentation, and roughly the midpoint of
the range referred to in its 1Q 07 10Q. This is clearly well below
the $989 ($716 net) cost budgeted for FiOS, which includes $817
($572 net) to pass a home and $172 ($144 net) in video network
and support costs. Based on the information provided by both
companies, neither of these figures includes the cost to connect a
subscribing home to the network.

         Before comparing the $320 and $989 figures on an apples-
to-apples basis, it’s worth keeping in mind that for U-verse, a
home “passed” does not necessarily translate into a “home
marketed” in the same as it does with FiOS. The difference is
tied to the distance and other copper-related limitations of the U-
verse service, which are similar in principle to those suffered by
ADSL service.
        The potential significance of this difference is highlighted in two key metrics included in
AT&T’s 3Q 07 earnings report (but not publicly updated for 4Q 07). The company reported that, at the
end of that quarter, its U-verse network passed 5.5 million homes, but was marketed to only 40 percent
of these. While this low percentage could be the result of a number of factors (in any given quarter,
Verizon has marketed its FiOS Internet service to 67-80 percent of homes passed), it seems likely that
one of these factors is the inability to deliver enough usable bandwidth to some portion of the 60
percent of “passed” homes that are not included in the “marketed homes” category.

        To the extent this is—and remains—the case, the cost per “marketable home” for U-verse
effectively increases. For example, while the $320 “per-passing” U-verse cost cited above is roughly
32 percent of the comparable $989 FiOS cost, the cost per marketable home would actually be $400
(40 percent of the FiOS cost) if 20 percent of U-verse “homes passed” cannot receive sufficient
bandwidth to qualify as “marketable homes.” If this “non-marketable” percentage was as high as 35
percent, the U-verse cost per marketable home would be $492, roughly half the comparable FiOS cost.

        Clearly, AT&T expects some of the current U-verse limitations to be overcome through the use
of pair-bonding, whose deployment the company now targets for late 2008--roughly a year behind its
original schedule.

       Though AT&T’s mid-December presentation indicated it expected to achieve a near-doubling of
throughput from pair-bonding, it remains to be seen what data rates and services they will be able to
support, and for how many homes.

        Among the issues likely to impact this are the availability of extra pairs across AT&T’s U-verse
footprint, the presence of bridged taps that must be removed, and the extent to which extra pairs are in
the same binder as the pair to which they are bonded, which can significantly reduce the bandwidth
boost they provide. Related to these factors is the added complexity that pair-bonding seems likely to
contribute to the already significant execution challenges U-verse faces with regard to technology,
operations and marketing.

        A review of online U-verse user forums suggests that AT&T’s video offering is very appealing
to some segments of the population but also continues to suffer significant problems related to
installation, marketing, billing, picture quality and reliability in at least some portion of its expanding
footprint.

        Among its notably competitive features are four-stream DVR recording, the ability to program
the U-verse DVR from a PC or cellular phone, Yellowpages.com searches, AT&T Yahoo! Games, and
the “AT&T U-bar” feature, which makes customizable weather, stock, sports and traffic information
available on the TV screen. The ability to access photos and home media on the TV is slated for the
first quarter of this year, followed by whole-home DVR and a second HDTV stream during the second
and third quarters.

       During its December analyst conference, AT&T projected more than a million U-verse
subscribers by the end of 2008, with weekly installs ramping to over 40,000, from more than 10,000
during 4Q07.
       The company also said it expects more than 70 percent of its projected 17 million homes passed
to be marketable by that time. That translates into at least 11.9 million marketable homes. A million
subscribers is the equivalent of 5.9 percent of 17 million homes passed and 8.4 percent of 11.9 million
marketed homes.

       Assuming AT&T can more than double its U-verse footprint during 2008, while also boosting
its “marketed” percentage from 40 percent in 3Q 07 to 70 percent and dramatically ramping its
companywide U-verse installation capabilities in the same time frame, it’s year end 2008 subscriber
goals do not seem unrealistic.

       In its December presentation, the company reported that U-verse penetration was averaging 7.3
percent, 10.2 percent and 11.4 percent, respectively, six, nine and twelve months after launching the
service. Assuming these figures reflect penetration of marketed homes, they suggest that an 8.4 percent
penetration target for year end 2008 is quite doable in light of U-verse marketing results thus far.

        This assumes, of course, that AT&T can successfully ramp its network upgrade, marketing and
installation capabilities to late 2008 targeted levels, all of which reflect a substantial increase from 2007
levels. The company’s 4Q 07 U-verse install rate raises some questions in that regard, especially given
the steep climb required to ramp from 10,000 to 40,000 weekly installs in the course of one year.

        While AT&T increased its weekly install rate from 5,500 at the end of 2Q07 to nearly 10,000 at
the end of 3Q07, its install ramp showed signs of flattening during 4Q07. Though it cited a 12,000-unit
weekly install rate for mid-December, the quarter’s 105,000 U-verse net adds average out to less than
8,100 per week for the quarter as a whole. While the holidays may have accounted for this apparent
slowing, the weekly average is still below 10,000 even if we subtract two weeks to account for holiday-
related lulls.

        Along with homes passed and marketable homes, the U-verse weekly install rate will be a key
metric to watch over the next few quarters to evaluate AT&T’s ability to execute on its current U-verse
plans.

                                      A Look At The Numbers
       The following section compares the progress of both FiOS and U-verse on several key metrics:

                                            *Homes passed
                                          *Homes marketed
                                             *Subscribers
                              *Penetration of homes passed and marketed
                    *Share of each companies’ total broadband and video subscribers

       The table below summarizes these metrics from late 2005, when Verizon was just starting to
market FiOS TV, through the end of 2007.
       FiOS and U-verse Growth To Date


       Availability (mil.)                              4Q05      1Q06    2Q06     3Q06         4Q06         1Q07         2Q07        3Q07     4Q07
       FiOS homes passed                                  3.0       3.6     4.4         5.3          6.0          6.8           7.6     8.5      9.3
       U-verse homes passed*                                                      na                 2.0           3.0          4.0     5.5      8.0
       FiOS Internet marketed homes                       2.0       2.6     3.1         3.8          4.8          5.3           5.7     6.5      7.5
       FiOS TV marketed homes                             0.0       0.4     0.7         1.2          2.4          3.1           3.9     4.7      5.9
       U-verse homes marketed*                                                    na           na           na           na              2.2      3.2
       Subscribers (000)
       FiOS Internet subs                                 175       264     375         522          687          864         1,067   1,296    1,541
         Quarterly net adds                             na          89      111         147          165          177          203      229      245
       U-verse Internet subscribers#                                                      3            3           12           47      116      213
         Quarterly net adds                                                               3            0             9           35      69       97
       FiOS TV subs                                           2     20       55         118          207          348           515     717      943
         Quarterly net adds                                   2     18       35          63           89          141          167      202      226
       U-verse TV subscribers                             -         -       -             3            3           13           51      126      231
         Quarterly net adds                               -         -       -             3            0           10           38       75      105
       Penetration
       FiOS Internet % of marketed homes                 8.8%     10.2%   12.1%        13.7%        14.3%        16.3%        18.7%   19.9%    20.5%
       FiOS TV % of marketed homes                                 4.8%    7.9%        9.8%         8.6%         11.2%        13.2%   15.3%    16.0%
       U-verse % of marketed homes*                                               na           na           na           na            5.3%     7.2%
       FiOS Internet % of homes passed                   5.8%      7.3%    8.5%        9.8%         11.5%        12.7%        14.0%   15.2%    16.6%
       FiOS TV % of homes passed                                   0.6%    1.3%        2.2%         3.5%         5.1%          6.8%    8.4%    10.1%
       U-verse % of homes passed*                                                                   0.1%         0.4%          1.3%    2.3%     2.9%
       Share of Total Broadband and Video Subscribers
       FiOS Internet % of broadband subs**    3.9%    5.3%                 7.0%        9.0%         11.2%        13.3%        15.8%   18.5%    21.2%
       U-verse % of broadband subs**                                                   0.0%         0.0%         0.1%          0.4%    1.0%     1.8%
       FiOS % of broadband net adds                    16%                  25%         33%          40%          43%          70%      80%      93%
       Uverse % of broadband net adds**                                                0.6%         0.0%         1.6%          11%      16%      29%
       FiOS TV % of Verizon video subs          1%      5%                  11%         19%          28%          36%          41%      46%      51%
       U-verse % of AT&T video subs                                                    0.2%         0.2%         0.8%           3%      6%       10%
       FiOS TV % of video net adds              4%     26%                  40%         50%          67%          64%          57%      70%      78%
       Uverse % of video net adds                                                        3%           0%           5%          19%      35%      45%


       * 4Q07 data assumes AT&T reached yearend 2007 target of 8 mil. homes passed and marketed U-verse to 40% of these
       # Assumes 92% of U-verse TV subscribers also subscribe to U-verse Internet service
       ** percent of "consumer" broadband subscribers
       Source: analysis of company data


       As the table shows, U-verse, which launched roughly a year behind schedule, passed a little
more than 2 million homes at the end of 2006, only about a third of the 6 million homes passed by
FiOS at that point.

       By 3Q 07, AT&T had boosted its U-verse footprint to 5.5 million homes, but was marketing the
service to only 40 percent, or 2.2 million, of these. This compared to 8.5 million homes passed for
FiOS, with 6.5 million (76 percent) and 4.7 million (55 percent) of these marketed for Internet and
video service, respectively.

         By the end of 2007, FiOS passed 9.3 million homes, about 300,000 more than Verizon had
earlier targeted. Homes marketed with FiOS service numbered 7.5 million (81 percent) for Internet and
5.9 million (63 percent) for FiOS TV.

        In its yearend earnings report, AT&T did not provide updated numbers for its U-verse footprint
and marketed homes. Though one could interpret this to mean that the company fell short of its target
of eight million homes passed, for the purposes of this analysis it is assumed that AT&T did in fact
reach that target. If true, this would represent a significant acceleration of AT&T’s U-verse ramp, to
2.5 million homes per quarter compared to roughly a million homes in 2Q07 and 1.5 million in 3Q07.
We also assume that year end saw AT&T marketing U-verse to 40 percent of total homes passed by its
FTTN network, the same percentage it reported for 3Q06.

       In terms of subscriber growth, we see FiOS Internet net adds moving north of the 200,000 mark
by 2Q 07, followed by FiOS TV net adds in the third quarter. These compared to just 38,000 and
75,000 U-verse net adds during the same two periods.

         By year end, FiOS Internet subscriptions had topped the 1.5 million market, with FiOS TV
subscribers reaching 943,000. At the same point in time, AT&T had attracted only 231,000 U-verse TV
customers. AT&T doesn’t report separate numbers for U-verse Internet service (which it only sells as
part of a package with U-verse TV service), but did say during its mid-December analyst conference
that it was “currently seeing more than a 90 percent broadband attach rate with U-verse.” Based on
that, we’ve assumed that its U-verse Internet subscriber count is 92 percent of its U-verse TV sub
count, or 213,000 at year end.

        Though AT&T had originally expected to complete its three-year 18 million-home U-verse
deployment by 2007, and to be well ahead of Verizon in the race to deliver on-net video services, the
reality—at least as of year end 2007—has turned out quite differently. U-verse ended the year with
significantly less homes passed than FiOS and was trailing even further behind in terms of marketed
homes. And U-verse ended the year with only 14 percent of the Internet subscribers claimed by FiOS
and less than 25 pecent of the latter’s on-net video subscribers.
        Clearly, much of this lag is a function of U-verse’s launch delays. But the low “percent of
homes marketed” figure reported in 3Q07 and the still-low penetration of homes passed and marketed
as of year end raises questions about the trajectory of future subscriber growth.

        For example, as of 3Q 07, U-verse penetration stood at just 5.3 percent of homes passed and 2.3
percent of marketed homes. And, based on our year end estimates (8 million homes passed and 40
pecent of them marketed), these numbers improved fairly modestly to 7.2 percent and 2.9 percent as of
year end. This compared to year end FiOS Internet and TV penetrations of 20.5 percent and 16.0
percent, respectively, of marketed homes, and 16.6 percent and 10.1 percent of total FiOS homes
passed.

         As noted earlier, AT&T recently reported that U-verse penetration was averaging 7.3 percent,
10.2 percent and 11.4 percent, respectively, six, nine and twelve months after launching the service in a
local area. Back in early 2006, Verizon had reported significantly higher take rates for FiOS, including
14 percent penetration nine months after launch. And, whereas Verizon’s 9/06 briefing had cited FiOS
churn rates below 1.5 percent, comments from AT&T executives during their yearend earnings call
suggested that U-verse churn was above two percent. This suggests that the stories of U-verse
installation and service problems posted on various online user forums and blogs may reflect a reality
that is putting significant upward pressure on U-verse churn, at least in relation to FiOS’ churn
performance.

        The final section of the table considers the share of total Verizon and AT&T broadband and
video subscribers accounted for by each company’s next-generation network. Among other things,
these numbers highlight the fact that FiOS has become the dominant engine of broadband growth for
Verizon, whereas U-verse’s role in AT&T’s broadband business remains relatively small. Specifically,
FiOS accounted for more than 21 percent of Verizon’s consumer broadband customers at year end, and
a whopping 93 percent of broadband net adds in the year’s final quarter. In sharp contrast, U-verse
ended the year generating less than two percent of AT&T’s total consumer broadband lines. Its share of
net adds, however, had increased to 29 percent from 16 percent in the third quarter and just 1.6 percent
in the year’s first quarter.

       By year end, FiOS could claim a little more than half of Verizon’s total video subscribers
(which also include bundled-service sales that include DirecTV satellite video). At the same point in
time, U-verse accounted for just one in 10 AT&T video subscribers (AT&T sells bundles that include
DISH Network satellite video and inherited some DirecTV subscribers when it acquired BellSouth).
U-verse is closer to FiOS when we consider their shares of fourth quarter video net adds, which are 45
percent and 78 percent, respectively.

                                      Wall Street’s Reaction
        For most of the period since the two dominant RBOCs announced their upgrade strategies, Wall
Street has seemed to favor AT&T’s decision to spend much less per home on its planned upgrade, while
at the same time investing roughly $85 billion to expand its wireline footprint (and control of Cingular)
by acquiring BellSouth. That acquisition was announced in early March 2006 and was consummated
in the final days of that year.

        After fluctuating within a few dollars of $25 from late 2003 through late 2005, AT&T shares
rose fairly steadily throughout 2006 to more than $35 by early 2007, topping $40 for much of the
second half of that year, and peaking near $43 in late September.
         In contrast, Verizon’s shares began falling in late 2004 from a high of more than $42 in early
November to a low below $30 in mid-October 2005. At that point—which roughly corresponded with
the initial ramp of its FiOS TV service—Verizon’s stock price began a turnaround that recovered back
to $42 by May 2007 and reached a peak above $46 in late October. This peak occurred just a few days
after Verizon announced that, for the first time, it had added more than 200,000 FiOS TV customers in
a quarter, with FiOS Internet and TV penetration reaching nearly 20 percent and more than 15 percent
respectively.

        Since their autumn 2007 peaks, shares of both companies have fallen fairly sharply along with
the rest of the market, with both ending the week of February 4 in the $36-$37 range.

      While factors other than wireline network upgrade strategies have no doubt influenced the two
dominant RBOCs’ share price, their overall trajectories since 2004 do seem to reflect a shift in
conventional wisdom as to the relative risks and likely rewards of these strategies.

        It seems reasonable to assume that the recent AT&T and Verizon price declines are largely a
reflection of overall stock market trends, and a sense that a serious housing and economic slump could
make it tougher for both companies to achieve the goals of their network upgrade strategies.

        So far, the trajectory of the two stocks’ recent declines has been roughly the same. Given the
greater level of execution risk and uncertainty surrounding U-verse, however, we would not be
surprised to see another round of divergence in their stock price, with its nature and magnitude
depending in part on how AT&T’s U-verse numbers look over the next few quarters.

                                     A Note on “Public” Value
        Though the network strategies pursued by AT&T and Verizon were both motivated by a desire
to maximize shareholder value—and rightly so, given their nature as private companies with publicly
traded stock—it seems appropriate to briefly consider another form of value tied to those investment
decisions.

         A key component of this value is tied to the notion of “externalities”--benefits that do not accrue
(or are not perceived to accrue) directly and fully to those paying for communication services. As a
result, their value is difficult for service providers to monetize in the form of service fees, and therefore
to justify as a priority for private investment dollars.

       Examples of potential externalities associated with the presence of broadband networks—
especially FTTH networks, given their huge and readily upgraded capacity—include:

              *a community’s ability to attract new businesses and strengthen its tax base;
  *driving economic growth and increasing the global competitiveness of the community’s workforce
                                            and business base;
*increased efficiency in the delivery of public and private services, including education and healthcare;
                             *reducing traffic congestion and pollution, and;
                    *enhancing the overall quality of life of a community’s citizens.

      While it’s possible that U-verse will overcome its challenges and prove to be a better investment
for AT&T’s shareholders than FiOS is for Verizon’s investors, it’s very difficult to imagine U-verse
outperforming FiOS when it comes to supporting externalities, given the latter’s much greater network
capacity.

        As discussed earlier, the challenge for FiOS will be to generate enough “monetizable’ value to
drive penetration, ARPU and revenue to high-enough levels to satisfy its investors, even as its much
greater network capacity supports a greater level of positive externalities than is possible with a FTTN
network. This result would, it seems, be good not only for those investors, but also for the country.

By the Numbers: Verizon’s FTTP Strategy Scores Big
By Brian Whitton, Executive Director, Verizon Technology Organization
with Joseph Finn, Distinguished Member of Technical Staff


        On millions of TVs in dozens of markets in 17 states, commercials are appearing right now with
the following tag line: “This is FiOS. This is big!”

       In that context, the “bigness” of FiOS refers to its superior broadband download and upload
speeds and its pristine video signal transmissions over fiber optics right to the home.

        But bigness implies measurement and measurement implies numbers, and, by the numbers,
FiOS and the Verizon FTTP build-out win -- not just for today’s customers, but for customers yet to fire
up a networked apparatus of any kind, or those who can’t yet envision a day when every piece of
electronic equipment in the home is networked to some resource.

        That day is coming such that network companies need to prepare. Bandwidth demand is like
the infield diamond in Field of Dreams, only more insistent. If you build it, users with bandwidth
demands will come…but they will come even if you haven’t built it, and what happens then?

       In the January 2007 issue of The FTTP Prism, I reviewed the strategic thinking behind
Verizon’s $23 billion, seven-year commitment to pass 18 million homes by 2010 with all-fiber
capability:

       ● Our cable competitors were leveraging their facilities to develop three-service bundles that
included voice calling; we needed to meet or beat that competitive challenge.

        ● Fiber to the node with VDSL and then-unproven IPTV delivery of video delivered nowhere
near the bandwidth nor the outside plant maintenance advantages of FTTP.

       ● No technology provided the headroom for services innovation that FTTP did, with virtually
unlimited bandwidth enabled by simple electronics change-outs.

       ● The simplicity of the service from the customer viewpoint and the versatility of routing inside
the home using wireless routers, MoCA and existing wiring was attractive.

       ● Going to all-fiber in the distribution plant would save us up to $110 per customer per year in
plant maintenance costs, given the reliability of fiber links and fiber’s imperviousness to the gnawing
problems caused by water invading copper facilities.
       Verizon has been building its fiber to the premises network since 2004. We accepted the risk
and the investor hits with our eye on results, and the results are coming in:

       ● Our FiOS Internet service has already been upgraded several times and is now available at up
to 50 Mbps speeds, with 100 Mbps in active testing. Verizon’s symmetrical upload and download
transmissions at up to 20 Mbps lead the industry. With two light frequencies moving toward the
customer-carrying video and data and a third coming back to our network, we have built a seamless
service customers love. It enables new services and sources of revenue, including television,
broadband Internet and high-end business data services. With a backbone and distribution network that
has been all-fiber for some time now, the “last mile” won’t be a choke point for service innovation.

        ● We have achieved a great competitive advantage, trumping cable’s video product in terms of
quality and reputation, with customer demand leading ahead of our build and sales that have satisfied
Wall Street skeptics. Following the marketplace interest in bundles, we have an industry-leading high-
tech “quad play” that packages Verizon Wireless services with networked voice, data and video, even
as Cable falters in its attempts to follow.

        ● FTTP has proven that it is the best replacement for copper-based distribution plant. Copper
has a useful life of about 35 years after which it needs to be replaced, and before which it often loses
the persistent battle with water that fiber optics doesn’t care about. During problematic weather
situations, our fiber plant has already proven dozens of times that service reliability is unmatched when
fiber carries the signals.

        ● Future-proofing the network has proven not just to be a promise. We already have upgraded
the fiber network first to BPON broadband delivery and now are building out the network using
GPON. Only the Passive Optical Network technology allows this kind of versatility.

        So, is it working? Is FiOS “big?” What do the numbers say? Let’s look first at customers and
sales, then at technology, the environmental impact and scan the horizon, brightening even now with
the early light of unimaginable innovation.

        On January 28, 2008, Verizon reported that as of the end of 2007, the FTTP network passed 9.3
million premises, served 1.5 million FiOS Internet customers with service at rates of up to 50 Mbps and
with synchronous upload and download speeds at up to 20 Mbps…an increasingly vital user advantage.
Also reported was the fact that FiOS TV is available to about 5.9 million customers in 13 states where
sales of FiOS TV have passed the one-million video customer mark in less than three years. In some
areas, the company reported, the TV penetration rates reach beyond 30 percent, and Verizon has moved
up to be ranked as the tenth largest MSO in the country.

        Those results say two things: (1) That the products are perceived as better than those of the
competition and (2) that the competition is probably not satisfying customers on other fronts. Verizon’s
entertainment services include some 454 standard definition and high definition TV channels, and will
offer 572 standard def and 150 in HD by year-end 2008, with universal video on demand capability,
10,000 VOD titles in the library, a 120-hour DVR, the capabilities of a home media DVR hub linking
all networked pictures, music and video and an advanced interactive program guide unmatched in
versatility.
        A leading consumer products magazine has declared our FiOS bundle the best in the
marketplace and our FiOS TV and FiOS Internet products flawless in the categories rated. FiOS scored
in the top 5 of PC World magazine’s 100 best products of 2007 and earned top ISP awards from the
magazine. FiOS also gets repeated kudos in PC Magazine. FTTP enables enormously gratifying
services.

        Sales figures like those just reported are impressive. What’s more, as new-user broadband
demand begins to flatten due to near market saturation, Verizon can, because of the glass, take
broadband to new heights, opening new markets for broader, faster broadband services, and not choke
off the speed to a broadband-intensive household. In the homes of tomorrow, every room will be
consuming HDTV signals, may be trading multimedia content up and down and there may be
broadband connections between every electronic appliance in the home and some networked resource,
including perhaps the refrigerator, the thermostat, the water meter, the iPod or the dog’s RFID implant.

        Verizon can confidently address that kind of future home because broadband Passive Optical
Networking is future proof. As noted, GPON technology is already being deployed to boost by four
times the current downstream capacity of the FiOS network and by eight times its upstream power.
Here we are just five years into the second generation of transmission technologies. Is FiOS “big,” as
the commercials say? Yes, as big as it needs to be.

        From a network planning and capacity point of view, an interesting report from the Nemertes
group suggests that bandwidth demand will exceed the capacity of most access networks by 2010…at
least those networks that have not upgraded beyond current copper technologies. In an eWeek analysis
of that study, the conclusion was that even though some sorting of signals could spare some carriers
capacity issues, the real win would be fiber, built immediately, not in five years when a compressed
deadline puts pressure on to spend more capital more quickly. Verizon’s FTTP project is exemplary of
a beat-the-threat execution.

       What are those new bandwidth hogs network companies have to plan for? They include burst
download high-definition video, like rented movies going to iPods; multi-location HD and/or 3D video
conferencing; 3D HD medical imaging; HD security monitors; and Multiple-image video with camera
shot options for sports and movies.

        How about HD standards raised to 2160i for enormous 100-inch or bigger screens, or 3D video
telecasts that consume 2571 Mbps, or 3D multiparty interactivity?

       The question of demand is undeniable: More uses and more users will join to stress the system.
                                           Traffic Growth




                                               Historic & Projected Bandwidth Growth (Infonetics)


                        • Historically there has been a ten-fold increase in
                          bandwidth every six years


        This chart is probably too conservative. It suggest that about the time the current Verizon FTTP
project winds up in 2010, power users will be bumping up against a 100 Mbps Internet appetite. That
estimate appears conservative. Some estimates put the demand at well over 1.2 Gbps on the planning
horizon.



                        Applications and Media Bandwidth
                            Upstream                                           Downstream
                                                            Web Surfing
                                                            Video Conferencing, Premises Surveillance
                                                               SDTV VOD, Telecommuting
                                                               File Sharing, Home Video Sharing/Streaming
                                                               Real Time SDTV, Network PVR
                                                               Multi-Player Gaming, Interactive Distance Learning
                                                                Premises Web Hosting
                                                                 Telemedicine
                                                                   Large File Sharing
                                                                      HDTV VOD
                                                                                  Network Hosted Applications & Storage
                                                                                         Next Generation 3D TV

                 FTTP
                                          VDSL2
                                              ADSL2+
                                        Cable Modem
                                               ADSL
                                              Dial-Up

                                100    25 20 15 10 5    0 5 10 15 20 25               100
                                                        Mbps




        The problem for cable and telco competitors not using fiber is one of physics, at least today’s
physics. There are actual limits to the amount of signal you can pump into a coaxial cable or
alternatively a twisted pair of copper wires. Cable companies are at the “full” mark for their coax,
already swapping TV channels in or out in order to feed in more HDTV. Switched cable technologies
can help and the DOCSIS3 “salvation” may well be too little too late: Meeting today’s bandwidth
demand will not be nearly enough tomorrow.

        And for telco technologies, while VDSL may be able to squeeze a bit more life out of copper
plant, both the long history in data communications as well as forecasted growth rates in consumer’s
appetites for bandwidth and services will quickly overwhelm VDSL’s ability to compete effectively in
the marketplace.

         With enormous broadband and video traversing the fiber, interactivity becomes a natural
development. Verizon today offers “widgets” on our TV service, linking customers via Web grabs to
localized and individualized weather and traffic data, displayed right on the TV. More widgets will be
added soon, but the vision of true interactivity is not far behind, taking TV viewers down Internet paths
to statistics for sports, shopping for on-screen items via interactive advertising, personal broadcasting
of, for example, items available at your garage sale, or alternate camera angles for movies.


                                  The FiOS Advantage
                  FUTURE:
                  FUTURE:                INTERACTIVITY AND CONVERGENCE
                                          INTERACTIVITY AND CONVERGENCE
                   Verizon One, Intelligent Media Search, Interactive Advertising, Personal Broadcasting
                   Verizon One, Intelligent Media Search, Interactive Advertising, Personal Broadcasting

                  TODAY:
                  TODAY:            ENHANCED PERSONALIZATION & CONTROL
                                    ENHANCED PERSONALIZATION & CONTROL
                                        Home Media DVR, Media Manager, Widgets
                                        Home Media DVR, Media Manager, Widgets

                     VIDEO SERVICES
                     VIDEO SERVICES                 DATA SERVICES
                                                    DATA SERVICES                  VOICE SERVICES
                                                                                   VOICE SERVICES
                   350+ all-
                   350+ all-digital channels
                        all-digital channels                                 Best-in-
                                                                             Best-in-class Voice Service
                                                                             Best-in-class Voice Service
                                                   Unsurpassed speeds
                                                   Unsurpassed speeds
                   Most HD channels Int’
                   Most HD channels // Int’l
                                        Int’l                                      Highly reliable
                                                                                    Highly reliable
                                                    up to 50/20 Mbps
                                                     up to 50/20 Mbps
                      Large VOD library
                      Large VOD library                                              High quality
                                                                                      High quality
                       HD on demand
                        HD on demand

                                                    FTTP NETWORK
                                                    FTTP NETWORK
                                             Reliability, performance, & cost
                                              Reliability, performance, & cost
                                           Converged video, data, voice services
                                           Converged video, data, voice services




        No one just a few years back could have foreseen the appeal, the surge and the power of My
Space, Facebook, YouTube or the way they all interconnect. Three years ago, high-definition television
was a novelty and beyond the imagination or budget of most TV viewers. The first widgets appeared in
Apple software just a couple of years back. Technology enables but consumers engage and drive new
things. Before long, the uploads will be HD and the volume of widgets available will be as broad as
the base of Web applications in the market.

       And what of the modern focus on all things “green?” Where does FTTP fit in?

       Dan Parsons of Broadlight, in an article titled Green is PON’s Color, suggests that substituting
GPON technology for just one million ADSL2 lines conserves 4.8 million pounds of carbon dioxide
annually – about as much as burning 250,000 gallons of gasoline, and compared to VDSL2, GPON
saves 13.6 million pounds of CO2, or 700,000 gallons of gas. With alternate calculations, the impact of
GPON versus ADSL2 is the equivalent of 1,650 customers changing from gasoline cars to hybrid cars,
and compared to VDSL2, the number becomes 4,700 conversions to hybrids.

        His study also suggests that FTTP encourages teleworking and that if everyone worked at home
just one additional day per month, there would be a five percent reduction in gas consumption, a four
percent reduction in CO2 emissions, a $5 billion reduction in road expenditures and 1.5 billion hours of
commuting time recaptured.

        Venturing a peek at some quality-of-life issues, consider telemedicine, where extremely high
definition images can be read remotely, saving doctors and patients time and travel, or innovative video
conferencing using ultra-high-definition video at double today’s resolution rates on wall-sized screens.
The future of fiber-enabled life-changing tools has barely been peeled back.

         Verizon committed to FTTP when the nation was just on the cusp of what is happening with
networked information of all kinds today. The risk was big. But the demand is big, and growing. FiOS
is the result.
         The ad says it all: This is FiOS. This is big.

The Case for U-verse
Staff

       There are compelling reasons why AT&T U-verse is the right strategy for today's broadband
market.

        First of all, U-verse fits the market. By that we mean that it offers broadband that people can use
at prices that they can afford. U-Verse is expected to cost between $6 billion and $8 billion to go to
some 30 million living units. By comparison, Verizon's FiOS may cost up to $23 billion to go to 18
million living spaces. That is a major difference.

        Secondly, U-verse is the only all IPTV architecture, which would seem to position it well for the
future. It will not be necessary to replace the RF overlay with IP as the MSOs and Verizon will have to
do.

        One reason why it is economical is that it costs less per living unit to serve. U-Verse seems to
cost in the range of $250-300 per unit, while FiOS is more in the range of $900-1,000. FiOS also has to
pay significantly more than that for each living space that wants fiber.

        Data provided by AT&T suggest the average “per connection” cost for U-verse is significantly
lower than for FiOS. When AT&T first announced its U-verse plans, it cited initial installation costs of
$500-600 per subscriber including home gateways, set-top boxes, in-home wiring and truck rolls. At
that time, AT&T projected this cost to decline to $300-450 by 2007. More recently, in its 12/07 analyst
conference, the company pegged per subscriber 'CPE costs” at approximately $550, falling to roughly
$400 by 2010. Each FiOS subscriber has an average connection cost of $718, not including set top
costs, which Verizon treats separately.

        As with Verizon, AT&T is upgrading its network, installing more than 40,000 miles of route
optical fiber cable and new coaxial cable where necessary.
                                                                                             Continue Pg 22
        When you think about it, AT&T would seem to be rolling out technology that meets the needs of
the vast majority of the population in a manner that can reach the greatest amount of customers in the
least amount of time, using a next generation architecture at a price that is only a fraction of what FiOS
costs.

        The broader results are in many respects the same. AT&T is offering TV, including HDTV, to
the U.S. market, providing fast Internet and enhanced voice service. In fact, each of AT&T's Triple Play
services is being enhanced as it rolls out over U-verse. U-Verse voice, for example, is far different from
traditional voice services. AT&T U-verse voice:

       *combines AT&T U-verse voice and wireless voice mail with U-verse messaging, which
provides a single voice mailbox that can be accessed from any phone line or PC

       *U-verse central, an on-line management portal that gives users the option to easily and
conveniently manage their call preferences, voice mail, contacts, call history and more from any PC, in
addition to the ability to access voice mail and control call preferences from their home phone.

       *An on-line voice mail box so that customers can listen to, manage and forward voice mail
from the on-line portal, much like an e-mail inbox.

       *Call history, which enables customers to view their most recent incoming and outgoing calls
on-line, or to view their most recent incoming calls on their AT&T U-verse TV screen.

        *Click to call, which will connect a call to any number in a customer's call history with one
click of a mouse or the U-verse TV remote control.

        *An on-line Address book that is accessible from any PC and allows customers to Click to Call,
to create and share contact groups with other U-verse voice customers, or to set up distribution lists for
voice messages.

      *Locate Me, a feature that provides simultaneous ringing on up to four wireless or landline
numbers so that a customer never misses an important incoming call.

       *Traditional calling features, such as Call Screening, Call Blocking, Do Not Disturb, and
privacy settings.

       Because U-verse does not have to be connected to every home, it can be ramped up quickly.
AT&T anticipates passing 17 million homes by the end of this year, which would give it leadership in
providing fiber-rich broadband solutions.

        AT&T anticipates more than one million subscribers by the end of 2008, with weekly
installations ramping to over 40,000. The company is now averaging in the 10,000-12,000 range for
new subscribers each week.

       There are obvious advantages to passing more homes earlier. The longer U-verse is available,
the higher the penetration rates will be.
        AT&T has heard the argument numerous times that if it only puts in FTTN now, it will have to
upgrade later. Yet look what others are doing now. As Jim Farmer notes in his column later on in this
issue, the cable TV companies are implementing a variety of techniques to increase their broadband
capabilities, including switched digital video, DOCSIS 3.0, etc. Verizon already is attempting to
upgrade its network to GPON. Network upgrades will be ongoing no matter who is putting what in.

        U-verse is providing the best technology to match the needs of its citizens in a manner that will
provide the company financial flexibility going forward. It is providing plenty of Internet speed, video
service, etc for the foreseeable future. While the technology has at times been tricky, the results are
expected to be more in line with what AT&T's customers and shareholders truly desire and allow the
carrier to reach the greatest number of customers fastest.

Ed. Note: FTTH vs. FTTN is an issue that exists at all telco levels, not just between Verizon and AT&T.
In order to get a better perspective on what smaller telcos are doing, we asked two innovative
broadband leaders, Consolidated and NTELOS, to discuss why they adopted the particular
architectures they did. Bob Udell, senior vice president at Consolidated, and Frank Berry, Vice
President of Engineering and Operations for NTELOS, joined us in a broad-reaching, issues-of-the-
day conversation.
       Bob Udell was named Senior Vice President and President of Telephone Operations for Texas
following the purchase by Consolidated of TXU Communications in April 2004. Bob has more than 15
years of telecom experience and previously worked at McLeodUSA.
       Frank Berry has been with NTELOS for 10 years. He began his telecommunications career with
AT&T serving in a variety of positions in Network Operations, Engineering, Planning, and Product
Management. Frank grew up in the Virginia Beach area.

The FTTH Prism: What role does fiber optics play in your networking architecture?

Bob Udell: Its the dominant transport medium we use. It started in the late 80s in our backbone, then
got into our metro and currently is in our fiber distribution networks into the home.
Frank Berry: We are utilizing an FTTH access architecture

Prism: What advantages does your networking architecture approach have in terms of economics?

Berry: For new “Greenfield” subdivisions, the incremental cost of an FTTH architecture is minimal.
Also, having all fiber OSP essentially future-proofs the network. Any new services, bandwidth, etc.
can be handled over the same infrastructure with electronics upgrades.

Udell: For us, it depends on who you are comparing it to. We look at all capital investment in terms of
meeting new revenue opportunities and reducing operating expenses. We started with a carrier serving
architecture back in the 90s that allowed us to shorten our loop lines so that we could provide DSL
service to 95 percent of our universe. Our first base was ISDN that brought us digital subscriber lines.
Our carrier serving architectures brought us to loop lengths of 15,000 feet or less. We have kept
extending this network in the past 10 years on an incremental basis and are now bringing 10 Mbps plus
and 20 Mbps plus for the Triple Play. We are now shortening to 8,000 foot lengths with fiber. And, in
Greenfield, we are going directly to the home. Our architecture has allowed our service delivery to be
done on an incremental basis. We capped our old TDM and replaced that with backbone IP and stopped
the reinforcement of old copper plant and began replacing it with fiber.
Prism: What bearing did your existing plant condition (age, gauge, etc.) and placement
(underground/above ground) have on your decision to pick FTTH/P or FTTN/C?

Berry: That was certainly part of the decision, given an FTTN implementation would have required
additional investment in copper to reorganize our network. FTTH is the future and we made a
commitment for the long-term.

Udell: Let me paint a picture for context. I also worked at Bell of Pennsylvania. It is different for
independent telcos than for the Bells. The independent companies have continued to keep their plant in
good condition. You get better expense control to keep it up rather than having to face a big hockey
stick down the road. It has been to our benefit to have plants in good condition. We have waited longer
for fiber to stabilize. We have been very satisfied with our copper plant and we still get 20 Mbps over
copper up to 7,000 feet. However there has been ongoing maintenance of that copper. We are now at
the tradeoff point to where you can deploy fiber, We have been waiting for the technology to stabilize.
We now think it has gone beyond parity.

Prism: We all know that broadband requirements are growing. Are you confident that your approach
will resolve broadband issues five or ten years from now?
Berry: Absolutely, with an FTTH network we will have to throttle speeds as applications and demand
for bandwidth grows in the years to come. You will face these issues where copper plays a role in your
long-term network architecture.
Udell: I am confident we will be able to address broadband issues five or ten years from now. Our
network allows us to incrementally grow with customer demand. We have the node architecture. For
highest-need customers, we can extend our network through pair bonding until it is necessary to
overbuild. This is all business-plan driven. We are providing video, IPTV, 220 channels plus of digital
video, and increased demand for higher access speeds. We have to decide where we think the best
potential is to sell those products and that is where we have invested the capital to shorten the loop
lengths and increase the speed. We call this strategy beyond the backbone technology. We will make
the investment to shorten the fiber and will deploy in Greenfield applications.

Prism: Tell us about your vendor selections. Who is doing the heavy lifting and why did you hire
them?What specific capabilities were you looking for from your vendors?

Udell: Let me start with the key decisions we made. We have three main vendors in the backbone and
distribution networks. On the customer side, we have Zhone, Mory Ejabat's company. Feeding those
devices, we have Foundry and Cisco. In our Illinois market, in place of Cisco, we use Turin. Our
distribution network gives us the ability to do intelligent routing. The heavy lifting is done by Zhone,
which gives us multiple sizes of backplanes. The same cards work with 500 customer nodes or 12
customer nodes. Zhone has been very accommodating with regard to our needs for remote
management, access and tools. All of the software nodes are all maintenance management system
controlled and do not require a dispatch.
Berry: Our GPON electronics is provided by Alcatel-Lucent and Tellabs. Both have proven track
records. They were also doing business with larger customers which makes them viable for the long
term. We also wanted two vendors so we could keep them honest.

Prism: If there is one thing that seems evident in today's telecom world, its that change and flexibility
are critical. How will your network be able to deal with adding new groups of people, diverse
broadband requirements, telecommuting, the growth of video, etc.

Berry: We believe that an FTTH architecture gives us maximum flexibility for the future. Bandwidth
demand will drive everything and we can satisfy the need regardless of the application.

Udell: The incremental nature through which we can grow our network using the node architecture
and ability to extend that closer to the customer is helping us. We can add a node to a gig E backbone.
We have a gigabit Ethernet backbone.

Prism: Some independents have had difficulty getting affordable programming as they switch to video
in part because NCTA will not help them. How has your experience been in this area?

Berry: We certainly cannot demand the discounts that a large national player can, but we feel like we
have obtained decent terms given our initial position. Coop support for additional programming in the
future certainly can help.
Udell: We started working with consortia but have found it effective to negotiate our own agreements
in our last two markets. We haven't had difficulty getting affordable programming but wish it were
cheaper.

Prism: How do you look at integrating wireless into your “triple play” offering to make it the so-called
“quadruple play”?

Udell: We are not going to build our own network. We are using the MVNO---mobile virtual network
operator, which is available through the national rural telephone cooperative. In Washington, DC, they
bought or merged with Telespire, representing a couple of networks. We have struck a deal and are
offering the service in our Texas markets. It is not a must, but it is a nice niche to have. We are finding
some demand from our developers. We do some of that.

Berry: We are examining the opportunities and certainly believe the more the services can be
integrated, the better we can differentiate ourselves and make the customer stick. Fixed Mobile
Convergence is being examined and how it fits with our customer base.

Prism: Are cable TV companies your primary competitors? What are you doing to compete effectively
with them?

Berry: Yes, cable companies are a concern. We are bundling services, deploying IPTV, differentiating
using unique feature sets, increasing traditional DSL speeds, and pointing to our local community
heritage particularly as it relates to customer service and experience.

Udell: I agree with Frank that they definitely are a competitor. However, we believe we are offering a
superior quality picture versus cable competition. People find that we provide a picture that is crisper
and clearer. We are not in a price cutting war with cable. We are basically offering $100 for voice,
video and data, and that's about at parity with our video competitors. We believe we are providing a
superior product and superior service. We have just rolled in during the last six months a local content.
This includes all the high school football games, the city council meetings in Lubbock, Texas--thats big
stuff if you are the only provider that has it. Our competition is primarily the cable providers, but
second is satellite. It is easier to dislodge a cable TV provider than dish.

Prism: Please feel free to add any comments regarding issues that you think are important that we may
have failed to bring up.

Udell: Two years ago a lot of people thought IPTV was a myth, yet we had 5,000 plus customers voting
with their pocketbooks. We probably have the largest IP base of customers beyond ATT. We are able to
do that quickly because we have really good facilities. Don't get me wrong. We have had our share of
challenges, and when you are starting a network you have a tendency to only see what is wrong but
when you move back we have actually had it pretty good. We were really one of the first to go about
IPTV in size and scale. The larger carriers have learned quite a bit from us smaller guys. It actually
became clear to us in the 2003-4 timeframe that you could build video on a converged network not an
RF overlay. We felt the time was right.

Prism: Thank you, gentlemen, for an inspired discussion.


                                             Columns
Ed. Note: We asked Jim Baller and company, the Washington broadband experts, to explore the views
of the presidential candidates on FTTH and broadband. While still in the race, they decided not to
include Ron Paul or Mike Huckabee, who are decidedly longshots at this point. We also note the
possibility that Al Gore may come in as a peacemaker to what some believe may be a chaotic
Democratic convention. If there is any chance of that happening, we will present Gore's views about
broadband, including his apparent father of the Internet claim, laughable in some circles.

The Presidential Candidates: How They View Broadband
By Jim Baller and Casey Lide, Baller-Herbst

         Senators Barack Obama, Hillary Clinton, and John McCain differ on many major issues, but
when it comes to broadband deployment, they appear to agree on most points, either explicitly or
tacitly. To be sure, they do differ in some significant ways, but these differences do not appear to be
irreconcilable.

        Of the three, Obama has provided the most detail about his broadband policies. On his
campaign website, Obama states that he understands the “immense transformative power of technology
and innovation,” and therefore seeks to “encourage the deployment of the most modern
communications infrastructure” that “can be used by government and business to reduce the costs of
health care, help solve our energy crisis, create new jobs, and fuel our economic growth.” An Obama
administration, he says, “Will ensure America remains competitive in the global economy.” He then
goes on to discuss at some length his support for network neutrality, diversity of media ownership,
safeguards for personal privacy, openness of government, and use of 21st Century technology to
improve government service.
       Turning to next-generation broadband, Obama states that America “deserves the finest and most
modern communications infrastructure in the world.” More specifically, he states:

               Deploy Next-Generation Broadband: Barack Obama believes that America
               should lead the world in broadband penetration and Internet access. As a country,
               we have ensured that every American has access to telephone service and
               electricity, regardless of economic status, and Obama will do likewise for
               broadband Internet access. Full broadband penetration can enrich democratic
               discourse, enhance competition, provide economic growth, and bring significant
               consumer benefits. Moreover, improving our infrastructure will foster
               competitive markets for Internet access and services that ride on that
               infrastructure. Obama believes we can get true broadband to every community
               in America through a combination of reform of the Universal Service Fund,
               better use of the nation’s wireless spectrum, promotion of next-generation
               facilities, technologies and applications, and new tax and loan incentives.

        He then goes on to discuss several specific steps, including redefining “broadband” from the
FCC’s current 200 Kbps to the “speeds demanded by 21st century business and communications;”
amending the Universal Service Program to replace support for voice communications at a time certain
with support for affordable broadband, focusing specifically on un-served areas; overhauling restrictive
current policies on wireless spectrum; ensuring that schools, libraries, households and hospitals have
access to next-generation networks as well as adequate training and resources to use them to full
advantage; and providing federal support for public/private partnerships at the local level.

        Most recently, Obama has proposed a program entitled “New National Infrastructure
Investment” to “rebuild America’s national transportation infrastructure – its highways, bridges, roads,
ports, air, and train systems – to strengthen user safety, bolster our long-term competitiveness and
ensure our economy continues to grow.” The program will include a National Infrastructure
Reinvestment Bank funded by $60 billion over 10 years, which Obama predicts will create a million
new jobs.

      For her part, Clinton in numerous campaign speeches has explicitly called for “a National
Broadband Strategy.” Senator Clinton’s campaign website briefly elaborates as follows:

       Support initiatives to establish leadership in broadband. Under the Bush
       administration, the country that invented the Internet has slipped to 25th in the global
       rankings for broadband deployment. In order to accelerate the deployment of
       sophisticated networks, Hillary Clinton proposes that the federal government provide
       tax incentives to encourage broadband deployment in underserved areas. She also
       proposes financial support for state and local broadband initiatives. Various municipal
       broadband initiatives are underway around the country to accelerate the deployment of
       high speed networks. The initiatives are useful for education, commerce, technology
       development, and the efficient provision of municipal services.
The statement quoted above is not a stand-alone policy but part of Senator Clinton’s “Innovation
Agenda,” a 9-point plan “to renew the nation’s commitment to research; help create the premier
science, engineering, technology and mathematics workforce; and upgrade our innovation
infrastructure.” It is also part of Senator Clinton’s infrastructure plan called “Rebuild America Plan.”

       As she recently explained in an interview published in the San Francisco Chronicle,

       The degradation of America's infrastructure isn't just a serious threat to the safety of
       Americans; it is also a threat to our homeland security and our economy - something I
       experienced first hand as Senator of New York during 9/11. This is why I've set forth a
       Rebuild America Plan. Along with emergency initiatives that will invest billions of
       dollars to deal with critical infrastructure plans, conduct immediate safety reviews of
       high priority and high risk assets and review the safety certification process and
       standards, my Rebuild America Plan includes specific strategies to modernize our
       infrastructure in public transit, seaports and intercity passenger rail while also
       addressing congestion, traffic growth and broadband networks

        Clinton has also been a long-time supporter of legislation to spur economic development in
rural areas through broadband initiatives. This includes sponsorship of bills such as the Rural
Investment to Strengthen Our Economy Act and the Rural Broadband Initiatives Act. Senator Clinton
is also a supporter of net neutrality, particularly through her sponsorship of the Internet Freedom
Preservation Act.

        John McCain has not said much in public about a national broadband strategy, but his few
words, and especially his deeds, are very revealing. For example, in November 2006, McCain and
Cisco CEO John Chambers were asked what single thing Congress could do that would have the
biggest impact on innovation. They responded as follows:

       Chambers: Broadband. We need to put the rhetoric on the back burner and need to focus
       on making broadband a priority in the United States. We need a national broadband
       plan. We need to change the current FCC broadband measurement of 200Kpbs to 100 or
       even 500 times faster. The U.S. is falling behind on broadband and without leadership
       and focus we will continue to do so.

       McCain: I agree with John.

        Although McCain is a strong advocate of private enterprise, he was one of the first members of
Congress to sponsor federal legislation that would prohibit states from enacting or enforcing measures
that would interfere with public broadband initiatives. The essence of McCain’s position on this is
reflected in the following excerpt from his floor statement introducing the Lautenberg-McCain
Community Broadband Act of 2005:
       This bill is needed if we are to meet President Bush’s call for ‘‘universal, affordable
       access for broadband technology by the year 2007.’’ When President Bush announced
       this nationwide goal in 2004, the country was ranked 10th in the world for high-speed
       Internet penetration. Today, the country is ranked 16th. This is unacceptable for a
       country that should lead the world in technical innovation, economic development, and
       international competitiveness.

       Many of the countries outpacing the United States in the deployment of high-speed
       Internet services, including Canada, Japan, and South Korea, have successfully
       combined municipal systems with privately deployed networks to wire their countries.
       As a country, we cannot afford to cut off any successful strategy if we want to remain
       internationally competitive.

       I recognize that our Nation has a long and successful history of private investment in
       critical communications infrastructure. That history must be respected, protected, and
       continued. However, when private industry does not answer the call because of market
       failures or other obstacles, it is appropriate and even commendable, for the people
       acting through their local governments to improve their lives by investing in their own
       future.

        On other issues, Senator McCain defies easy classification. For example, he supports greater
concentration of media ownership, supports a la carte cable programming,and “in general” opposes net
neutrality legislation.

                                             Conclusions
        Senators Obama, Clinton, and McCain all support the concept of a National Broadband
Strategy, and they apparently agree on many of the details. There are some significant differences –
most notably on network neutrality – but there may be room for compromise. Under these unique
circumstances, advocates of a National Broadband Strategy should, whenever possible, prod the
candidates to spell out their positions in greater detail. Advocates should also do their homework now
to be prepared to participate effectively in the national dialog on a National Broadband Strategy that
will surely occur in the months ahead


What Happens When The H in FTTH Goes Bust?
By Diane Kruse, CEO, Zoomyco  
 
        I don’t have to tell you that the United States is in the midst of an economic downturn. The
housing industry especially is being hit hard by the sub-prime lending crisis and the deterioration of the
real estate market. Oil prices are skyrocketing, the dollar has fallen to an all-time low against the euro,
and the worrisome discussions of a pending recession are all casting troublesome shadows. Well, you
all know me - the eternal optimist. Here are a few things to consider given the murkiness of the
economy.
                         The Housing Crisis, Making Sense out of it
         It’s important to understand the housing market, its great size and the markets that are being
impacted in the United States. First of all, the new housing market, even in an economic downturn, is
still significantly huge. In its downturn, the U.S. still builds 1.5 million new homes each year. At its
peak, the U.S. housing market witnessed over 2.2 million new homes built each year. While this is a
significant decrease in size of the addressable market, it is still a substantial market. Some 50 percent
of the new homes that are being built are being built in master-planned communities, which is a target
market for many Fiber to the Home companies. The U.S. population continues to grow; over 1/3 of our
population growth is from immigration. The baby boomers are continuing to purchase second homes,
and the second home market does not seem to be impacted by the housing downturn. The baby
boomer’s children are just entering the housing market for the first time. There is still a need for new
homes to be built in the U.S. and the size of the market is still, even in the housing slump, quite large.

        Yes, it is true that many housing developments have slowed down; however this is territory
dependent and not all markets are facing the same challenges. Builders have cut back on new building
projects as they are trying to sell the unsold homes on their backlog; this seems to have hit markets
such as Florida, Nevada, and Arizona, more so than Mississippi, Colorado and Utah. Across all
markets, in November, residential real estate construction declined again for the 22nd month for private
builders, and in December, there was another decline in construction spending in government public
works projects. However, the positive news is that commercial and office space real estate spending
actually increased last month. And, now that the Fed has lowered the interest rates again, homes are
more affordable. It’s important to choose wisely the territories in which to operate and build, the type
of development, and now that commercial office space spending is increasing, to make sure the
community has a sufficient amount of mixed-use.
         In 2005, we were in “boom times,” and we overbuilt the market demand for housing.
According to economists, we are currently entering a recession cycle, with the bottom being forecasted
to hit this year. We are hoping that as 2009 approaches, the housing market begins to become active
again.

        The model for FTTH builds in new communities is an efficient use of capital if the agreements
with the developer are structured properly. We at Zoomy have structured our agreements with the
developer to align our revenues with our capital outlay; we believe this is an efficient use of our capital.
For example, we spend capital during each new phase of construction, while the utilities for the
community are being laid. Approximately 50 percent of the total capital cost for “lighting” a home is
spent during the time when trenches are open and the outside plant network is being built. The
remaining 50 percent of the capital costs are spent when homes are actually built and are taking
services. Zoomy typically has the developer absorb some of the construction costs until homes are
built and taking services. This has allowed for an efficient use of our capital; aligning the costs with
our sources of revenue. Paying a door fee to the developer, without the certainty of a home being built,
is a tough sale internally for us, because it shifts the risks of the slow housing market to the network
owner, when it should remain with the developer or builder.

           Hunker Down, Forget the Housing Troubles, and Expand into New Markets

        We that focus on the new housing market in the United States need to indeed hunker down,
focus on profits rather than sales, reduce our expenses, and be patient for better times. The housing
market cycles every 7-10 years; it will come back again. Times are tough, this is true. The housing
woes are no big surprise to those of us that have been marketing to master-planned communities for the
past several years, and therefore, it should be no surprise that we need to hunker down, focusing on
profitability, rather than high growth.

       Other markets that continue to grow for the FTTH industry are overbuilds, from municipalities,
incumbent phone companies, CLEC’s and Triple Play providers. Also, the cable companies are even
alluding to looking into FTTH. These markets still represent a significant opportunity, especially for
companies that now have engineering, construction, and operating experience, not to mention all of the
potential equipment sales that these markets provide.

       Markets in Latin America, Europe, Asia, Korea and Japan are expanding. The global economy
does not live and die by strength or weakness of the U.S. economy today as much as it did even five
years ago. The Japanese market continues to add 80,000 to 90,000 new FTTH connections every
month.

        Recent data on FTTH builds from the Fiber to the Home Council’s sister organizations (North
America, Europe, and Asia) show Asia continues to lead the world in FTTH deployments, with the
three top markets being Hong Kong, Japan, and South Korea. Several markets in Europe – Sweden,
Denmark, Norway, and Italy -- follow in terms of FTTH penetration. Taiwan and China are also ahead
of U.S. deployments, with the U.S. in 11th place in the world. The overall health of FTTH in the U.S. is
healthy, and worldwide, it’s exploding.

      For those of you that are impacted by the slumpy housing market, be patient, tighten your belts,
improve your processes, manage those cashflows. This too shall pass.
Gonna Get Ya!
James O. “Jim” Farmer, CTO, Wave7 Optics

        When my daughters were young I invented (I guess that’s the word to use) a little story for them
and their friends at Halloween. I had the girls sit barefoot on the floor in a room in a group, with space
in the middle for me to sit down. Then we turned off all light while I came in and sat. My wife stood
by the light switch, with smelling salts if needed. What the girls didn’t see was the bowl of water and
the wet rag I brought in with me. I sat in the middle of the group and started this long story about how
I was walking through this scary place one night and I heard something say, “I’m gonna get you!” The
threat kept getting louder and louder. As I was crossing a stream, I heard then felt something coming
up out of the water to get me. At that time, I took the rag out of the water, and squeezed it to make the
sound of water trickling. Then I slowly dragged the rag up the foot of the girl sitting closest to me. Of
course I didn’t get very far before she started screaming, which meant all the other girls started
screaming, and my wife had to switch on the lights so they could see what really happened.

         Today, in many areas, we FTTH dudes are the ones saying “I’m gonna get you!” as we move in
as a competitive supplier of telecom services. But the other guys have figured out the game, and are
making their own “I’m gonna get you!” Let’s talk about what the competition is doing to meet our
competition. We’ll talk mostly about cable TV, but we’ll also talk about satellite. No one is standing
still, not by a long shot.

                                           The Data Scene

        In North America, cable TV has maybe three times the subscribers satellite does, a lot because
they were there first, and also because they have a viable two-way plant, which satellite lacks. They
have the lion’s share of the residential high speed data (HSD) business, in large part because in the
1990s they were working, while the phone companies were sleeping. Or maybe the Bellheads were
preoccupied putting in all those second lines for data service, which would be stranded shortly as
people dropped dial-up Internet in favor of high-speed data. Or maybe they were racing each other to
the long-distance market, to see who could destroy it first. At any rate, Cable Guy got a pretty good
head start on Bellhead for HSD, and the first anyone started tracking such things, Cable Guy had a two-
to-one lead in subscribers. Somewhere around 2004, give or take a few years, Bellhead decided to go
after a greater share of the high-speed-data market, so he dropped prices for DSL service. Wisely, I
think, Cable Guy didn’t get into a price war with him, choosing instead to increase speed and compete
on performance.

                                         Two Data Markets

       So the HSD market has bifurcated: If you are satisfied with lower-medium-speed service at a
lower cost, go with DSL from the phone company. If you want higher-medium-speed (my FTTH bias
is showing, as you can see), go with cable modem service from the cable company at somewhat higher
cost. This strategy cost Cable Guy some market share, so that the last we saw, he now has about a 3:2
advantage in market penetration. But the customers he lost were the lower tier, cost-conscious segment,
where profit tends to be muted. Of course, Cable Guy has continued to be his own worst enemy in
some cases. In many places he still deserves his reputation for shoddy customer service, though in
some places (e.g., BrightHouse Tampa Bay), he has actually beat out the competition in the J. D. Power
survey of customer satisfaction. And I have to say that my own recent experience with Megabig
Bellhead has convinced me that he is learning all the bad customer service habits of Cable Guy. While
Cable Guy is learning the big-company-we’ve-always-done-it-that-way-at-the-slowest-possible-pace
worst practices of Bellhead. (Are you starting to see a roadmap for success, those of you who are
competing with the big guys?)

        So now we find the HSD market bifurcated (for now) into slower, cheaper DSL, usually around
1.5 Mbps downstream, a few hundred Kbps up. That competes with Cable Guy at a faster 5-8 Mbps
down and a few hundred Kbps up. With some exceptions (such as AT&T’s fiber-to-the-neighborhood),
Bellhead is severely limited by the speed capabilities of twisted pair, given the relatively long loop
lengths here in North America, and the age of the plant. Cable Guy is using a shared medium to a
group of subscribers. For the most common form of cable HSD today, DOCSIS 2.0, the payload data
speed downstream is about 38 Mbps per one RF channel, and about 8 Mbps upstream. Cable Guy has
gotten really good at figuring out how many subscribers he can put on one RF channel – statistics work
wonderfully well at enabling data sharing. If one RF channel doesn’t work, he can add more DOCSIS
channels (at the expense of video, since his network, unlike ours, shares the same bandwidth for video
and data). Alternatively, Cable Guy can physically rearrange his network (usually called “splitting the
node”), so that he puts fewer subscribers on a physical part of his network. This works, but costs
money.

                                       Cable Guy Awakens

        Well, sir, a year or two back, Cable Guy learned of this new kid on the block called FTTH, and
rather than a 38 Mbps downstream channel, FTTH had one that ran at 1 Gbps or faster, to serve fewer
subscribers. That kind of spooked Cable Guy. There had been this proposal for a new form of
DOCSIS called DOCSIS 3.0 lying around for a while, being worked on at modest speed (this is my
interpretation – I wasn’t there to see what was happening, and I’m sure I could get in quite an argument
with the right folks). Cable Guy got serious about finishing the spec because one of the things it
promised was up to about 160 Mbps in one data stream. So now Cable Guy could sort of compete on
speed, delivering 100 Mbps to a single subscriber if he wished.

       How does DOCSIS 3.0 work? Well, those of you from a Bellhead background will know about
pair bonding for getting higher bandwidth. DOCSIS 3.0 does the same thing in the frequency domain
by bonding several RF channels, so that data can be split over the channels then put back together.
Right now, the most popular form of channel bonding groups four channels in upstream and/or
downstream to deliver about 160 Mbps downstream and maybe 30-plus Mbps upstream (depending on
a bunch of assumptions).

        But that speed, low as it is compared with what we can do, comes at a steep price: bandwidth.
It’s no secret that Cable Guy is out of bandwidth at a time when he needs more and more. It works out
that adding more DOCSIS channels, whether bonded a la DOCSIS 3.0 or not, costs the ability to
program about 10 standard definition videos or two high definition videos for every 38 Mbps of
downstream bandwidth you add. How do you trade that off?
       But Cable Guy has more tricks up his sleeve, so don’t get overconfident. Most systems were
rebuilt between about 1995 and 2004, to a bandwidth of 750 MHz; that is, the usable downstream RF
bandwidth goes from 54 MHz (low end of channel 2) to 750 MHz. A few systems rebuilt near the end
of the rebuild era operate up to 860 MHz, gear for this bandwidth having come available later in the
rebuild cycle. Now 1,000 MHz gear is available, and is being deployed in certain markets where it is
most needed. This gives Cable Guy a big boost in bandwidth, and some folks are starting to deploy it.

                                          The Video Scene

       Meanwhile, Cable Guy is getting more creative with the bandwidth he has. What with cable
being built to nodes of 500 homes passed or less and with a couple of hundred video broadcast
channels (maybe), at any time there are many channels not being watched in a node. (Logically, a node
is equivalent to our PON – the group of homes served by a common bandwidth pool.) So Cable Guy
has developed switched digital video (SDV), the cable TV equivalent of IPTV. The most commonly
watched programs are sent by broadcast as always: they are present at every TV or set top box in the
node. Less popular programs are not broadcast. Rather, they are queued up at the headend ready to be
sent out if someone wants the program. When a subscriber requests a program, the set top sends the
request back to a server at the headend (or hub – the difference is unimportant for this discussion). The
server checks to see if anyone on the node is currently receiving that program. If so, the requesting set
top is told where to find it, and it gets the program already being transmitted. If no one is currently
watching the program, the server finds a vacant channel (and subchannel, since more than one program
is sent on an RF channel), puts the program on it, and tells the set top where to find said program.

       SDV has been shown to save about 2/3 of the spectrum going to a node, potentially opening up a
lot of bandwidth. The rub is that it only applies to digital programs, and not to analog. There is
nothing the cable industry would like better than to take off all the analog programming and replace it
with digital. With today’s technology, they get about a 10 to one improvement in bandwidth use. The
problem with doing that is that, depending on whose unreliable numbers you use, maybe 2/3 of the TVs
connected to cable can only receive analog signals. To remove analog, Cable Guy would have to put
set tops on all those TVs, and the cost to do that is unbearable. Cable Guy has also worked a deal with
the Friendly Candy Company (better known as the FCC) that essentially keeps certain channels in
analog through 2012, at which time the issue will be revisited.

                                        Reclamation Project
        Some operators have gotten kind of aggressive at analog reclamation, in which they move less-
watched analog channels to the digital tier. Customers who want those channels on TVs that don’t
have digital reception are given basic digital boxes. This has been met with some success, though not
without agony in some cases when important shoes were stepped on. Other operators are not doing
significant analog reclamation yet.

                        So Why Analog or Even Broadcast in FTTH?

        So why, with all the issues with analog programming, do some FTTH vendors, including the
one who has not yet figured out how unproductive your author is, strongly advocate at least a basic
analog tier for FTTH, and suggest that you look at all-broadcast, at least for the short term? There are a
couple of reasons. Broadcast on FTTH doesn’t have all the same problems broadcast on FTTH has.
First, we don’t have to dedicate any precious broadcast spectrum to data – unlike Cable Guy, we send
data on a different set of wavelengths from broadcast. Secondly, we have more usable bandwidth – at
least to 860 MHz and in some cases to 1 GHz. Finally, while the alternative to broadcast, IPTV, is
coming along quickly, it is not as mature as is cable TV broadcast – heck, cable has a 50-year head-start
on IPTV. We’ll scare you below by showing you all the standards the cable industry has in place, and
why they have an easier, if not ultimately more satisfying, situation with set tops. So why not take
advantage of what is out there and works, both analog and digital broadcast? Digital broadcast done
right is every bit as good as is IPTV done right. Done wrong, both are horrible.

         As for analog broadcast, even most Cable Guys admit there will be at least some basic analog
tier for years to come – remember those 2/3 or so of TVs connected to cable without benefit of a set
top? Remember that it costs moolah to put set tops on them? And think about where some of them are:
Where do you put the set top--on the under-counter TV in the kitchen? Where do you put it--on the TV
behind the half-silvered mirror in the bath? Do you know they sell TVs in the shape of dolphins,
footballs, and bunny rabbits? No, I don’t know who buys them, but someone must, nor do I know
where the set top would go. TVs last an average of 15 years, so don’t expect those sets, most without
digital tuners and certainly without Ethernet connections, to go away soon.

                                         More for the MHz

        There are yet other tricks Cable Guy has for getting more out of his bandwidth. Normally, you
can cram about 10 standard definition (or two two high def) videos in one standard 6 MHz RF channel.
But the industry has found that with careful compression and the right selection of channels to go in the
group, you can cram in more channels. For example, you don’t put a bunch of sports channels in the
same 6 MHz group. Rather, you put in one or two sports channels, and fill out the group with things
that usually take less bandwidth: channels that run news are often showing talking heads, and this takes
less bandwidth. Cartoons tend to have large areas of exactly the same color value, so this takes less
bandwidth. Channels that run movies at 24 frames per second take less bandwidth than something
done at the TV-standard 30 frames per second. So if you get creative in your compression and you
think right about what channels you group, you can do better at utilizing the bandwidth you assign to
digital broadcast.

                                       Those Blasted Boxes

        Cable Guy’s set tops are in a very advanced state, despite there being more proprietary features
than the industry would like. Private equipment vendors developed the set tops at their expense, and
battled for market share. Two companies have long dominated the cable set top marketplace.
Compared with the way IPTV is developing, this is good and bad. It is bad that other parties have been
limited in what they contribute, but it is good in that Cable Guy has had access to reliable, fully
featured set tops with “one neck to grab,” one vendor to fix any problem he has with his set tops.

        For historical reasons, cable TV set tops were supplied complete with all software provided by
the manufacturer, including encryption and digital rights management (DRM). Normal broadcast
tuning doesn’t affect the network at all – in fact, the network has no knowledge about where the set top
is tuned. For the exceptions, such as video-on-demand (VOD), there might have been two vendors
involved, but they went off and did compatibility work before the operator saw the gear. This
proprietary situation is changing now, a little bit, with a standard middleware being defined by
CableLabs. It is known as OCAP, Open Cable Access Platform, and can be applied to both set tops and
embedded in TVs to bring set-top-like features to TVs. Open Cable has recently been rebranded as
tru2way™ for consumer applications. Open Cable is really more than just middleware. It and other
standards are backed up by certification testing to ensure proper operation.

        Compare this with the situation in IPTV: Today we have a number of hardware manufacturers, a
number of middleware guys, encryption guys, DRM guys and so on. And every tuning decision results
in the entire network getting involved. There are only a few standards in place yet, and no certification
body to make sure it all works together. So each decision on a set of vendors means a new set of
compatibility issues with which the operator must deal. Fortunately, things are sufficiently mature that
it usually works, but Cable Guy has a lot of standards' work behind him that we don’t necessarily have.
Of course, if you go with a broadcast tier, you get access to all the work done in cable TV, including the
next thing we’re going to talk about.

        By the way, you may be confused by seeing references to both CableLabs and the SCTE, the
Society of Cable Telecommunications Engineers. CableLabs is a research organization owned by the
operating cable companies. It sponsors development of certain standards. However, since it is not a
recognized standards-setting organization, it has no standing with ANSI, the American National
Standards Institute, our U.S. body responsible for U.S. participation in international standards
organizations. The SCTE is a professional association of individual members of the cable TV
engineering community, and is a recognized standards-setting organization. So CableLabs turns its
prototype standards over to SCTE, which in turn goes through the process required to submit the
proposed standards to ANSI. In addition, SCTE maintains its own standards organization, supported
by full-time staff, at its headquarters in Exton, Pa.

                                 A Half Fix: Better then No Fix

        One of the standards developed in the cable industry is the CableCard.™ The CableCard goes
in cable TV set tops to carry the decryption algorithm, and some TVs can accommodate CableCards.
This lets you supply encrypted programming directly to TVs with the CableCard slot, with no set top.
Now CableCard is only a one-way device, so features that need two-way support, such as VOD, cannot
be implemented with CableCard. But all digital subscription broadcast services can be supplied
without a set top. Currently CableLabs is working on a way to get two-way performance from the one-
way CableCards.

       We’re seeing a number of TVs with Ethernet connectors now, so there is hope for no-set-top
support for IPTV, too. But we are not aware of any way to implement security with these sets yet.
Several organizations are working on IPTV standards, but they are just not all there yet – Cable Guy is
ahead. Fortunately, though, if you have a broadcast tier, you can ride for free on all the work that has
been done in cable TV set tops over the last 20 years. For a scary list of cable TV standards, check out
www.scte.org/standards.
                                           Other Features

       Cable Guy has a lot of experience with program guides, a place where IPTV thinks it can
compete very well. I’m not so sure: Cable Guy has a good upstream path to request information from
the headend. We have a much bigger upstream path, but he has enough for what he needs to support
program guides. There has been a lot of work done on video program guides in the cable industry.
These are the program guides that put thumbnails of a number of programs on the screen at the same
time. You highlight the one you want to watch, and the set top tunes to it. Now IPTV has maybe some
advantage here, though it comes at a price. IPTV can, in principle, encode (read, $$) thumbnails of all
programs at the headend and send them as multicast packets. With proper firmware in the set top, the
set top could pick out any eight or so thumbnails from the viewer’s favorite channels, and display them.

         Cable Guy, since he is tying up precious bandwidth, is restricted to pre-selecting the thumbnails
he puts together. So he could put together a sports page, a news page, etc., but he can’t let Joe Sixpack
choose his own favorites. In theory, IPTV could do so, though we’re not aware of software to support
it, and the servers to generate the thumbnails are going to cost.

                                        Caller ID On-screen

         Cable Guy is already doing this in a number of systems. He puts in a system that monitors
traffic from his softswitch (or whatever he uses) and when it hears one of his subs getting a call, it
sends a command to the appropriate set top(s) to use it’s internal character generator to put the info on
the TV screen.

                                                  VOD

        Video-on-demand (VOD) is big in cable today, and is one of the weapons Cable Guy uses
against Death Star (Cable Guy’s name for satellite). Death Star can’t really do VOD, first because he
doesn’t have the good upstream channel we (and to a lesser extent Cable Guy) have. VOD in cable is
very, very advanced, both in the equipment available, in standards for using it, and in program
acquisition.

        When you select a movie through Cable Guy’s program guide, a request is sent to the headend.
A free channel is found (hopefully) for the movie, and it is sent to you. It is standard practice to offer
VCR-like controls, such as pause, resume, fast-forward and rewind. (Hmmm, wonder how long it will
be before people don’t understand the meaning of VCR-like. I think I’ve used my VCR about twice in
the last few years, once when I ordered some old TV shows that were supposed to come on DVD and
they came on tape instead, and once when my boss lady wanted to transfer some old tapes to DVD.
Oh, and recently I ordered a comedy music video that was not available on DVD.)

                                         Multi-room DVRs

       Cable Guy is doing multi-room DVRs, too. From the main set top box, which includes the
DVR, you simply put out the desired video program on unused channel space on the incoming coax,
and send the program to other set tops in the house. An RF remote control is used to communicate
from the other set tops back to the one with the DVR. Since the modulation is digital and only one or
two programs are being transmitted, you can use low density, robust modulation techniques. If you can
run an extra coax from the main set top back to the cable entrance, you can launch the program into the
home system very cleanly. Otherwise, you simply put a special filter at the cable entry point to reflect
the signal back into the home.

                                         Voice: Big Growth Spurt

         It’s no secret that Cable Guy is getting a lot of voice customers now – putting them (well,
putting their voices) over his DOCSIS infrastructure. The triple play bundle at a discounted rate is
proving to be pretty attractive, both at getting and keeping customers. Voice bandwidth is practically
lost in round-off in our networks, we have so much bandwidth. And Cable Guy doesn’t have too many
downstream problems. But upstream for him is another issue. He doesn’t have a lot of upstream
bandwidth to play with. So he is tempted to compress voice to reduce bandwidth. But compression
doesn’t play pretty with quality, nor does it play pretty with fax. (Remember fax? Some people still
use it.) We have the upper hand on bandwidth, but Cable Guy has a lot of standards, a minor advantage
in this case, unlike the video case.

                                           Who Gets Whom?

       So everyone’s out to get everyone else today. It’s a free-for-all, you all! You can get into
anyone’s pocket, and he can get into yours. We’re the new kid on the block, with the best technology,
so we’re gonna get you. But the other guy is not standing still and if he can, he’s gonna get us.

When I’m Sixty-Four: Fiber-To-The-Premise
Evolution to 1x64 Split Architectures
David Kozischek, Ted Messmer, Costas Saravanos, and Mark Turner, Corning

Introduction

As PON and FTTP networks continue to grow around the globe, they also continue to evolve. This
network evolution spawns from several key market drivers. One of those drivers includes the
consumer’s unquenchable thirst for more bandwidth, which comes from many areas as shown in Figure
1.

                                                                                            Figure 1:
                         Application +                User
  Population             Application +                User                Bandwidth         Bandwidth
  Population
    Change
   Change         +       Technology
                         Technology
                            Change
                           Change
                                             +      Experience
                                                   Experience
                                                     Change
                                                     Change
                                                                     =    Bandwidth
                                                                            Growth
                                                                           Growth           Drivers


   Demographic
                        The Microprocessor         Needs vs Wants
     Change

                         OTT Technologies         Web Page Viewing


                             File Size               Downloads


                             HD Video                Streaming


                          The DVR Effect             Traffic Flow
       With more “Internet Age” users, faster dual- and quad-core microprocessors, over the top (OTT)
technologies, growing file sizes and HD video, bandwidth demand can only continue to grow as
witnessed by the first demonstrations of Quad-HDTV and 3D-HDTV by several key television set and
camera makers at the recent Consumer Electronics Show in Las Vegas. Moreover, it will be even more
important for carriers and content providers to differentiate their services based on “User Experience.”

        Another driver for FTTP evolution is the dramatic increase in overall consumer and business
penetration and the mix of those users on FTTP networks, which is making it more difficult to allocate
bandwidth. Lastly, carriers are looking to get a better return on investment (ROI) for their shiny, new
fiber networks.

                                           FTTP Evolution
        The demand for more video services, including high definition television (1080i and future
1080p), multi-location video conferencing and multi-image and streaming video is driving FTTP
carriers to evolve their video platforms. They are addressing this demand much like other network
operators with better modulation schemes. They are converting analog channels to digital and, in the
early stages, moving to IP television. Operators can add more channels into existing bandwidth by
moving from 64 QAM (Quadrature Amplitude Modulation) to 256 QAM. Each standard definition
digital channel uses about 3.75 Mbps, which yields seven channels out of a 64 QAM and ten from a
256 QAM.

        In terms of improving their ROI, carriers have evolved their FTTP networks from traditional
fusion-spliced systems to more pre-connectorized, plug-n-play networks which significantly lower
labor costs during construction and subsequent customer turn-up. They are also more reconfigurable for
network changes and upgrades, which reduce overall operating costs and future investments. FTTP
operators have also improved their ROI by taking advantage of new passive optical innovations such as
bend-insensitive fibers that reduce costs of deploying fiber cable infrastructure to units within
MDU/MTU environments. Overall, it is estimated that these new passive equipment solutions for
single-family homes have lowered the cost of building out an FTTP network by as much as 45 percent
since 2004.

        Just as exciting is the evolution of FTTP from BPON to GPON, which has the opportunity to
immediately address all three market drivers. The ITU 6.984 GPON standard is now established and
offers carriers more bandwidth, enhanced security, and greater choice of Layer 2 protocol (ATM, GEM,
and Ethernet). It boosts data speeds from 622 Mbps downstream and 155 Mbps upstream to 2.488 Gbps
downstream and 1.244 Gbps upstream. This addresses the need for more bandwidth and provides more
economies of scale.

        All of this has not been lost by the carriers. Even those who have already invested in their fiber
plant see GPON as an immediate and effective means to get an even better return on their investment.
Light Reading Insider projects that the market for active GPON electronics will exceed $1 billion in
2007 and that it will grow to approximately $4.7 billion worldwide by 2011. Large incumbent and
dozens of independent carriers in North America have now committed to GPON deployments.
                                   GPON Deployment Strategies
        In evaluating GPON deployment strategies, carriers need to decide on near-term and future data
transmission requirements to ensure they take full advantage of GPON’s capabilities and economic
value. They must also understand how they will manage video demand and link-loss budgets. Integral
to all of theses GPON strategies, the carrier must ensure his physical fiber infrastructure is robust and
flexible enough to manage the evolution of GPON and beyond.

                                       Data Transmission
        BPON systems are based on the architecture described in ITU-T recommendation series
G.983. The downstream transmission bandwidth is 622 Mbps, and the upstream bandwidth is 155
Mbps. The nominal wavelength of operation for the downstream signal is 1490 nm and 1310 nm
for the upstream signal. If the optical signal (the bandwidth) is split by 64 at the OLT, the worst
case downstream bandwidth per end user is <10 Mbps in a time-division multiplex system which
may not meet the bandwidth demands of the subscribers. The worst case upstream transmission is
limited to 2.5 Mbps which offers little advantage over the current DSL networks.

         Transmission systems based on GPON utilize the architecture specified in ITU-T
recommendation series G.984. The downstream transmission is 2.488 Gbps, while the upstream is
1.244 Gbps. By splitting the bandwidth by 64 at the LCP, the minimum downstream rate per
subscriber is 40 Mbps, while the upstream is 20 Mbps. Based on statistical usage for a given
service area and time of day, the actual bandwidth that a PON subscriber can utilize typically far
exceeds the average rates. Therefore, with GPON, carriers have the option to maintain the 1x32
split to offer more guaranteed bandwidth per subscriber. Additionally, they may use a 1x64 split
to achieve more economies of scale and the best of both worlds.

         With a GPON 1x32 split, the carrier can offer a blazing 75-100 Mbps downstream and 35 Mbps
upstream data bandwidth – a compelling competitive advantage. The question is: how much are
customers willing to pay for all that bandwidth, and is the carrier getting the best ROI? If the service
area has a good mix of business customers with home subscribers, the answer may be “yes.” However,
if the service area is all residential, it may make more sense to deploy a 1x64 split. This still offers a per
user bandwidth minimum of 40-50 Mbps downstream and 18-20 Mbps upstream – still a big
competitive advantage.

       There are also real cost advantages by using a 1x64 split in the near-term until customers are
willing to pay more for higher speeds and/or more competitor threat. At an average Optical Line
Terminal (OLT) card cost of $200 per homes passed, carriers can save $1 million in upfront capital for
a 5,000 home deployment by effectively doubling the OLT using 1x64.

                                   Managing the Physical Layer

        One important thing to note is that a 1x64 split does not necessarily require a change to your
physical network and can be managed in a couple different ways. If you build a PON network with
enough feeder fibers for a 1x32 split, then you have the option to do a distributed split with the 1x32
splitters located at the LCP as is done today, then adding a 1x2 splitter at the OLT. The benefits of this
distributed split follow:
       You achieve the economies of scale on day one by being able to service 64 customers from one
port
       If the carrier wants to later increase bandwidth per subscriber in a given service area, the 1x2
splitters can be easily accessible in the central office or hub site, where the ports can be rearranged to a
1x32 split

       Another way to achieve a 1x64 split is a centralized split with a single 1x64 splitter at the LCP.
There are now 1x64 planar splitters commercially available that meet Telcordia GR-1209 and GR-1221
requirements with very good performance specifications. Furthermore, state-of-the-art plug-n-play
1x64 splitter modules (Figure 2) are fully backwards-compatible for existing LCP cabinets, and they
have the same form-factor as a 1x32 splitter module.




                               Figure 2: Plug-n-Play 1x64 splitter module

       The following are advantages of using a centralized 1x64 approach:
   •   Again, achieving the economies of scale on day one by being able to service 64 customers from
       one port
   •   50 percent reduction of feeder fibers which could double the life of carrier’s existing cable plant
   •   Still able to migrate to 1x32 split with plug-n-play modules
   •   Less loss per link than a distributed (2x1x32) network
   •   The OLT interconnection to the fiber patch panels do not have to change at all. Swapping out
       the 1x32 module for a 1x64 at the LCP is more beneficial. A workaround 2x1x32 may require
       more rack space and possibly even patch cord re-configuration. (However, network designers
       need to ensure that the received power level at the ONT meets the ONT’s sensitivity after the
       swap. New FTTP designs should be optimized for bandwidth and coverage.)

       The limitation of the number of output splits in passive optical networks carrying video,
data and voice depends on two parameters: the desired bandwidth per customer of the
downstream and upstream data as well as the link insertion loss budgets of each optical channel,
e.g. RF overlaid video signal. Each one of the two limitations will be evaluated and compared.
                                     RF Video Overlay
       The video signal is transmitted out-of-band over the same PON fiber at a nominal
wavelength of 1550 nm either by analog or digital transmission or a combination of these. In the
analog case, the video signal is transmitted in the 50-550 MHz band transmitting 133 channels.
Analog transmission requires a high carrier to noise ratio (CNR) resulting in a received minimum
power level of about -7 dBm at the residential ONT. This high received power is possible by
increasing the launch power to about 20 dBm or a minimum of class B optical budget. In this
study, we use a power budget of 26.2 dB for AM video transmission which is typical for such
systems.

        Digital transmission of the video signal is possible by either a Quadrature Amplitude
Modulation (QAM) format or transmitted in-band at 1490 nm as IPTV. This RF digital
transmission method increases the effective bandwidth of the video signal, significantly enabling
the effective transmission of HDTV channels. Noise effects are also reduced in digital
transmission compared to analog. Currently, some video providers use a combination of both
analog and QAM transmission methods in order to increase the number of video channels. This
number also depends on the modulation format and compression techniques used. In the case of
QAM format, the typical optical power required at the ONT is reduced, increasing the link loss
budget. IPTV is transmitted in the 1490 nm channel together with the downstream data signal.

      An FTTP PON network with the passive elements that contribute to the loss of the link is
shown in Figure 3. This network supports voice, data and video signals. It uses the following
elements:

A Wavelength Division Multiplexing (WDM) device that is used to combine the OLT voice and
data signals and the video overlay signals at the central office (CO) or head-end (HE)
A cross-connect Fiber Distribution Frame (FDF) that is located at the CO/HE
Angled-polish connectors that are used throughout the network to eliminate transmission
degradation due to optical reflections of the analog video signal
An optical fiber cable that can reach a distance of 10 km or 35,000 feet
A fusion splice that occurs every 2 km
Two fiber cuts that are assumed over the life of the network
A 1x32 or 1x64 splitter that is used in the LCP
OptiTap connectors that are used at the Network Access Point (NAP) terminal and the ONT
                                FD
                                                                                      Home



                                                                             ON
                            Optical
                            splitter




         Central
                    FD

                                                    Terminal


                                                       SCAPC to SCAPC

                                                        Optitap to Optitap

                                                        Optitap to SCAPC

                                                        Fusion
     Data   Video
     OLT    OLT


Figure 3: FTTH optical network model used to calculate the link loss.

The link loss was calculated using a Monte Carlo statistical analysis which provides the most
realistic way of simulating how system variables interact and the distribution of potential
outcomes. In this method, actual manufacturing insertion loss data from each component in the
network are compiled to evaluate the loss of the optical link. These results are shown in Table 1
for optical networks using 1x32 and 1x64 splitters at the LCP. For comparison purposes, the
maximum values are shown after over 10,000 simulations were analyzed at a certainty of 99.6
percent.
                                                1490/1550 nm        1310 nm
                                               downstream link    upstream link   Units
                1x32 Split                          25.40             26.60           dB
   Link Loss
                1x64 Split                          28.09             29.16           dB
                BPON class B+ optical budget        28.00             28.00
                                                                                      dB
                Planning Margin 1x32                 2.60              1.40           dB
                Planning Margin 1x64                -0.09             -1.16           dB
    BPON
                Analog video overlay Budget         26.20                             dB
                Planning Margin 1x32                 0.80                             dB
                Planning Margin 1x64                -1.89                             dB
                GPON optical budget                 29.50             29.50           dB
                Planning Margin 1x32                4.10              2.90            dB
                Planning Margin 1x64                1.41              0.34            dB
    GPON
                Digital QAM video overlay            28.9                             dB
                B d t Margin 1x32
                Planning                             3.50                             dB
                Planning Margin 1x64                 0.81                             dB

Table 1: Monte Carlo simulation results of link loss and power budget limitations for current and
                                    future FTTH networks.

       From the results above, the link loss increases by 2.6 dB if the 1x32 splitter is replaced by
1x64. The worst case planning margin is in the 1310 nm upstream link. It is shown that using a
1x64 splitter on a 35,000 ft BPON would be difficult, and the planning margins would be
negative.

        The power budget values of current FTTH networks are based on BPON transmission
systems and analog video transmission at 1550 nm. GPON transmission systems are able to
increase the link power budget by 1.5 dB at 1310 nm upstream and 1490 nm downstream. Next
generation systems will continue to provide out of band video at 1550 nm. However, a 2.7 dB
gain in power budget is achieved by switching from analog to digital video transmission.
Providers are also opting to use a combination of digital and analog transmission. In this case the
power budget increase depends on the number of analog channels being transmitted. In the most
typical case, the power budget increases by 1.3 dB over the analog video case.

        From the above data, it is seen that 1x64 split can be implemented at the LCP However,
this network requires that the GPON transmission meets the optical power budget requirements
and that an out of band digital video system is used. Since a 1x64 split at the LCP offers
significant cost reduction in the deployment of the FTTH network, the service provider needs to
assess the subscriber needs and determine the optimum architecture.
                                               Conclusion
        Despite the fact that we are still in the early stages of FTTP and PON networks, there has been a
significant evolution in technologies and deployment strategies. This evolution will continue to
improve carriers’ network performance and return on investment. As demonstrated in this paper, GPON
and the 1x64 splitter create a very real and immediate opportunity for FTTP operators to distance
themselves even further from the competition and to reap more benefits from their passive optical
network.

Bend Optimized Fibers are Best Chosen by Application
John George, Andrew Oliviero, Pete Weimann, OFS

        As optical fiber has been pushed to the residence for the past several years, Bend Optimized
fibers have enabled installations not possible with conventional single-mode fibers (CSMFs). By
dramatically reducing the optical signal loss when fibers are bent either accidentally, or intentionally,
Bend Optimized fibers can help decrease space requirements and improve network reliability in Central
Offices, CATV Head Ends, Data Centers, and Cabinets. More recently, service providers have desired
fiber cable solutions than can be routed inconspicuously in residential environments, for example down
hallways in multiple dwelling units (MDUs), or within residences as in home wiring (IHW).
Installation of MDU drop cables or fiber IHW should ideally be similar to installation practices used
for copper cabling, including use of staples and routing around tight corners. Such installation will
intentionally bend fibers tighter than ever, but should also significantly speed up deployments and
lower installation costs.

        Several categories of bend capable optical fibers have been developed over the past two decades
and recently new types have been introduced. Given the varying requirements for bending loss,
reliability, and backward compatibility for each of the key applications, a simple question arises: Which
bend capable optical fiber fits best with each application? Answering this question requires an
understanding of applications, which can drive the definition of the bend capable fiber type optimized
for each application.

                 Central Offices, Head Ends, Data Centers, and Cabinets
        These are the mission critical nerve centers of service provider networks. Central Offices, Head
Ends, and Data Centers each contain hundreds--and more commonly-- thousands of optical fiber
cables, and each fiber may support hundreds or thousands of businesses and residences. A single,
spontaneous fiber break could bring down service to thousands of customers. These might include
health care institutions, financial institutions, government entities, schools, or businesses. Thus high
reliability in the Central Office, Head End, Data Center, or cabinets is paramount.



    Optical fiber reliability can be viewed in terms of optical loss reliability, and mechanical reliability.
A view of mechanical reliability is shown in figure 1 below, and is based on classical modeling
equations used by the International Telecommunications Union (ITU) recommendations for optical
fiber systems. With traditional rules for fiber management at large bend radii, fiber breakage has not
been an issue. As fiber bend radii are dropping, based on improved low bending loss fiber designs, fiber
reliability becomes an important consideration for all applications.
                                                  Figure 1 – Predicted Optical Fiber Reliability
                                                     1ppm failure Probability for Bent Fiber
                                 40
                                                                                                          0.1m
                                 35                                                                       1m
                                                                                                          0.2m
                  Fiber Lifetime, years
                                 30

                                                             Bend            Bend             Traditional
                                 25
                                                           Optimized     Optimized for        Installations
                                 20
                                                              for         CO/HE/DC/
                                                           MDU/IHW         Cabinets
                                 15


                                 10                     Chance                            Reliable
                                          5
                                                        of fiber                          system
                                                        break
                                          0
                                              0           5             10               15                    20

                                                               Bend Radius (mm)




        All of the applications discussed above share the same need for low-fiber bending loss,
regardless of the minimum acceptable bending radius. Additional loss beyond a few tenths of one
decibel (dB) for most applications might impair or shut down video and other mission-critical services.
In general, one should expect the maximum macro-bending loss of a bend-optimized cable assembly to
be less than 0.2 dB for a single turn at 1550 nm at 10 mm radius, for the CO/HE/DC/Cabinet
applications. Below a 10 mm radius there is risk of random fiber breaks for a length of 20 cm (about 3
turns at 10 mm radius). Another challenge in COs and Head Ends is high optical power transmitted
over fiber to support video or DWDM systems. Optical cable assemblies used in these applications
should be able to support these high powers under bending conditions without degrading, burning, or
excessive signal loss, while maintaining mechanical reliability. Again, for high power applications the
10 mm minimum radius is recommended to balance these needs.

                                                           MDU and In-Home Wiring

        Service providers have recently requested fiber drop cables that can be routed down hallways
and inside a residence while conforming to corners and being stapled in place. This type of installation
promises to be less conspicuous to the customer, and lower the cost of deployment for the service
provider. The material cost savings per unit passed, for example, could be $5-$10 per unit in addition to
significant labor savings of $10-$20 per unit. The ultra-low-bending loss of these cables, at 0.1 dB
maximum for one 5 mm radius turn at 1550 nm, enables the stapling and routing around corners with
minimal signal loss. An example of such an ultra bend and staple capable MDU/IHW drop cable is
shown below in Figure 2.
   Figure 2 – MDU and In-Residence Optical Drop Cable using OFS EZ-Bend ™ Technology
 (4.7 mm cable shown routed around thirty five 3.2 mm radius corners and stapled twenty five times)




        Unlike the traditional connectivity applications, the MDU/IHW bend capable drop
installation involves intentionally bending the fiber to radii down to somewhere between 5 mm and 7.5
mm, through stapling and routing the cable around corners. All things being equal, mechanical
reliability of the glass in MDU/IHW cable will inherently be much lower than that in the
CO/HE/DC/Cabinet applications: the stress on the fiber at 5 mm bend radius is four times higher than
stress on a fiber at a 10 mm bend radius, and over forty times higher than fiber following the traditional
32 mm bend radius fiber management upon which the historical optical fiber reliability experience is
based . This leads to new questions for the industry: Is the reliability risk associated with these
intentional sharp bends acceptable in MDU/IHW applications given the first-cost benefits of using
bendable cables? One consideration with the MDU or single family residential application is that only
one subscriber is supported for each optical drop cable. Is it acceptable in this case to lower the
reliability expectation? Is the reliability of nanovoid types of fibers the same or lower than that of solid
glass fibers which have decades of field service and are supported by well established reliability
models? This is unexplored territory in practice and one that the industry will study in the coming
months as the market desire for bendable cables intensifies.

                                     Additional Considerations
       All of the applications discussed above share the same need for low-fiber-bending loss,
regardless of the minimum acceptable bending radius. Additional loss beyond a few tenths of one
decibel (dBs) for most applications might impair or shut down video and other mission critical services.
In general, one should expect the macro-bending loss of a bend-optimized cable assembly to exhibit
less than 0.2 dB of loss for a single turn at 1550 nm, at the minimum radius appropriate and reliable for
that application.
        Another bend capable cable consideration is splice compatibility. Is the bendable fiber
backward compatible to splice with traditional G.652 fibers with low loss of less than 0.1 dB per
splice? Optical cables are available today that minimize both bending loss and splice loss using
traditional splicing machines and programs. Fibers that are standards compliant to ITU-T G.652D, for
example, may not necessarily splice seamlessly to other G.652D fibers.

                                    A Bend-Capable Solution Matrix
       The following matrix is a simple guide to determining the optimized fiber for each bend
challenged application.

        Applications                 Solution Examples   ITU-T         Bending Loss (one turn),
                                                         standard      connections loss, and design
                                                                       life at min radius.
        Central Office premise       AllWave FLEX ®      G.657A        0.2 dB 1550 nm
        cable, Splitter cabinets,    cable assemblies,   G.652D        0.5 dB 1625 nm
                                                                                               r10
        Enterprise, Data Center,     indoor cables       Compliant     (10 mm radius)
        MDU riser/backbone.                                            66% lower loss than G.657A
                                                                       0.25 dB max connection loss
                                                                       40 year
        Central office cross-        Blue Tiger ™        G.657B        0.1 dB 1550 nm
        connect, OC-48, OC-192       Jumpers             G.652D        0.25 dB 1625 nm         r10
        and OC-768 systems,                              compliant     (10 mm radius)
        DWDM, High Power                                               0.15 dB max connection loss
        applications.                                                  40 year – double strength fiber
        MDU drop cables and in       MDU/in residence    Much better   0.1 dB 1550 nm
        home FTTH drop cables.       drop cables using   than G657B,   0.25 dB 1625 nm         r5
        Super bendable copper        EZ-Bend             G652D         ( 5 mm radius)
        cable like installation.     Technology (2008)   compatible    20 year

(Ed. Note: These solutions use OFS products. Other products are also available that could be used.)


                                                 Conclusion
       Bend-capable fibers provide significant value to many applications. There are three bend
capable solutions that each are optimized for key application spaces. By choosing the solution
optimized for the application, one can achieve best balance of reliability and optical performance in
bending challenged systems.
Ed. Note: The FTTH Prism tries to be a publication of ideas, and all reasonable ones are treated
equally. Timm Bechter has graciously agreed to take the downside of network neutrality in response to
an earlier column written in favor of net neutrality by Mario Rossi in our January issue.

Network Neutrality: The Con
By Timm Bechter, Waddell, Reed

        I have been asked to share with The FTTH Prism readers my view of network neutrality – the
principle that a broadband network owner/operator not restrict content, sites, or platforms and not
unreasonably degrade, i.e. prioritize or de-prioritize by origin or content classification. I’m going to do
that, but first, let me lay some groundwork. Just what is The Internet? How about the World Wide
Web? Those are nebulous terms really. Ask any layperson what The Internet really is and just stand
back to be entertained at the answer.

         Wikipedia defines The Internet as a “worldwide, publicly accessible series of interconnected
computer networks that transmit data by packet switching using a standard known as the Internet
Protocol (IP). The Internet is a "network of networks" that consists of millions of smaller domestic,
academic, business, and government networks, which together carry various information and services,
such as electronic mail, online chat, file transfer, and the interlinked web pages and other resources of
the World Wide Web (WWW).” The World Wide Web is defined by Wikipedia as “a system of
interlinked hypertext documents accessed via the Internet.” Does this help? Not really. How about the
visualization of the Internet offered up by Wikipedia? Looks more like a star nebula (nebulous indeed)
or a lit up nerve network in the brain—which is not a bad analogy, actually, but it doesn’t do us much
good.




                              Source: http://en.wikipedia.org/wiki/Internet
       I will use a different analogy to explain the Internet and Network Neutrality. Those that know
me well know my love of analogies. Through the analogy I hope to build my case that network owners
should reserve not only the right to control or groom traffic, but also that they should have the
responsibility to do so, for the assurance of the highest quality of service for the highest number of
users possible. I like to think of this as the “greater good argument.”

        So let me simplify The Internet for purposes of my analogy. From a network element
standpoint The Internet is a massively interconnected star topology of routers and switches. That is the
Interstate highway portion of The Internet. The major interconnection points in the big cities around
the globe are subtended by smaller routers. Those routes are the state/provincial highways to the
smaller cities. In those smaller cities, aggregation routers connect to the more distributed nodes and
outward to neighborhoods. At the first level of aggregation, routes are analogous to the main
thoroughfares of our towns and cities and the final routes are the neighborhood streets that connect to
driveways where the people live and park their cars that travel over the roads of our transportation
systems globally. I like this highways, byways and roads analogy because it allows for discussion of
two elements of The Internet that are often overlooked by network neutrality advocates – ownership
and capacity.

         Let’s deal with capacity first and start with the driveway and work upstream into the interstate
highway system. Most people’s driveways can only handle one or two cars moving in or out at any
given time. There is very limited capacity for flow of cars because there is normally very little demand
for it. Now if a family decides to have a party for a large number of people, and they all drive their cars
over, that driveway will not be able to accommodate all the cars and they will necessarily have to be
parked up and down the street as well as in the driveway. This puts a strain on the residents who live
along that street, especially if people are parking on both sides of the street and restricting flow of
traffic to one car at a time. People not attending the party have to wait their turn to get through the
parked cars on the street that normally would be wide open to normal flow. One big party every now
and then and the neighbors around this house probably won’t mind that much. After all they might
want to have a few parties of their own now and then. But if someone is having parties like this night
after night and consistently limiting the flow of traffic, the neighborhood is likely to do something
about it – probably call the police. The neighborhood could widen the street at its own expense or
build a massive parking garage nearby for parties, again at its expense, but I doubt that would be the
preferred course of action.

         The driveway is the last mile of broadband, the last mile of The Internet. The driveway is
analogous to a home owner’s cable modem, DSL or FTTH or wireless connection to the aggregation
router closest to his/her home. If that homeowner wants to have a party every now and then on his/her
broadband connection and it is a fairly rare occasion nobody is going to be overly concerned. However
if that homeowner is running a peer-to-peer network and is using far more up and downstream
bandwidth than his/her neighbors do on average that home owner’s usage clogs the flow for everyone
else that might want to use the collectively available bandwidth, bandwidth that at some point is
aggregated, i.e. shared. The more parties in homes on the street the more congested the street.

       Now let’s deal with the ownership issue. The streets that people live on are owned collectively
through our local governments and their power to tax the citizenry makes this system work. The
driveways are part of a home owner's property. In the analogy to The Internet, the last mile connection
is owned by the service provider – the cableco or telco serving the homeowner. It is not owned by the
homeowner. It is not owned collectively by the citizenry. Network neutrality advocates would like
everyone to believe that “The Internet” is public property – that is hogwash. There are some parts of it
that are public property, as Wikipedia correctly points out, but in the last mile that connects to the
consumer household, it couldn’t be further from the case. Homeowners pay for their broadband
connection on a monthly rental basis, and expect it to perform at some minimal level of performance.
The only way these broadband pipes will get bigger is through investment by the service provider,
cableco or telco. The only way those investments are recouped are through fees charged to the
consumer of that bandwidth. If that service provider allows the service to be degraded to the point that
people complain, or worse, switch to another provider perceived to have better service, they do not
recoup their investment as quickly, if at all.

         So what is a service provider to do? Making the road bigger, i.e. delivering a bigger pipe and a
bigger feeder aggregation point for those bigger pipes, is one approach. This approach costs more
money and the extra cost must be passed on to the end user, the consumer, the homeowner with
broadband. In general, the homeowner doesn’t want to pay more for broadband any more than he/she
wants to pay more for a wider street or a parking garage so that more parties can be accommodated.
The other choice is that the service provider plays the role of the neighborhood regulatory body and the
police for those severe circumstances I alluded to previously. In my analogy, that role involves
regulating the size and frequency of parties. The service provider therefore must be allowed to monitor
the activity on the street and restrict the use of bandwidth so that the collective experience is not
degraded too much. I am not talking about censorship here, nor am I talking about prioritization of
traffic. I will get to that in a moment. My only point here is that of advocating the rightful and
responsible role of the service provider as overseer of traffic with the goal of a higher level of
performance for all on its last mile broadband network, a network it owns in full.

        So now let me address prioritization of traffic. Back to the highways and roads and my analogy,
and in order to make my point let me suggest we look at a few examples of prioritization of traffic on
our nation’s roads and highways. A not-too-long list should suffice:

   1.   Emergency vehicle right of way
   2.   No trucks in the left lane on superhighways and on uphill grades climbing mountain roads
   3.   HOV lanes for rush hour traffic
   4.   passing on the left
   5.   rules for four-way stops
   6.   no bicycles or horse-and-buggies on the interstate
   7.   One-way streets in cities
   8.   No air brakes allowed in small towns
   9.   Toll roads

       For fun, and more importantly, to make the point of the similarities that allow my analogy to
work let’s examine these in the context of The Internet and the last mile.

   1. Emergency right of way is analogous to 911 traffic on the VoIP network – prioritization of
      emergency voice before any other type of Internet traffic.
   2. Slower moving truck traffic is analogous to bulky large packet size traffic being de-prioritized
      so as to allow the smaller sized packets which are more readily routed to move along
      unimpeded.
   3. HOV lanes during rush hour is analogous to reserved bandwidth for more efficient packet traffic
      to have priority over less efficient and thereby lower value traffic.
   4. The simple rule of passing on the left is analogous to the general rule of naturally faster traffic
      having priority over naturally slower traffic – exactly what makes any particular packet
      naturally faster I will leave to the IP packet experts!
   5. Rules for four-way stops (or three way stops or traffic circles or stop lights) are analogous to
      prioritization at switching or routing points in the network. What no network wants are
      collisions that degrade network performance.
   6. No bicycle or horse-and-buggy rules are a form of usage limits (censorship) for safety reasons
      and are analogous to rules on the network against certain types of dangerous traffic. This is a
      can of worms and not an area I wish to attempt tackling in this article.
   7. One-way streets in cities are ways to groom traffic for efficient movement and are analogous to
      allocation of upstream and downstream bandwidth in last mile connections to deliver the best
      overall experience to the user.
   8. No air brakes is another form of usage limits (censorship) that users put in place for a less
      annoying experience and are analogous to the pop-up filters that most all browsers have these
      days.
   9. Toll roads are analogous to special routes that require an extra payment for the right to use
      them. Maybe the route is more direct than any other available saving time and gas (money) or
      maybe one can drive faster on it thus saving time.

       The overarching point is that we as collective users of our nation’s road and highways have
welcomed various rules of the road for a better use experience on those roads and highways. On the
Internet who makes the rules for traffic? Who decides the prioritization of traffic, how traffic is
switched at points of intersection, what can and cannot be sent over the broadband pipes and at what
time? It can only be service providers that own their respective portions of the greater network of
networks. There is no other way if there is to be any prioritization at all. And don’t fool yourself into
thinking the core of the network today is like the Wild West with no rules at all – it simply is not the
case. There is no network neutrality in the core. Network elements already separate the traffic we have
today between voice and the various types of data and that separation and prioritization will have to
continue as the volume increases over time.

        In the last mile IP connection of a typical triple play customer it is a fairly safe assumption that
the user wants voice prioritized first and live TV video prioritized high as well and that e-mail traffic is
not so important. The network neutrality question comes not from the end user standpoint but rather
from the content providers whose content rides the last mile pipe at no cost, i.e. no direct payment to
the broadband pipe service provider by the content provider. The content provider fears that the service
provider will also become a content provider and prioritize its own traffic ahead of the content provider
that rides the broadband pipe for free. To use the street analogy once again – who would you rather
park on your street first? People who live in your neighborhood or people who don’t?

        Just to pick on the largest network neutrality advocate, Google, I find the entire argument
interesting in that Google has no problem charging its advertisers more for higher prioritization of their
advertisements on a search but has a problem with the idea that whatever content they might want to
push down to a user might also get prioritized by the owner of the network over which it rides. Alas,
money solves the problem for Google as it is building its own core network to circumvent the problems
of a prioritized core and has pushed the service providers of wireless broadband to the brink with its
entry into the 700MHz auction and its successful push to put an “open network” requirement on the C-
block of the auction.
         In summary, traffic over the Internet is already prioritized in the core. Traffic is separated and
sent along various routes for optimum performance and lowest cost. For the last mile, I assert that
users want prioritization along logical lines and, I believe, want the best experience possible over their
broadband connection and are happy for the service provider to serve the role of supervisor of the
traffic to ensure the best experience for the greatest number of people possible. So to the extent that
that means the last mile is not network neutral I am in favor of that. I have not attempted to deal with
service provider censorship, which in general I am against. This said, I recognize the Internet can be
used for illegal activities, and as such should be regulated just as the U.S. Mail is, i.e. mail fraud should
have an equivalent on the Internet. So to the extent service providers can contribute to less fraud over
the Internet, I would be for that type of oversight, just as I believe citizens have a duty to testify in
court if they witness a crime.

         The bottom line for me is that network owners, a.k.a. service providers, have an obligation from
a shareholder standpoint, call it a fiduciary duty if you want, to keep customers happy and paying their
bills. It should not be the content providers’ position to dictate the pace of investment in the capacity of
the broadband pipes – that should be dictated by the marketplace and by competitive forces. Those
competitive forces will work and pipes will get bigger. They already have. In 1998 broadband was just
getting started and most all those who accessed the Internet at home used dial-up ISP services.

        As content develops that stresses the last mile network, in my analogy the number and
frequency of parties on the street increases, it must be the service providers’ role to monitor, balance,
prioritize and even limit that traffic so as not to permit degradation of the traffic to the point of user
dissatisfaction across the board. For those broadband users that want bigger pipes and want to use
them fully they should pay up for that ability and in that way the service provider can invest in bigger
pipes and put the cost burden on the users that should be paying and not on those that should not have
to.

Ed. Note: This is our second rebuttal article in a row. This one is responsive to our faceoff last issue
between PON and point-to-point networks. Not only does Occam's Russ Sharer argue that its not
either/or, but he also believes that both can be deployed in the same network.

PON or P2P? How About PON and P2P
By Russ Sharer, Vice President, Marketing, Occam Networks

       High definition has dramatically transformed the digital entertainment experience. It has
spawned a new generation of televisions and components creating images once unthinkable in quality
and clarity. Behind the scenes, HD has changed how Hollywood produces this programming, with
dramatic changes in everything from camera technology, makeup and the editing infrastructure.

       Concurrently, people today rely on their broadband network for everything from the nightly
news, to music, social networking and running businesses. They now expect and demand an “always
on” experience. Even an hour of downtime can mean a social networking chat missed or a business
opportunity lost.

        As people have tasted the attractiveness of “on demand” information, they have started to insist
on it throughout their computing experience. Today’s “Me, Me, Me” generation of users expect access
to any on-line information available at any time of day over any device in their home.
        The development of HD content, the tidal wave of on-line information available and people’s
insatiable demand for access has severely disrupted the telecommunications infrastructure. Telcos
content to build out faster broadband networks at a leisurely pace just 2-3 years ago are now
aggressively deploying FTTx just to stay alive.


        But the cloud that represents the Internet on every telco’s network diagrams has a silver lining.
Telcos that view the changed telecommunications landscape as an opportunity and aggressively meet
consumer and business demand can reap enormous benefits from this disruption. To reveal that silver
lining, however, telco executives must change how they look at their networks and reverse the typical
question of “with my existing network, what services can I offer?” to “what services are consumers and
businesses demanding, and how do I built out my network to stay ahead of them?”

        Telco engineers have traditionally debated and been led to believe that they must make a
singular choice between GPON and Point-to-Point (P2P) architectures. Much like paper versus plastic,
or Ginger versus MaryAnn, each has earned a loyal following based on the presumption that selection
of a technology is mutually exclusive. In their passion to support one technology over the other,
however, engineers have sometimes failed to recognize the advances of each in recent years, as well as
potential benefits of deploying both architectures within one network. Affecting this change in how
telcos view their networks begins with changing the way they look at the two core network
technologies.

       To achieve what one might call a “High Definition Access” architecture that maximizes the
potential of both GPON and P2P technologies, it’s important to first break down the myths still widely
discussed but often based on archaic information, and then define and elaborate on what exactly High
Definition Access means and how telcos can go about achieving it.

                                Myths and Realities about GPON
                                     GPON Is a Lower Cost Solution

      The debate has raged that by sharing a common fiber from the first point of electronics (the
OLT) until the first set of splitters, a service provider can save significant money on fiber facilities.

        The reality is that with the ever-decreasing cost of fiber, the increasing cost of deployment
labor, and the need in most cases to dig a trench for the fiber in the first place, the cost of laying 5 km
to 10 km of extra fiber is less than five to 10 percent of the overall per home deployment cost. At the
same time, real-world deployments of GPON networks are seeing a take rate of 24 to 26 homes per
OLT port, less than half the specified capacity. This results in amortizing the overall equipment costs
over a fewer homes. Combined, any savings on fiber is usually a wash.

                               GPON Does Not Require Power in the Loop

       That GPON deployment does not require powered electronics in the outside plant is a second
myth long held about the technology. This then resulted in a savings to the Service Provider on an
ongoing basis since power costs were moved to the subscriber (at least for the ONT).
       The reality is that in many real world deployments, P2P networks are deployed from Central
Offices in a model similar to GPON: OLT electronics in the CO, ONTs on the side of the home or
business. The powering argument is also a wash.



       Next Generation PON definition is now underway to encourage mid-span amplifiers, or optical
repeaters, in the outside plant. The goal is to enable a GPON to reach up to 60 kilometers. These
repeaters must be deployed in the Loop due to point where amplification must occur, thereby placing as
much, or more, powering requirements in the field.

                                 GPON can Support Native RF Video

       There are two components of this argument: network and in-house distribution of video.

       Network distribution of video means the ability for the fiber reaching to the home to carry a
downstream or bi-directional video signal. Given the point-to-multipoint nature of GPON, video can
be cost-effectively inserted into the downstream fiber. The point-to-point nature of P2P renders this
approach to video cost prohibitive. This would appear to be the only advantage of GPON over P2P in
the short term, because existing video headends do not need to be upgraded to support an FTTH
deployment.

       However, in examining business cases for a number of service providers, implementing a fiber
network for only RF video does not yield desired returns. The point of installing fiber is to offer the
customer a broader array of IPTV and on-demand offerings that generate additional revenue per
household. Even Verizon, with the largest FTTH network in North America states that RF video is
merely a short-term solution.

        Distribution in the home over existing coax is also occasionally mentioned as an advantage of
GPON over P2P. This approach means the ONT at the home can bridge the RF signal arriving on a
separate lambda to the in-house coax. However, with today’s HPNA and MOCA technologies, this
same bridging function can occur with P2P, and at the same time enable the in-house coax to carry
Internet traffic to home computers or more sophisticated entertainment devices such as game consoles,
digital music systems or even Digital Video Recorders.

                          Myths and Realities about Point-to-Point
                                Only P2P Provides Enough Bandwidth

        In 2000, most people were satisfied with a 56 Kbps dial-up connection to conduct simple Web
browsing and check email. Today, most people on-line on a regular basis enjoy a connection of 1-3
Mbps, a bandwidth jump of 35 times in just 7-8 years. And circumstantial evidence today demonstrates
that bandwidth needs are growing at an increasing rate, meaning people will potentially demand
bandwidth of more than 100 Mbps by 2011.
       With statistically assigned bandwidth, GPON could not consistently deliver more than 20 Mbps
per home. However, with features such as Dynamic Bandwidth Allocation (DBA) and lower per OLT
subscription rates, many GPON deployments are now capable of statistically delivering 100 Mbps per
subscriber. Again, next generation standards under definition expect to push this total even higher,
although some maybe “disruptive” to any cable plant deployed in the next three to five years.

                                P2P offers Longer Reach over the Fiber

        P2P optics enable subscribers to be served at extremely long distances, in some cases up to 100
km from the OLT electronics. The combination of P2P laser technology evolution and the fact that no
optical power is consumed by splitters enables reaches at least twice and sometimes even greater over
GPON deployments. (Given the state of optics today, GPON maximum reach is approximately 20 km,
however since every splitter or connector consumes optical power, most networks do not try to reach
more than 10 km.)

       While true, in reality most networks today are working on the design concept of Customer
Serving Areas (CSAs) of somewhere between 15,000 feet and 18,000 feet, approximately 4.8 km to
5.5km. As a result, reaches longer than 10 km are very rare and likely not a solid reason for picking
one technology over the other.

Other arguments that both sides have historically made are:

  *More flexibility (each side makes this argument based on the visibility a service provider has into
    their homes-connected schedule) which is also referred to as “pay-as-you-go” in some cases
                               *Fewer cable management and/or splices
                          *Easier to troubleshoot with a problem occurs, and
                                        *Broader interoperability.

                                        The Right Choice?
       With today’s new realities, asking whether GPON or P2P is the “right” architecture for a
network is really asking the wrong question. The right question is, “What services do subscribers want
today and tomorrow, and how can I provide them cost effectively?”

      Posing that question should yield two answers: first, which network architecture provides the
maximum long-term opportunities; second, should the telco integrate both architectures into the
network to tap in the best features of each.

                              It All Starts with the Service Model
       It is surprising to me how often network planning sessions start with a technology rather than
the goal of what a customer wants to purchase from the service provider. Occam encourages its
customers to start with a simple question: what services do you expect to offer over the next five
years? (Given all that has happened in the last five, and the accelerating pace of technology evolution,
five years is about as long a planning horizon as is possible).
        First up is Internet service – what will the various levels of Internet service offerings be over the
next five years? If you are currently offering say 1Mbps, 5 Mbps and 8 Mbps over DSL, these could
evolve to 10 Mbps, 20 Mbps and 50Mbps in that timeframe. Not every customer will use the high end,
but with DOCSIS 3.0 and the coming capabilities of cable providers, fiber providers must be able to
match and exceed competitive offerings. This could expand significantly over the next few years if
“over the top” video continues to grow, and sites like YouTube and Joost evolve to more complete
cable offerings. We also need to watch whether CPE providers figure out a way to more seamlessly
integrate the different kinds of video.
        Second is television service – what will the offering look like in the future? In the United States
today, the average household is nearly three television sets, and in over half the primary TV is HD
capable. RF may be a way to deliver downstream basic services, especially for vacation and retirement
communities where the goal is lowest possible service cost for the subscriber. However, in order for
most business cases to work, a higher end set top box will be required on the primary TV to enable Pay
Per View, and soon, Internet commerce from the TV remote control. Many of these sets will have
picture-in-picture plus a DVR. Therefore the service will need to support 2-3 high-end devices, and 1
to n lower-capacity TVs. (Note: Many would argue that even these second and third TVs will require
an STB, since PPV often occurs in rooms outside the main living room, for example, watching movies
in the bedroom or sporting events in a den.)

        Finally, there is a question of other services: alarm management, gaming, web cameras and
others that may not require large amounts of bandwidth, but do require low network latency and a high
level of predictability.

       When the service package is defined, bandwidth requirements can be calculated and return-on-
investment decisions made about the various technologies.

        More and more, Occam is seeing the need to combine both technologies in a single network.
For example, a housing sub-division may be ideal for GPON, but a neighboring business park requires
the bandwidth of P2P. A higher-end sub-division may require P2P due to the expectation of multiple
TVs and heavier demand for Internet services, while most sub-divisions can be handled with GPON.
Or even Single Family Residence (SFR) homes can be supported via GPON, while Multi Dwelling
Units, such as condominiums or apartments, require the extra bandwidth of P2P.

       In summary, access decisions need to be based upon the service provider’s view of required
services now and in the future, as well as a well-studied balance of GPON and P2P. Fiber plants are
too expensive to be left to myths and half-truths. Realize both technology types will be needed in your
network, and therefore be able to choose the best one at each point in the deployment.


The FTTH Prism magazine is currently published on a quarterly basis. Back issues can be retrieved at
www.ftthprism.com. For advertising rates or to submit an article contact the publisher
at 410-988-2723 or cdcfiber@aol.com.

Editor and Publisher...................................................................David Chaffee
Director of IT..............................................................................Jason Scammell
Editorial Advisory Board: Timm Bechter, Bernhard Deutsch, Jim Farmer, John George, Larry Johnson,
Diane Kruse, Laurie Poole, Richard Moran, James Salter, Peter Westafer

								
To top