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October 04, 2011

EU Wants to Slice Copper-Based Wholesale Rates
By Gary Kim
Contributing Editor

European Union telecoms commissioner Neelie Kroes wants to create a new pricing model for wholesale access to incumbent telecom provider networks that would cut prices for copper access but exempt carriers from the rules if they sell fiber optic access to wholesale customers. The new rules would create incentives for replacement of copper infrastructure. Kroes calls for greater broadband investment

Private investors have been reluctant to invest the €270 billion Kroes estimates is needed for Europe to replace its copper access network with an optical fiber network. Broadband investment is the issue

It’s a contentious issue, as you might guess, as service providers remain unconvinced there is adequate end user demand for new services that would justify the investment, at least for the moment. And that has investors concerned as well.

Sometimes, even optical fiber access isn’t enough. Consider Yukon Telephone, which serves extraordinarily isolated communities in rural Alaska. The company recently installed a fiber-to-the-home network serving Tanana, a village of about 300 people, mostly Athabascan Indians, on the Yukon River in the vast interior of Alaska.

So you would think Yukon Telephone customers in Tanana now can take advantage of optical fiber speeds. But there’s a problem, company President Don Eller says. All the backhaul is by satellite (Tanana is really isolated. Historically, moving bulkier goods in and out of the village has required waiting until the Yukon unfreezes in the spring, and then halting again when the winter freeze comes again).

And given the high cost of satellite backhaul (up to $12,000 a month for a single T1 circuit), the entire Tanana fiber to home network has 3 Mbps worth of bandwidth. If you wonder why so much of the “broadband stimulus” spending was for middle mile projects, Tanana shows why.

Tanana now has a state of the art fiber to the home network. What it doesn’t have is an affordable way to connect with an Internet point of presence at speeds that take advantage of that local access capability. The middle mile issue is the barrier, not the local access network.

But both developments, both the pricing rules for EU wholesale access, and the backhaul problem faced by Yukon Telephone, show the huge investment challenges and revenue models for fiber to home services. Everyone agrees people need more bandwidth, and for a fixed network, optical fiber is the long-term solution.

What remains unsettled is the revenue model, and therefore the wisdom of investing in such infrastructure.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Rich Steeves


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