Fiber hits home in Iowa

Mar 12, 2001 12:00 PM, Vince Vittore

On a map, Huxley, Iowa, doesn't look like much more than a dot sandwiched somewhere between Des Moines and Ames off U.S. Route 69.

Indeed, Huxley Cooperative Telephone Co., with a headquarters office just off the town's main drag, isn't much different from the more than 100 other independent telcos that have carved up the state. It has 2000 access lines in Huxley (population 2500) and Kelley (population about 300) and 1400 cable customers scattered across nine towns.

Except, of course, for the fiber-to-the-home trial that is getting started about a mile northeast of town.

Fiber to the home as a concept has been tested in various new home developments across the country. Time Warner's aggressive test in Florida and the former GTE's Cerritos test bed come to mind, but rarely has the concept been tried in a small town by a company that didn't have millions to bankroll the project.

Starting a mile outside the city limits last November, HCTC pulled fiber into six new homes, providing each residence with enough capacity to have standard telephone service, 53 channels of analog cable TV and 8 Mb/s of high-speed Internet access via cable modem over the same infrastructure.

Although the fiber provides enough bandwidth to offer more services, HCTC is starting with a relatively simple offer in an effort to test the technology, which comes from Optical Solutions, a Minneapolis-based vendor.

For HCTC, which already offers DSL services in some areas, the decision to move to an all-fiber plant amounts to a bet on the future demand of services, particularly those related to high-speed data.

The only way to cover the company's bets on virtually any service to come down the pipe was to pull fiber all the way to the home, according to Billy Hotchkiss, general manager of HCTC.

“From what I'm seeing, I don't really believe anyone's going to provide the type of data services we want to provide over a copper infrastructure,” Hotchkiss says. “So for us it was either go out and spend the money now or pay for the improvements later.”

The gamble goes beyond the initial six homes, of course, but like the gap between what's possible with the technology and what will be rolled out initially, the chasm between vendors' desires and economic reality is at work here. Still, if the trial works out, Hotchkiss is willing to make the leap.

“I'm looking for assurance that it works the way Optical Solutions says it does,” he says of his goal for the initial trial, which will move from 6 to 15 homes as soon as they're completed. “If it does, it's the only technology we'll be using from here on out.”

“I want to be comfortable not using twisted pair or coax,” adds Gary Jamison, assistant general manager.

Such a bold statement just two years ago would have been almost impossible given the technical choices and financial implications of FTTH. At the time, FTTH was viewed more as an impressive technology experiment, but it was so limited in its economic feasibility that trials were restricted more to showcase neighborhoods where telcos (and on the rare occasion, cable operators) would offer up a glimpse of potential services in “homes of the future.”

In the intervening time, though, vendors have made enough strides to bring the cost of FTTH down, says Darryl Ponder, chairman and CEO of Optical Solutions, which has landed deals with a handful of telcos, municipalities and competitive local exchange carriers (CLECs). In fact, on a life cycle cost, putting in fiber is becoming cheaper than other access technologies, he adds.

Breaking that into raw numbers, bringing fiber to the side of the home costs about $500 per home passed in a conservative cost model. Of that cost about 15% is in the central office, while 43% is in the customer premises equipment and installation.

“The cost of putting fiber is comparable with coax,” Ponder says.

Much of the credit goes to improvements in the basic technology used in the FTTH architecture that make installation much more cost-effective. Just a couple years ago, a single fusion splice could run as high as $60, Ponder says. Today it's closer to $20 and he sees it moving below $10 in the next few years. The cost of the electronics is also falling, leading to an overall cost that rapidly declines with time, he adds.

“In 2001 what you'll find is fiber to the home going from 10% to 15% more than coax to being the lowest cost access method,” Ponder says. “Companies like Corning have put a tremendous amount of work into bringing the cost down.”

Before that happens, though, telcos such as HCTC must trudge through some basic operational issues. For the initial trial of FTTH, one of the biggest difficulties was power. HCTC chose to locally power the network interface device (or “Home Universal Demarcation Point” in Optical Solutions' verbiage), which requires an outlet within 25 feet of the box.

However, in some homes, getting power to the box required an additional truck roll with an electrician who would add an extension. It doesn't cost much in a small development, but aggregated over thousands or millions of homes, it's something that could slow FTTH deployment.

Otherwise, the architecture has proven itself out in terms of reliability, says Brant Stumpfer, combination technician for HCTC. “So far the only types of problems have been little things like synching up with the cable modems. And from my perspective, the maintenance is much easier.” In fact, FTTH vendors are banking on telcos looking at long-term costs that include maintenance labor.

“You have to look at things like the lowest cost on a life cycle basis,” says Ponder. “When you can take something and put it in the ground and not think about it for 35 years, that's effective. The days are numbered for hybrid fiber/coax (HFC) and coax systems.”

For Huxley, HFC is indeed an endangered species. Though it has more cable plant than telephone, it's currently trying to find a buyer for the systems. The company purchased a system in Kelly in 1993 to become more familiar with broadband systems. With increased competition for video from satellite providers, though, the economics have changed.

“We like cable, it's just not a very good way to make money,” says Hotchkiss. More important, the company is taking a long-term view of future services with plans to provide video service over the fiber infrastructure.

Though it would never be mistaken for a metropolis, Huxley isn't some backwater town waiting for the crumbs of technology to fall from the big telcos' feast. It's more of a bedroom community that happened to start life as a typical Iowa Dutch farming town. Thanks in part to its proximity to Ames, which is eight miles to the north and home to Iowa State University, and Des Moines 10 miles south, Huxley residents are bit more demanding than typical small-town customers, Hotchkiss says.

“We've been a fast-growing community for a while now,” he says. “The people here know what's available. Fiber to the home would be hard to justify at one or two customers per mile. But we're more like a semi-urban telephone company.”

And what's available right now boils down to two options for high-speed data — DSL and cable modems, neither of which Hotchkiss is comfortable with in the long term.

That's not to say the company is ignoring either technology. As a telco with an ISP group, the company is offering symmetrical DSL and will expand into asymmetrical DSL. And like most telcos, HCTC has more demand for high-speed access than it has capacity to provide.

Part of the problem, according to Jamison, is the two suppliers of backbone services, Iowa Network Services and another independent telco, are having problems keeping up with demand. Unlike other providers, though, it isn't staking its future on DSL or cable modems.

“I'm just not comfortable with DSL and don't really feel cable modems provide reliable enough service,” says Hotchkiss, noting that AT&T Broadband, which owns the incumbent cable system in Huxley, is having problems deploying cable modem service.

In the Optical Solutions platform, the end data device is currently configured like a cable modem, but it also can be used to provide Ethernet-type service directly from the network interface device. In that case, customers could conceivably be given a 100 Mb/s service along with unlimited video channels and pay-per-view, something Hotchkiss is counting on by installing FTTH.

Of course, not every resident in Huxley and Kelly can expect to have a fiber coming into their home any time soon. For the moment the trial will remain limited to the 15 homes, part of a larger development of about 40 that have yet to be built. If everything performs as expected, the platform will be expanded into those new homes, with existing homes getting fiber as costs drop and existing plant is amortized.

To be sure, FTTH is not for everybody, and most of the activity will be in new build areas. In a regional incumbent LEC though, that market alone accounts for anywhere from 200,000 to 500,000 new lines ever year. And while the former RBOCs are showing some interest, according to Ponder, big deployments are still a few years away.

“It's still an early adopter market,” he says. “Right now you have people eating at the edges.”

Company HQ: Huxley, Iowa

Top Officers: Billy Hotchkiss, general manager; Gary Jamison, assistant general manager

Number of employees: 18

Date founded: 1902

Focus: Local telco/cable provider

URL: www.huxtel.com