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First Mile Technologies

Fiber & Wireless Technology Can Replace Copper Loop But Lack of Politically Viable Business Model Prevents Progress

License Exempt Wireless Flourishes While Private Fiber First Mile Builds Struggle with Grid Lock

Industry in Absence of Capital Is Eating Its Seed Corn

Introduction

This triple issue of the COOK Report covers technologies of the first mile. It offers an encyclopedic treatment of the state of fiber to the home and enterprise. As readers will see our discussion covers in a much more sophisticated manner than we did a year ago the business models, technologies and architectures of what Alan McAdams calls, in his IEEE workshop report, Advanced Fiber Networks. We outline in a detail not seen elsewhere the range of the possible. And in a three-hour interview with Steve Stroh we cover the waterfront on broadband wireless Internet access. Anders Comstedt, the Managing Director of Stokab gives us in an interview the evolution of the business model of Stokab, Stockholm's dark fiber provider. Finally Roxane Googin explains the forces behind the on-going commoditization of the industry showing why they are destructive of old models of business value and why MicroSoft is likely to begin the erosion suffered by the LECs. Over the long run its OS monopoly is unlikely to with stand the onslaught of the open architecture business products needed.

The potential for extraordinary transformation is here. But not the will. Instead we are eating our seed corn. Wireless is a bright spot. But across the industry people are hitting the wall and companies that can make sales are laying off what remains of their brain power. And even in wireless there is significant talent unemployed. The disruption is perhaps inevitable as the new, open technology continues to push everything else over the cliff. One hopes that some new equilibrium will soon be found.

 

Ignorance in Washington

What the administration certainly does not understand is that it is unlikely to be anything like the days of old. Sources from Washington tell us that the White House is basically uninterested in telecom and IT. That the 'action' is within the Executive Departments that have enough money to do anything meaningful. Evidence of the White House's ignorance is found in the announcement of the President's Information Technology Advisory Committee (PTAC) announced on May 8, 2003. http://www.whitehouse.gov/news/releases/2003/05/20030508-6.html

Gene Spafford, Bernard Daines and Eli Noam were the only names we recognized. We did some research which confirmed that, for the most part, the members appear to have been chosen on the grounds of politics and, with two exceptions, are not viewed by people we respect as innovative. The Clinton Administration PTAC was far different and far more notable. Check out http://www.ccic.gov/pubs/blue00/pitac.html and scroll to the bottom of the page for the members.

Congress? Other than lapdog for the LECs, Cable Cos and media companies, its major objective is to kill SPAM. At the end of the recent three-day hearings, the FTC was promised whatever money it needs. An attendee told us the rage was palpable. Of course whatever other damage the Congressional elephant will do remains to be seen.

Will VoIP Become the New Enemy?

Meanwhile, as the PSTN begins to crack, beware of a concerted effort among state PUCs to pass legislation to regulate VoIP. An interesting approach is one designed to be "transport neutral." That is the law will say we don't care whether the voice service is TDM or IP. Whatever it is it must be able to link the caller to a Public Service Access Point (PSAP) - in other words to 911. Cisco apparently sells a software module that enables much of its VoIP technology to be linked to a PSAP access provider by entering into the appropriate database the geographical location of the VoIP phone. If the regulatory rampage at the state level takes off, it could kill services like Vonage and in doing so would play into the hands of keeping the LECs alive. For more readers should see The Pulver Report, May 8 2003 issue http://pulver.com/reports/subscribe.html The article VoIP Regulatory Battle moving to the US States is quite informative.

Wireless and fiber as last mile technologies can replace the local loop. The next 100 or so pages of this combined issue should make that clear. The technology is here. It is capable and affordable and getting more so all the time.

Consider Scott Woolley's article on David Dorman in Forbes May 8. http://biz.yahoo.com/fo/030508/5a84bf6440672f774af18fe927ce5a70_1.html "AT&T ripped out 48 different legacy network systems last year. This year it will kill another 52. He figures the old network will fade into oblivion by the next decade, and he's doing everything he can to accelerate the ability of the Internet to subsume all forms of telecommunication. Already data traffic is six times greater than voice on AT&T's network. 'Internet protocol is like Pacman: It will eat everything in its way,' . . " The LECs are being bypassed. As Frank Coluccio pointed out: "Virtually every top level bank, brokerage and insurance company in the tri-state NY area by now has put in a MAN using dark fiber from MFN, Giant Loop, Con Ed and others. Much to the chagrin of Verizon. I would imagine the same holds true in other [large] cities."

With wireless regulatory and technology changes are coming together in powerful ways. Already in the first week of May we have announcements of the pending creation of a wi-fi cloud over all of lower Manhattan for the purposes of economic development and the pending installation via fiber through the Paris Metro and transmitters at each station entrance of a wi-fi cloud. Another profound revolution is in the making.

Business Models of Fiber to the Home

In the community network, fiber to the home and small business area over the past year thinking has evolved considerably about organization and business models. The technology has not slowed down. Ten gigabit Ethernet is getting affordable and gigabit more so. Hybrid fiber wireless schemes to get broadband economically where fiber does go are available. As the discussion that we publish below shows, however, agreement on the business model is NOT there. Furthermore the legacy players have the politics tied up in knots. The broadband future is there it is affordable. It is buildable. It is being built, in Korea, Japan, Sweden, Canada and elsewhere. It is not being built in the US.

We suggest that if one looks at the past 100 years one will see that the technology itself has determined whether telephone systems or cable TV companies are municipally or privately owned as opposed to customer owned - which is of course another for of private ownership. The cost of the early technology was very great. It demanded enough capital investment to ensure that only a large private company or a regulated monopoly could do a build out. (The two were often the same.) The cost of the current technology is so much less that it brings individual ownership into the realm of the conceivable. A critical question is whether there is room for private companies to build what the IEEE Cornell report discussed below calls Advanced Fiber Networks.

As the discussion shows the answer likely depends on the business model adopted. That model in turn will depend on the decision of the benefits that are expected by those who are building the network. The question is raised as to whether a customer-owned network would preclude a private company acting as the FTTH Service Provider. We argue that this is not necessarily true. The outcome can encompass a number of possibilities. The technology implementations as we shall see, depend in major part on how the build is paid for and what kind of pay back the builder is expecting. The truly open network, as Roxane Googin points out, is such a perfect commodity that it can promise very little pay back to its builders. Consequently the model that is left is one of treating it as municipal infrastructure - paid for perhaps by the taxing authority for the residents or business that will be its owner. However, as we shall see, the spectrum from valuable monopoly to open valueless commodity has a lot gradations.

Asset Based Customer Control in the Post Technology Era

As Steve Lohr writes in the May 4, New York Times http://www.nytimes.com/2003/05/04/business/yourmoney/04TECH.html; "The industry, according to Irving Wladawsky-Berger, a strategy executive at I.B.M., has entered "the post-technology era." It is not that technology itself no longer matters, he explained. Instead, he said, the steady advances in chips, disk storage and software mean that the focus is no longer on the technology itself with its arcane language of processing speeds and gigabytes but on what people and companies can do with it."

"As a result, industry executives and analysts say, the balance of power is shifting away from technology suppliers and toward their corporate customers. At the same time, the use of lower-cost building blocks of computer hardware and software is spreading, making it easier for companies and individuals to share data and work together using industry standards rather than remain dependent on one or two main suppliers."

COOK Report: Lohr's next two paragraphs explain why MicroSoft's attempts to continue to tie users to increasingly proprietary solutions are headed for trouble. For an acerbic putdown of what Redmond has in the wings see: 'Athens' - MS defines the next Windows PC standard http://www.theregister.co.uk/content/4/30612.html

Googin on Why Microsoft will Fade Away

Roxane Googin's comments on why she sees MicroSoft likely to suffer the fate of the LECs are found in her interview later in this issue.

Lohr: "Corporate customers are insisting that technology companies adopt industry-standard software formats and communications protocols, so that the many different kinds of computer systems in corporate data centers can work together. In doing so, the companies are encouraging a technology trend that was really kicked off by the Internet, with its global reach that connects all sorts of technologies. For the Internet to work, the computer plumbing had to cooperate. And hardware and software standards make it more difficult for technology companies to "lock in" customers to their more expensive, homegrown technology offerings."

"With their new power, customers are also pressing for greater flexibility in how they buy computing resources especially as a utility-style service in which they pay only for as much as they use, as if they were buying electricity. Mr. Salow [American Express] signed a utility pricing and outsourcing deal with I.B.M. last year, in which 1,500 technology workers were transferred to I.B.M. The arrangement, he explained, reduces fixed technology expenses, giving American Express more flexibility.

COOK Report: While we hammered IBM without mercy three and four years ago for its conduct with ICANN, we now hope that that attempt to help ISOC grab control of the DNS and hence the internet through ICAN and NSI will turn out to have been just an aberration in an otherwise brilliant transformation of the huge organization. IBM gets it with its embrace of outsourcing, Linux and education. Like it or not in the enterprise arena, this is the future just as municipal and end-user-owned networks are the future for the rest of us.

During the rest of 2003 we look to be exploring first what IBM and others are down in open commodity computing, telecom, and IT. Second we intend to explore the direction of wireless in much more depth.

Contents

The Commoditization of Everything

Roxane Googin Describes the Impact of Open Standards on a Mature IT and Telecom Industry

Linux, Web Services and Need for Interoperability Spell Trouble for Microsoft

p.8

Stokab - A Neutral and Open Access Dark Fiber Infrastructure for Stockholm

Selling Access to Fiber to All Comers No Questions Asked Successful Business Model Deserves Broader Emulation

p. 13

Symposium on a Fiber Broadband Last Mile

Our Panel Debates Last Mile Fiber Business Models Architectures, and Technology

Existing Gap Between End-to-end Customer Control and What Marketplace Can Support Building is Described, Experiments Are Proceeding But No Answers Seem Readily Apparent

p. 20

A FTTH Service Provider is Needed p. 21

The Grant County Business Model p. 23

Fiber versus Wireless p. 24

Utah Municipal Fiber Builds p. 27

Business Models for FTTH p. 28

Paradox of Commoditization p. 30

The First Mile Bottleneck Again p. 32

Delivery Options in the Face of High Capital Costs p. 34

Four Different Architectural Models p. 37

Viability of VoIP over Time p. 38

FTTH Economic Issues - Maximizing Yields p. 41

Meanwhile Different Issues in New York City p. 46

Verticalization p. 49

License Exempt Wireless p. 50

Video over Internet p. 51

Feasibility of Competitive Fiber Over Build p. 51

Letting Bandwidth be Determined by Moore's Law p. 54

The Bankruptcy of the FCC LEC Investment Strategy, p. 56

Feasibility of Last Several Hundred Feet of Fiber Being Asset Based p. 57

Ethernet in the First Mile Some Technical Detail p. 60

Single versus Multi-Mode Fiber Performance and Cost Factors - A Tutorial by Jonathan Thatcher p. 61

VLANs Aggregation and Scaling Issues p. 66

Architectural Issues p. 67

Subscriber Owned Versus Carriers' Carrier Model p. 68

The Small Problem of the Definition of Open Architecture p. 70

Video Transport & Bandwidth Demands p. 70

Jere Retzer's Simplified FTTH System p. 72

Broadband as the "Shark the Eats all Other Telecom Services" p. 75

Chicago and CivicNet p. 76

Utah: Network Reciprocity p. 76

Grant County PUD Network Problems p. 77

Modeling Software to Ascertain Viability of Locally Owned Networks p. 80

Open Source? p. 83

Steve Stroh on Broadband Wireless

License Exempt Wireless Now a Viable First Mile Technology

We Offer Extensive Survey Of Spectrum Issues, Technology Alternatives, Antenna Innovations, Vendor Applications in Attempt to Cover the Broad Outlines of Thriving and Innovative Industry

p. 84

Wireless DSL and Wireless Sheriffs p. 84

Other Segments of the Broadband Wireless Market p. 85

License Exempt Spectrum, p. 85

System Certification p. 86

Pushback from Licensed Interests p. 88

Spectrum Bands Again - Ten Ghz and Above p. 89

Ultra Wide Band (UWB) and Free Space Optical p. 90

Many Many Choices for Point to Point - Canopy p. 90

More Spectrum, p. 91

Events in 802 Land p. 92

License Exempt as a Commodity? p. 93

Radio Fiber - Intelligent Antenna Linkage p. 94

Mesh Networks p. 94

Wi-Fi Hotspots and Local Infrastructure Business Models p. 95

Cognizant Radios and FCC Disruption p. 96

FCC Rulemaking p. 97

News Items New York City and Paris Wi-Fi - Cisco Wi-Fi phone - Urban Development Wi-Fi p. 98

End to End as a Design Principle by David P. Reed

p. 100

An Information Society: Free or Feudal? Issues of Intellectual property may not be left of the table of an information society by Lawrence Lessig

p. 102

Interview, Discussion, and Article Highlights

p. 104

Executive Summary

p. 125

Contributors to this Issue

Larry Anglin is the President and founder of Hometown Computing. a central Texas ISP in business since 1996. With operational wireless systems in Hamilton, Gatesville, Stephenville, Clifton, and Comanche, Hometown Computing has Central Texas covered with broadband.

Jim Baller is a principal in The Baller Herbst Law Group, which (in addition to maintaining an excellent website on municipal telecom) is tin our opinion the leading firm in helping municipalities to understand, comply with or overcome legal obstacles to building their own networks.

Frank Coluccio, President DTI Consulting. Frank designs and builds optical networks in the northeastern US for the largest Wall Street Banks and similar financial institutions.

Anders Comstedt is Managing Director of Stokab, the dark fiber utility in Stockholm.

Fred Goldstein, formerly with BBN and Arthur D Little, is principal of Ionary Consulting in Newton, MA. He works with CLECs, other competitive service providers, and their suppliers..

Roxane Googin is an equities analyst for fund managers. Roxane has been helping Isenburg and Cook and many others understand why the phone companies - including the LEC s are going to go bankrupt.

David Horne works on networking and communications architecture for next-gen technology initiatives in the Intel Communications Group, out of the Chief Technology Office. He has been active in broadband standards efforts and in studying the economic and technical aspects of FTTH.

Coe Hutchison is the Fiber Business Manager for the Grant Co. PUD in Ephrata, Washington.

Pete Kruckenberg Senior Network Engineer at Utah Education Network and the Intermountain GigaPop, and is a vice-chair of the Utah Valley Community Network.

Alan McAdams is Professor at the Johnson Graduate School of Management, Cornell University. Beginning in June of 2002 Alan lead the formation of an IEEE policy group on Gigabit Ethernet and Advanced Fiber Networks.

Francois Menard is a Project Manager with Xit Telecom, a Canadian Consulting Engineering firm. At Xit he has managed more than 40 projects and studies related to the deployment of fiber-optic telecommunications networks.

Jorge Ortiz is CEO of Interfibra a start up doing FTTH builds in Mexico.

Jere Retzer is Senior Manager, Next Generation Networks at Oregon Health & Science University.

Marlon Schafer runs a wireless ISP in Odessa Washington and is an independent consultant to other WISPs.

Rich Shockey, Chair of the ENUM work group and very involved with SIP. He is also Senior Manager, Strategic Technology Initiatives, NeuStar Inc.

Bill St Arnaud Director Advanced Network Projects CANARIE. Bill is not offering any guarantee but, if his work on CA*Net4 is successful, within 5 years we might have lambdas on our desktops. It was just about two years ago that Bill coined the term "asset based telecom."

Steve Stroh is Editor of FOCUS On Broadband Wireless Internet Access newsletter.

Jonathan Thatcher chaired the ten gigabit Ethernet standards effort; chaired the Ethernet in the First Mile Alliance (EFMA). Past Chief Technologist at World Wide Packets.

We also republish material by David P Reed and Lawrence Lessig