A further addition to the interesting debate we have been having on Internet 2/broadband. OT perhaps, and relating to the US/Canadian scene, but fascinating. This is taken from the CYBERTELECOM list. <sample quote> Demand will not skyrocket until the LEC controlled copper based local loop is by passed and either fiber or multi-megabit per second wireless reaches the vast majority of homes and businesses. Frank March Specialist Advisor, IT Policy Group Ministry of Economic Development, PO Box 1473, Wellington, NZ Ph: (+64 4) 474 2908; Fax: (+64 4) 471 2658
-----Original Message----- From: Gordon Cook [SMTP:cook(a)COOKREPORT.COM] Sent: Wednesday, 27 February 2002 11:14 To: CYBERTELECOM-L(a)LISTSERV.AOL.COM Subject: Trapped in a glut of surplus bandwidt with no apparent way out
from pages 31 -33 of may 2002 cook report - published yesterday. more detail at http://cookreport.com/11.02.shtml
We find that we are trapped between the jaws of huge ununsed capacity and content owners protection of intellectual property at any cost. The politics and economics of our slavish obedience to the "free market" is constricting the availability of bandwidth by placing marketing and policy in the hands of those who expect pay-per-use demand that lives in a walled garden to define and drive the development of broadband services.
Only about 5 or 6 percent of the long haul inter city fiber installed has been lit or will be lit in the foreseeable future. Of the fiber that is lit by 80 wavelength capable boxes only about 8% of what these boxes are capable of is in use. Each incremental wavelength used costs only a few thousand dollars per line card per a couple of dozen boxes to install. Adding ten gigabits to a backbone is relatively trivial and compared to the original cost of building and lighting the incremental cost of doing so is very small. Currently only about four to eight wavelengths per carrier are lit.
Consider demand. Just as the demand for dark fiber IRUs has peaked and fallen off, the demand for wavelengths may now be peaking. Until the fiber owners start publishing verifiable numbers every quarter on how many wavelengths they have "sold" via IRU and via lease there is no credible way to judge changing trends in supply and demand.
Now we can safely assume that with phone network use having peaked there will be little in the way of additional demand there. Assuming that data still doubles every year in North America, you may be able to sell an aggregate of 20 to 25 new lambdas this year to handle carrier data growth. But with fifteen American carriers and six Canadian each with 80 wavelength capable systems you have an easily provisioned supply of more than 1600 lambdas perhaps only 150 of which are lit. The problem is that without complete disclosure from each carrier there is no way of knowing exactly what capacity is actually in use.
Nevertheless our experts are all in agreement that used capacity is only a tiny fraction of what's available. Whether the amount is 4 percent or 12 percent, under current circumstances, makes little difference. In short we likely have at least a five or six year window with current growth before, with the addition of new lambdas, we fill the capacity of the fibers that have been lit. Sales of dark fiber IRUs have basically ended leaving long haul growth dependent on lambdas sales.
But who will buy? Prices are getting cheap enough for enterprise networks to consider using lambdas. But right now even the largest enterprise networks are mostly 155 megabits with a very few 2.5 gigabit links here and there. Most enterprises don't have the means of connecting 2.5 gigabits to a campus let along ten. This leaves other carriers who have a fraction of the capital they once did and whose need for new capacity has slackened.
Bill St Arnaud put it this way: "However, even given a rapid growth in data traffic, I think in the long haul it will be another 3 years before we see any new fibers lit, another 10 years before new fibers are blown in existing conduit and another and 15 years before new conduit is trenched in the ground." The situation seems dire and will determine the fate of many carriers. Policy makers and financial markets are being called on to make judgments but neither policy makers nor financial markets can see the carriers' resources. With the small resources at our command, The COOK Report certainly cannot do a definitive census of the carriers. But even if increased resources could be brought to bear, it is unlikely that carriers would admit to a highly embarrassing situation.
We are stuck with a conundrum where until the debt is wiped off carrier books or until demand skyrockets you have the entire industry embedded in a continued downward spiral that results in more and more bankruptcies. Demand will not skyrocket until the LEC controlled copper based local loop is by passed and either fiber or multi-megabit per second wireless reaches the vast majority of homes and businesses. Even then the demand may still be too easily filled by capacity on hand, until and unless the Canadians can make it possible to extend a wavelength to every home and business.
The technology has indeed overwhelmed the global infrastructure and its installed economic base and rendered it not economically sustainable. Canada looks to be following a strategy of enabling more uses for bandwidth while the United States follows a course of laissez faire in which the market knows best theory is freed to allow the concentration of media and carriers to consolidate an infrastructure duopoly where cable and DSL are the only officially blessed avenues to broadband. The US policy seems likely to be one of handing the market to huge and powerful old technology companies. The funny thing is that if Googin is right those companies will fail.
-- ======================================================== The COOK Report on Internet, 431 Greenway Ave, Ewing, NJ 08618 USA (609) 882-2572 (phone & fax) cook(a)cookreport.com Subscription info & prices at http://cookreport.com/subscriptions.shtml Summary of content for 10 years at http://cookreport.com/past_issues.shtml The Future of the Industry - Googin & Odlyzko on telco viability - April issue available at http://cookreport.com/11.01.shtml ========================================================
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