exclusive for Digital Mogul with Rafael Queseda
note: this article was heavily edited by Rafael Queseda and the editors at Digital Mogul. The article is not necessarily written in my style.
Most people talking about broadband these days generally have in mind two different kinds of services: HFC (hybrid fiber coaxial) cable and DSL. Understanding the differences and limitations of these services is important to any discussion concerning the future
of the Internet, and basic to that understanding is defining what the term “broadband” means, as it can have many meanings.
Some consider broadband to be a description of
bit rate speeds in excess of 64 Kbps or even 1.5 Mbps.
However, in strict technical parlance, the term refers to the
transmission of numerous frequencies over a single pipe such
as coaxial cable or DSL, preferably bi-directionally, or
interactive. In that respect, for example, the opposite of
broadband would be baseband service such as
POTS, or plain old telephone service, that delivers voice
circuit services, only (though it is bi-directional and
In the case of cable operators, broadband services are enabled when a cable company
“overbuilds” the capacity of its existing copper-based network so as to deliver products other than normal CATV. This is accomplished by connecting to the long haul telecommunications fiber optic backbone, thereby adding telephony and Internet
services to a cable company’s traditional offering. Similarly, DSL providers transform the phone networks’ legacy of “twisted pair” copper wires by overbuilding that network with a
system of components including “digital subscriber access multiplexers,” “splitters,” and “distribution frames.” In this way, broadband pipes are created out of POTS, with the DSL
provider then able to deliver voice, high speed Internet, and (as a by-product of Internet), streaming video, music, and other media.
What most people don’t know is that a lurking behemoth is set to re-define the broadband landscape, delivering bundled services unimagined (and largely feared) by cable and DSL providers. This behemoth is none other than the brethren of power utility companies, presently re-defining themselves in the face of advancing deregulation in both telecommunication and utilities industries.
Starting around fifteen years ago, power companies began laying fiber optic cables along their rights of way. They figured at the time that they would use the data lines to monitor power consumption at remote locations and to control their power equipment from afar. As early as 1994 though, they began to understand that they might be able to do more
with these cables – that they might be able to provide full fiber to the home (FTTH). Congress’s passing of the Telecommunications Act of 1996 gave public utility companies the go-ahead to provide these services and the resulting projects are beginning to gain
The real inspiration to move into emerging broadband service provisioning came relatively
recently, with wave after wave of power deregulation sweeping the nation.
Deregulation invites discount-service providers to enter a regional marketplace and capture market share by discounting utility services. Incumbent utilities recognize that the
customer base they have spent as many as a hundred years developing is in jeopardy. Their fear, coupled with the uncertainty of their mission and profitability in the power
sector, has caused them to look at telecommunications, Internet, CATV, and a host of hybrid services developed from this baseline, as a way to take advantage of their existing
infrastructure and maintain relevancy in the new economy.
More important than their laying of fiber optic cables
are their perpetual rights of way to the customer base, that
differs significantly from the access models utilized by DSL
and cable operators. Power companies enjoy access to entire
regional populations to whom they can market additional
services through a variety of channels – beginning with the
monthly utility bill. DSL and cable operators would kill for
that kind of presence and, instead, must spend hefty sums to
market their products to a blanket population.
This is a key barrier to entry that favors utility companies over
cable and DSL providers. Since fiber optic cable is not
prohibitively expensive and its cost continues to decline,
power companies are in a position to become overlords of the
entertainment, information and communications networks of the
future. Wiring the proverbial “last mile” is crucial and
though the telephone companies and cable operators would like
to implement the solution, they are hard pressed to justify
the necessary upgrades. Power companies, with their knowledge
and experience in wiring and maintaining services to entire
cities, can deploy at will – whereas telcos and cable
operators, by contrast, are reluctant to tear out the cash cow
that their prior investment in copper has created. They’re
between a rock and a hard place because their moneymaker is
about to become a millstone around their neck in an emerging
economy where they will have to swim or sink. Not many CEO’s
want to deliver that message to their shareholders.
Furthermore, without direct access to the consumer in
meaningful numbers to create economies of scale, DSL and cable
operators are forced to buy it from the power companies who
control that floodgate.
One technology company that
has been driving this kind of initiative for the last six
years is EarthSun, through a project called the EarthSun
Alliance. This is a media and technology integrator with
centers of operation in Southern California, Nevada, Utah,
Texas, Virginia, New York and Cambridge (MA). EarthSun is
focused on pure fiber networks and photonic technology that
far outperform the delivery capabilities of the legacy
copper-based infrastructures of DSL and cable operators.
EarthSun thinks of itself as “the light at the end of the
tunnel” – a long awaited miracle for the consumer, but the
headlight of an oncoming train for DSL and cable companies.
According to Rafael O. Quezada, EarthSun’s president
and CEO, nine out of every ten cable or DSL deployments
involve complex deals that lease rights-of-way and pole
infrastructure from power companies. EarthSun’s strategy was
to partner at the top of the food chain with investor-owned
utilities (and the most aggressive photonic technology
developers among them) to effectively end-run the temporary
dominance of the DSL and cable broadband provisioning network.
EarthSun is planning to roll fiber to the masses in a
hurry. “We have all the rights-of-way, the conduits, the
ductwork, to get to every home in the country,” says Larry
Logan, director of public policy analysis at Edison Electric
Institute (EEI), who consults with EarthSun. “We are wired to
more homes than have television sets or telephones” [from Stan
Benjamin’s “The Fiber Optic Connection,” Electric
Perspectives, September/October, 1994, p.14].
Power companies have also had time to learn from the
mistakes of existing broadband deployments, while continuing
to roll out their fiber. For example, the telephone companies
often use fiber optic loops (called SONET rings) to transmit
information between a group of nodes. A phone call between San
Francisco and Boston might traverse a few such rings. This
model scales well if most of your traffic is localized – that
is to say, most people make more local calls than
long-distance calls. But data traffic tends to be
non-localized – you’re just about as likely to be viewing a
website that’s across the nation as one that’s next door. This
means that the rings get increasingly congested as data
traffic rapidly outpaces voice traffic and consequently their
networks haven’t been scaling well. Instead of using SONET
rings, ideally one would deploy optical switches that could
very quickly pass information along to its destination,
without the need to convert back-and-forth between electricity
and light at every hop, as is done with the SONET rings. Just
in time for the imminent broadband party, optical switches
began to roll out this year. “About time!” one could cry; this
technology has been widely anticipated for years.
While many power companies are a little reluctant to
get into the ISP business directly, they have already been
making major moves to lease their fiber and infrastructure to
outside firms. Recently, Cogent Communications blew everyone’s socks off when they announced that they would be providing 100 megabit dedicated Internet services for
$1000/month starting in November. But it wasn’t exactly trumpeted that Cogent was leasing fiber from Williams Communications, a division of the energy and gas pipeline provider Williams; the deal netted Williams a cool $215 million. This clearly illustrates the value of power companies that take advantage of their extensive rights of way. The lesson is not new, however: Sprint started out courtesy of the rights of way on the Southern Pacific Railway, whose acronym provided the inspiration for the company name; Western Union was once partnered with the railway lines of frontier America. What portrait of the American west would be complete without telegraph lines strung next to the railroads?
Quezada’s EarthSun Alliance hopes to harness the utility companies’ fiber lines in a real
hurry, bringing network, hardware, and service providers to the table together to provide an all-fiber network for homes and businesses across the U.S. Their goal is to provide the
public with 100 megabit fiber service for prices that undercut ADSL by Christmas 2001. A very aggressive schedule, perhaps, but they are presently in Alpha and will be following that with a 2000-home beta trial mid-2001.
If EarthSun succeeds, it could trump the existing cable versus DSL
squabbles. Given the existing infrastructure with which both
cable and telephone companies are presently encumbered, it
might prove impossible for DSL and cable to scale up to this
level of service in any meaningful way. EarthSun and other
next-generation optical firms would duke it out to provide
better, cheaper fiber with a vast array of services. Combined
with streaming video over IP and low-latency voice over IP,
the power utilities, through third parties like EarthSun,
could end up providing electricity, dial-tone, Internet, fax,
television, teleconferencing, and other yet-to-be-imagined
services all on one low-cost bill (in similar fashion to Sprint’s ION) and
putting the cable and telephone companies in a scramble to
re-define their business models, perhaps ducking for cover as
they deliver the news to their shareholders.