Fibre will be main source of diet for utility companies going into telecom

When it comes to facilities-based competition, utility companies could be the next major competitor to challenge both incumbent telcos and CLECs. With control of an unrivaled number of rights of way, power companies are being told to plan early and choose wisely as they deploy new fibre optic networks. More than 100 delegates attending a conference in Toronto October 3-5 heard how American utilities are taking advantage of telecommunications, and how their Canadian counterparts can follow suit. The conference was organized by the Washington-based United Telecom Council, which is looking at establishing two Canadian divisions. In a session titled "Fibre, Fibre, Fibre", three experts explained how utility companies are well positioned to move into the carriers’ carrier business. Fueling this opportunity are the insatiable demand for greater bandwidth, the removal of regulatory restrictions and network differentiation, according to Lynda Kane, marketing manager of optical fibre solutions for Lucent Technologies Inc.But she stressed the importance of choosing the right solution when laying infrastructure. Time Division Multiplex and Dense Wavelength Division Multiplexing, for example, can’t do it all, she said. The choice of fibre is determined by both the application and system performance, while the choice of cable is influenced by the environment and installation performance. In comparison, she noted that the productivity requirements determine the splicing choice, and the network performance requirements determine the fibre connectivity choice. For example, when choosing a fibre, she said it must be able to accommodate an entire metropolitan network, rather than a particular niche market. Kane also suggested that utilities install more than they can use to reduce the cost per fibre mile. Laying 48 fibres per cable costs US$2531 per fibre mile, while installing 864 fibres only costs US$295 per fibre mile, she explained. As for the surplus capacity Kane recommended leasing it to other carriers. "When you lease out 15 to 20 per cent, you’ve paid for your construction costs. The rest is gravy." How to become a CLEC Blake Corbett, executive director of CIBC World Markets, explained that companies need to service only four cities – Vancouver, Toronto, Montreal and one other big municipality of their choice – in order to be considered national players. The first stage is the construction itself, with the utility buying or building its network, installing switches and connecting buildings. During the execution phase, the company connects lines, increases sales and fills the network by buying ISPs and buying LD resellers. The mature phase has the firm becoming cash flow positive, lowering capital costs and building its market share. Mark Gillard, a network consulting engineering with Marconi Communications, laid out the positives and the pitfalls for utilities entering the telecom market. Currently, the telcos make about 80 per cent of their revenues in voice distribution services. This leaves other parts of the market open for exploitation. As an example, he pointed to the American markets where some competitors, including utilities, are able to offer special deals the phone companies cannot or will not. A client may have a one-time need for extra bandwidth in order to hold a teleconference. Utility telecoms will accommodate the extra capacity for a one-time fee, while established telcos reject the idea. The demand for bandwidth is greater than the rate at which service providers can provide access and services to subscribers. The emergence of the Internet as a business tool, and the need for rapid WAN services, has resulted in the creation of a bandwidth bottleneck. One of the challenges facing utilities in this environment is pricing and billing. Firms must establish what services they are prepared to offer to customers and what rates they will charge. Billing must be broken down into a manageable segment, whether by service, by packet or some other system. "We’re moving into a completely different business than we were in," Gillard stated. The growth of fibre networks is a symbiotic relationship, explained Lucent’s Lynda Kane. The supply of bandwidth produces an increased demand, which leads to greater supply, which in turn leads to more demand. The uses of broadband have grown far beyond what was initially expected. While the majority of backbone use is B2B, the home entertainment use is now making up a significant portion of the market. The demand for fibre is growing from nine to 20 per cent each year, said Kane. While companies like hers and Corning are on target for expansion, it still takes 18 to 24 months for fibre to become available in sufficient quantities. She estimates the market will be tight until late next year.

Fibre will be main source of diet for utility companies going into telecom

News | October 11, 2000

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