In November AT&T made a commitment essentially to stay the course, assuming an expansion of its two IP-based hybrid fiber/DSL configurations, one supporting the U-verse IPTV service utilizing technology advances to get to 75 Mbps per connection and maybe more and the other moving to 45 Mbps or more, will suffice for a competitive fixed network strategy, leaving 25 percent of its wireline territory to be served solely by LTE-based wireless. At the same time, the cable industry has committed to a next-generation HFC infrastructure to deliver up to 10 Gbps to each fiber node, with individual access speeds depending on how many households are served by the coax access plant.
And then there’s the emergence of new all-fiber deployments utilizing 10 Gbps PON to support individual connection speeds all the way up to 1 Gbps, now in operation commercially in a handful of towns and small cities and under development in many others, including parts of Chicago. What makes these new GPON developments interesting in contrast to fiber networking up to now is the new approach to development efforts marrying financial support from the private, government and education sectors to spur economic development driven by applications innovations that will require ultrahigh bandwidth.
AT&T’s commitment to its expansion strategy, which includes extension of LTE to 300 million POPs within three years, comes after nearly a year of strategic planning that focused on questions such as how to relieve itself of delivering wireline services in low-density population areas and how to acquire more spectrum to make it more competitive in 4G mobile.
Along the way, says a high-ranking company strategist, serious consideration was given to getting out of the cable TV business altogether rather than spending on network upgrades that would be required to remain competitive. Once leaders became convinced that technical innovations could raise access line throughput on the U-verse service to at least 75 Mbps, they decided they could remain competitive without risking major capital outlays to facilitate a business they are less than enthusiastic about.
For the cable guys, the 10 Gbps-to-the-node migration strategy represents a huge commitment in capital spending, though nothing close to what it would take to move to an all-fiber infrastructure. They will have to tighten leaky coax plant like never before, shift RF spectrum allocations to allow for much more bandwidth on the upstream channels and drive fiber deeper in order to leverage higher spectrum levels on the coax plant.
It’s a truism in any industry that the established players take the more cautious approach to growth, leaving it to innovators to come along with more aggressive and riskier strategies. The big exception to this paradigm in the telecom industry is Verizon, which has taken its lumps for what many financial analysts perceive as an overly aggressive push with fiber.
So it’s not surprising that cable operators would put themselves through the difficult HFC migration process rather than biting the bullet on the more operationally efficient approach to delivering services afforded by the all-digital passive optical infrastructure. AT&T’s even more conservative approach on the fixed line side probably signals the real strategic commitment is to the wireless business as a national platform for competing against fixed as well as mobile providers with IP-based service innovations, including OTT-delivered video and applications like its Digital Life smart home service.
Thus, the U.S. as a whole is entering into a massive experiment to determine whether there’s a real payoff in innovation , economic development and service ROI to be achieved at bandwidth levels beyond what the incumbents are assuming will be sufficient to market needs. The bet here is the evidence will quickly accrue in favor of the all-fiber strategy, creating much greater risks for incumbents than if they’d built their next-gen strategies around that eventuality. The exception, of course, is Verizon, which, having capped FiOS expansion for now, is well positioned to capitalize on whatever the future may hold.