Towards Technologically and Competitively Neutral Fiber to the Home (FTTH) Infrastructure

31 Pages Posted: 15 May 2012

See all articles by Anupam Banerjee

Anupam Banerjee

affiliation not provided to SSRN

Marvin A. Sirbu

Carnegie Mellon University - Engineering and Public Policy (EPP); Carnegie Mellon University - David A. Tepper School of Business

Date Written: September 1, 2003

Abstract

This paper provides a framework for understanding competition and industry structure in the context of Fiber to the Home (FTTH). We present engineering cost models, which indicate that FTTH is a decreasing cost industry, thereby making facilities based competition an unlikely outcome. Non-facilities based competition (or service level competition) in FTTH can happen in data-link layer (or transport) services via unbundled dark fiber (i.e. unbundled network elements) and in higher layer (voice, video and data) services via logical layer unbundling (or open access). FTTH architectures differ in the extent to which they support unbundling and therefore the extent of non-facilities based competition in FTTH depends on the architecture of the shared network over which multiple service providers offer service. Among the four different FTTH architectures considered, the curbside single-wavelength Passive Optical Network architecture (PON) that has isolated pole-mounted splitters has the most economical fiber plant but permits unbundling only at the logical layer. Consequently, though a PON supports ‘open access’ based competition in higher layer services like voice, data and switched digital video, it does not facilitate competition in data-link layer services or in the provision of analog broadcast video services. In complete contrast, the Home Run architecture has the highest initial (fiber related) capital cost, but permits unbundling of both the physical plant and at the logical layer. The Home Run architecture therefore supports a per subscriber choice of data-link layer services (via UNE based competition) as well as competition in higher layer voice, video and data services (via open access).

This work further identifies deployment strategies, which can facilitate physical plant unbundling at costs much lower than the Home Run architecture. Physical plant unbundling is made possible by establishing Optimal Fiber Aggregation Points (OFAPs) that aggregate multiple distribution fibers (or homes). Unbundling is achieved at the cost of longer distribution loop lengths (vis-à-vis a curbside PON). Ideally, both passive splitters and active electronics can be deployed at an OFAP. OFAP architectures further lead to higher utilization of splitter and Optical Line Termination (OLT) ports in markets that have less than 100% penetration thereby providing the service provider with a real option to (i) defer investment in OLT ports (ii) deploy multiple data-link layer technologies and (iii) effectively phase in new technologies - under both monopoly and competition.

As a result of the FCC’s recent Triennial Review decision, incumbents who invest in FTTH are not obligated to offer UNEs at regulated rates. In deploying fiber to the home, incumbents may consider it unnecessary, therefore, to adopt an architecture that enables physical plant unbundling or they may be tempted to design the deployed fiber architecture in a way that eliminates the potential for future competition based on unbundled dark fiber elements even at negotiated rates. This paper argues why it may be desirable to have the option of deploying multiple data-link layer technologies and goes on to show that the minimum cost fiber network - taking into account the real options an OFAP provides - results in fiber layout, which is, in fact, hospitable to physical plant unbundling and Unbundled Network Element (UNE) competition. Such a fiber layout can, conceivably, support both point-to-multi-point (P2MP) PON architectures as well as point-to-point (P2P) active star and home run architectures.

While it is too soon to predict the effect of the Triennial Review on the pace of investment by incumbents in FTTH, the lack of such investment to date has led a number of municipalities and large subdivision developers to directly invest in FTTH systems. Municipalities and community associations are likely to have a greater interest in service level competition than incumbents, and therefore need to be aware of the significance of the choice of fiber layout strategies as discussed in this paper.

Suggested Citation

Banerjee, Anupam and Sirbu, Marvin A., Towards Technologically and Competitively Neutral Fiber to the Home (FTTH) Infrastructure (September 1, 2003). TPRC 2003, Available at SSRN: https://ssrn.com/abstract=2060612

Anupam Banerjee (Contact Author)

affiliation not provided to SSRN ( email )

Marvin A. Sirbu

Carnegie Mellon University - Engineering and Public Policy (EPP) ( email )

Pittsburgh, PA 15213
United States

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

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