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Too Late for Fiber?

But are these services sufficient? And are the networks they run over future-proof? The FCC defines advanced services as those providing connectivity of at least 200 Kbps in at least one direction. That kind of throughput--even the megabit capacities of most cable and copper-based DSL services--may be advanced today, but what about in five years? Much-higher-capacity fiber optic lines were available to only 180,300 homes as of October 2003, according to research firm Render, Vanderslice & Associates.

Some FTTH (fiber to the home) systems already deliver a gigabit of throughput. Although the majority of home users can't begin to fill those fat pipes today, a handful of providers--mostly independent telcos, municipalities and utilities--are investing for the day when broadband entertainment, telecommuting, education, medical, meter reading, video security and other applications are the rule rather than the exception.

Former Bell company Verizon is setting aside $2.5 billion this year to run fiber past more than 3 million homes in select residential communities in California, Florida and Texas. Under the plan, customers who order a certain level of Internet and phone service will get a direct fiber hookup. In other U.S. communities where FTTH has been made available, "take rates" have averaged 40 percent and run as high as 75 percent, according to Render, Vanderslice. Whether that pent-up demand can offset the cost of FTTH installations--as much as five times the cost of DSL--is another question.

For that reason, Verizon's rivals think its local plans are a tad loopy. Qwest, a participant in the frenzied overbuilding of fiber optic long-distance networks in the late 1990s, says there's no business justification for such FTTH aggressiveness. Analysts say the incumbents' DSL services are doing so well that they'd be crazy to start replacing them with fiber, especially following the worst downturn in the industry's 20-year history.

Verizon seems to be hedging its bets. While the company has said it plans to reach 60 percent of its customer base with fiber by 2008, it also has upgraded 80 percent of its copper infrastructure for DSL. The other ex-Bells are augmenting their DSL strategies with hybrid approaches that run fiber to a neighborhood hub rather than all the way to customer premises. Such installations shorten the distances DSL signals must travel and thus increase throughput, without the extraordinary expense and disruption of full-blown FTTH.

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