Homeward bound: CLECs take the plunge with fiber to the home

Some competitive local exchange carriers are planning for telecom's future by laying fiber to the home. According to their theories, fiber may be more expensive right now, but the payoff will be worth it. Copper eventually will reach its limit when carriers need to deliver video, audio and high-speed Internet access to smaller communities around the country.

Service provider Federated Telephone Co-op and partner Agralite Electric Co-op operate Hometown Solutions, a CLEC based in Morris, Minn. Hometown Solutions is building fiber links to approximately 6000 residents in Morris using an FTTH solution from Optical Solutions. It expects to provide voice, data and video to six additional communities in west central Minnesota by 2004.

While deploying fiber may initially be more expensive, fiber's capabilities should pay off in the long run because Hometown Solutions plans to operate in the area for a long time, said Kevin Beyer, general manager of Federated Telephone. "If you want to stay in the area, you want to choose [the technologies] that will last the longest. The cost [of fiber] actually was not that expensive." With FTTH, the provider doesn't pay access line charges to the incumbent and incurs only a per-building cost, he added.

Although it costs the same to deliver fiber to the business or to the home in smaller communities, Beyer notes that businesses likely need multiple lines, making them more lucrative customers. Because Hometown Solutions is owned by two local co-ops, the co-op members drive broadband deployment.

Rural Telephone is taking a similar approach, delivering fiber to all establishments in two Kansas communities. "We didn't separate these communities as to what type of customer," said Larry Sevier, CEO and general manager for Rural Telephone. "[Businesses] will be more lucrative early on, but we looked at the entire community. We priced out the equipment and found that compared to what we're able to do with [fiber] over the next 10 to 20 years, it was not that expensive."

Rural Telephone currently is rolling out FTTH services in two communities. FTTH lets service providers capture "all customers by delivering all services," said Joe Dooley, director of product management for Optical Solutions. Today, "you can deliver video over DSL but not to all your customers," he said. "It's not the cost of [FTTH] deployment but how many customers you can capture."

In areas where CLECs deploy the fiber themselves, they actually have an advantage over the RBOC, said Char Haidley, director of consulting services for New Paradigm Resources Group. "They eliminate the problems of dealing with the RBOC for the last mile," she said. The incumbent, however, already has the existing customer base to which it can market new services, she added.

Deployment will hit a few stumbling blocks along the way, Haidley said. The migration to IP, future planning and gains in wireless technologies are likely to pose deployment challenges (see figure).

Already focusing on last-mile access is ClearWorks.net, which serves Austin, Dallas and Houston,Texas, and Phoenix with FTTH. The company acquired Link 2 Communications, a wireless broadband access provider, to address areas where fiber is not an option. Currently, ClearWorks.net provides voice, digital TV and 100 Mb/s data services to its customers using a mix of solutions, said Shannon McLeroy, president and chief operating officer of ClearWorks.net. "You'd be surprised at how relative the cost [of FTTH] is.," he said. "It's a little more expensive, but the return is three-fold."