Raj Reddy

From: Paul Shumate [pws@mailee.bellcore.com]

Sent: Thursday, June 26, 1997 10:17 AM

To: rr@cs.cmu.edu

Cc: pws@thumper.bellcore.com; klu@notes.cc.bellcore.com

Subject: Comments 6/26

 

Raj,

 

The paragraph you sent is still misleading, and on the topic of costs, itís important to be very clear and accurate. First, hereís the story FYI, followed by an edited version of your paragraph for your consideration:

In high-density (urban) areas, the loops are short (<1 mile) and the cost is typically in the range $300 to $800. Here, FTTCurb can be massaged to reach parity; FTTH cannot EXCEPT perhaps for multifamily units, where it becomes FTTBuilding; sharing of common equipment is much higher, driving down costs. But FTTHome will prove in here last.

Typical suburban loops range from perhaps $700 to $1500. These are farther from the CO (typically 2 to 3+ miles) and are usually single-family units; many will use digital loop carrier (DLC). The traditional $1000 bogey represents these cases, where houses are on fifth- to quarter-acre lots, about 100 per mile. FTTCurb met the cost objective for these situations first, circa 1992, especially for those served by DLC. Broadband FTTHome for these situations carries about a $500 premium; and FTTBuilding rarely is applicable.

About 85% of all residential loops fall into the first two categories. Business loops, about one-third of all loops, are shorter by about 25% (on the average) but have a long tail stretching out to nearly 20 miles just like rural residential loops. FTTHome for all but SOHO businesses is not a factor: Most businesses can get direct fiber connectivity today by installing a DLC or other mux on the premises, and millions of these lines have existed for many years. We need a separate discussion/study to fill in the numbers for businesses.

Rural loops begin at densities perhaps below 60 homes per mile (light suburban) down to 5 per mile and less. Cable TV used to define rural as 20 or less per mile. This accounts for the remaining 15% to 20% of all loops. (There are a few % that are so far from a CO that radio links are used.) Here the cost of telephone or data service delivered by any wired medium ranges from $1500 to $4500, even >$5000 for a very small number of customers having the longest loops or in the most-difficult terrain. I sent a figure in my CLEO slides that shows FTTHome crossing over with other wired alternatives at about 30,000 feet. According to the last (1983) loop survey, there are about 5% of lines greater than 30 kft. So FTTHome can prove-in today (by meeting not a single objective but a range of cost objectives, each one application-specific) for about 5% of residential lines.

Key point is that there is no single price point, distance, or geographic scenario that is meaningful, only the % of lines where FTTHome could be substituted for copper at no cost penalty. Below that, the penalty varies according to geography and a number of other factors, but then PERHAPS proving in again when FTTHome transitions to the more-heavily shared FTTBuilding. We havenít done this one recently.

I ran a quick calculation: Taking the average new-build cost of a loop and adding the premium for FTTH ($1000 + $500), adding operating costs, a couple of future upgrades, and 30-year straight-line depreciation, I found that about $20/month makes this a break-even case (discounted-cash-flow sense). Iíve incorporated this below.

Your paragraph, reworded, with "last mile" deleted because, as you see, it really is nothing but a catch-phrase describing urban/dense suburban loops:

 

In addition to the National Grid, it is necessary to provide an access connection. According to Paul Shumate of Bellcore (see Prospects for FTTH ), the cost of providing broadband access to the nearest GigaPOP with FTTH (using passive optical networks for facility and bandwidth sharing), would add a premium of $500 or less to the normal construction cost of switched access. This normal cost ranges from about $300 for some urban loops to over $3000 for rural loops, with the average being on the order of $1000. For the higher-cost rural loops, FTTH can be installed today at no premium. Based on the average figures and assuming FTTH technology, this capital cost depreciated over a 30-year period (typical today for facilities of this type) suggests a net cost of only a few hundred dollars per year for providing a high-bandwidth OC3 to OC48 connection to every home! This is 10,000 times more bandwidth to the home, yet costs less than todayís ISDN rates.

 

Hope this is acceptable.

Best wishes,

 

Paul