Wireless Networks Need Fiber

As I examine each of the upcoming wireless technologies it looks like future wireless technology is still going to rely heavily on an underlying fiber network. While the amount of needed fiber will be less than building fiber to every customer premise, supporting robust wireless networks is still going to require significant construction of new fiber.

This is already true today for the traditional cellular network and most existing towers are fiber-fed, although some have microwave backhaul. The amount of bandwidth needed at traditional cell sites is already outstripping the 1 or 2 GB capacity of wireless backhaul technologies. Urban cell sites today are fed with as much as 5 – 10 GB pipes and most rural ones have (or would like to have) a gigabyte feed. I’ve seen recent contractual negotiations for rural cell sites asking for as much as 5 GB of backhaul within the next 5 – 10 years.

Looking at the specification for future 5G cellular sites means that fiber will soon be the only backhaul solution for cell sites. The specifications require that a single cell site be capable of as much as 20 GB download and 10 GB upload. The cellular world is currently exploring mini-cell sites (although that effort has slowed down) to some degree due to the issues with placing these devices closer to customers. To be practical these small cell sites must be placed on poles (existing or newly built), on rooftops and on other locations found near to areas with high usage demand. The majority of these small sites will require new fiber construction. Today these sites can probably use millimeter wave radio backhaul, but as bandwidth needs increase, this is going to mean bringing fiber to poles and rooftops.

Millimeter wave radios are also being touted as a way to bring gigabit speeds to consumers. But delivering fast speeds means getting the radios close to customers. These radios use extremely high frequencies, and as such travel for short distances. As a hot spot a millimeter wave radio is only good for a little over 100 feet. But even if formed into a tight microwave beam it’s a little over a mile – and also requires true line-of-sight. These radios will be vying for the same transmitter locations as mini-cell sites.

Because of the short distances that can be delivered by the millimeter wave radios, this technology is going to initially be of most interest in the densest urban areas. Perhaps as the radios get cheaper there will be more of a model for suburban areas. But the challenge of deploying wireless in urban areas is that is where fiber is the most expensive to build. It’s not unusual to see new fiber construction costs of $150,000 and $200,000 per mile in downtown areas. The urban wireless deployment faces the challenge of getting both fiber and power to poles, rooftops and sides of buildings. This is the issue that has already stymied the deployment of mini-cell sites, and it’s going to become more of an issue as numerous companies want to build competing wireless networks in our cities. I’m picturing having the four major cellular companies and half a dozen wireless ISPs all wanting access to the same prime transmitter sites. All of these companies will have to deal with the availability of fiber, or will need to build expensive fiber to support their networks.

Even rural wireless deployments needs a lot of fiber. A quality wireless point-to-point wireless network today needs fiber at each small tower. When that is available then the current technologies can deploy speeds between 20 Mbps and 100 Mbps. But using wireless backhaul instead of fiber drastically cuts the performance of these networks and there are scads of rural WISPs delivering bandwidth products of 5 Mbps or less. As the big telcos tear down their remaining rural copper, the need for rural fiber is going to intensify. But the business case is often difficult to justify to build fiber to supply bandwidth to only a small number of potential wireless or wireline customers.

All of the big companies that are telling Wall Street about their shift to wireless technologies are conveniently not talking about this need for lots of fiber. But when they go to deploy these technologies on any scale they are going to run smack into the current lack of fiber. And until the fiber issue is solved, these wireless technologies are not going to deliver the kinds of speeds and won’t be quickly available everywhere as is implied by the many press releases and articles talking about our wireless future. I have no doubt that there will eventually be a lot of customers using wireless last mile – but only after somebody first makes the investment in the fiber networks needed to support the wireless networks.

Verizon Bringing Fiber to Boston

fios vanEvery once in a while something in the industry comes as a true surprise and that happened last week when Verizon announced that it was going to invest $300 million to build FiOS in Boston. There hasn’t been any new FiOS constructed for many years and the company had announced at the end of 2011 that it was done with FiOS expansion. Then the company went on to sell a lot of customers to Frontier including a big chunk of the FiOS fiber network and it looked like Verizon was inching their way out of the residential landline business.

There was never any doubt that Verizon was interested in fiber to serve large businesses and to serve its own cellular towers. And this desire was emphasized a few months ago when the company announced the intention to buy XO Communications from Carl Icahn. That will provide a vast new fiber network throughout downtowns and business districts around the country.

Verizon says that there are a few reasons it wants to build Boston. Probably first on the list is a shift in the cellular business to add smaller neighborhood cell sites. The whole industry has started the migration from relying mostly on the big cell towers to smaller cell sites dispersed where there is demand. But these mini-cell sites need fiber. And so expanding the FiOS network in Boston will give the company fiber everywhere in the City and give it a competitive advantage over AT&T for providing cellular data.

Verizon also says that it wants to get into the ‘smart city’ business and it views Boston as an attractive market to pursue that goal. Verizon announced a smart city initiative last October and is working on plans to build things like smart traffic grids in cities. Again, this kind of big dollar business requires fiber throughout a city.

Verizon also says that it would like to tear down all of the copper in Boston. Of course, Boston’s copper is not older or in worse shape than the copper in other east coast cities and this justification doesn’t seem like a reasonable reason to invest $300 million in fiber. I’m betting that management took a new look at their existing FiOS business and saw how profitable it is now that broadband penetration rates keep climbing. Broadband is a very high margin business.

It’s also my guess that Verizon might be getting more realistic about the future of its cellular business. That business has thrived for a few decades due to astronomically high prices and margins compared to the cost of providing the service. And those margins are under attack throughout the industry as alternate cellular companies are offering cheaper rates. Even the new discounted rates are high margin, but they have forced Verizon and AT&T to bring their prices down out of the stratosphere. So perhaps the company is quietly going to build up the landline data business as a way to insure future profits.

One has to wonder what this means for other east coast cities. Verizon largely built FiOS in the suburbs and to a large extent ignored the downtowns of the major northeast cities. If there was any downtown fiber built it was spotty and only to neighborhoods where the construction costs were the lowest. There certainly would be a big sigh of relief if other cities could know that they were also going to finally get a fiber network to compete with Comcast.

One thing we’ve always known about big companies is that they can change strategies at will and something they say they will never do one day can end up as a major corporate initiative a few years later. Verizon gave every sign for the last few years that it was walking away from landline networks. One has to go many pages deep into their annual reports to even see that business mentioned.

But this Boston initiative is no small deal and requires a major investment. And the reasons why this benefits Verizon are just as true for many other cities. Verizon says that one reason they are willing to do this now is that city hall in Boston was receptive to making it easier to build fiber – something that has not been true in the past. Just like many cities are bending the old rules for Google, I imagine that there are discussions going on today in many east coast cities about what they might be able to do to get Verizon fiber too.

Building Fiber to the X

Fiber CableAnybody that is a client of CCG probably knows that we build business plans as one of our primary products. Over the years we have built business plans for just about every kind of network and technology imaginable. And as you might suspect, these days we build a whole lot of fiber-to-the-premise business models for markets of all sizes.

I recently realized that we are on the verge of being able to use FTTP networks to do a lot more than serve residents and businesses. My typical business plan concentrates on the revenue streams that can be gotten from residential and business customers. We also look at a few other revenue streams like selling to large customers like schools or cell phone towers. And we normally consider wholesale sales made to other carriers already in the market.

But everything I read tells me that there are soon going to a whole lot of new opportunities for using a fiber network, particularly in medium to large markets. We are seeing some of these opportunities today, but each of these areas promises to get larger as time goes by. Consider some of the following:

Outdoor WiFi Network: More and more cities and even some carriers are starting to foresee business plans that include numerous outdoor WiFi hotspots. This can be for law enforcement and municipal use, for roaming WiFi cellphones, to provide a digital divide solution, or just to provide a service to citizens or customers.

Smart Lampposts: Similar to WiFi hotspots are smart lampposts that include smarter lighting that saves energy coupled with WiFi hotspots.

Mini Cell Sites: As the cellular carriers contemplate going to 5G they are going to need a lot more and smaller cell sites located close to users. And these cell sites will need fiber.

Traffic Light Systems: There are new systems of intelligent traffic signals that promise to significantly improve traffic flows using AI.

Cameras: There is a proliferation of cameras today including private security cameras, traffic cameras, web-cams, and law enforcement security monitoring.

Digital Advertising Signs: There are now programmable billboards that can change the display through programming.

IoT Aggregation Points: Most carriers envision a network of IoT aggregation points that gather the traffic to and from outdoor and other IoT monitors as a separate Ethernet network.

Smart Meter Aggregation Points: Although wireless technology seems to have won the smart meter race, these networks need neighborhood aggregation points to gather signals from the wireless monitors.

SCADA Systems for Electric and Water Utility Monitoring: While many electric and water systems now have fiber networks to connect monitors in their system, as we develop more sophisticated monitoring there will be the need for more monitoring points.

On top of these applications there are others that nobody has yet thought of, into a business plan. But fiber is a long-term investment and there are going to be numerous revenue opportunities like these that are going to help to pay for fiber, assuming that a fiber network is deployed with these kinds of connections in mind. People always ask me what happens to a fiber network as cable TV and telephone penetration rates drop, and at least part of the answer is that there are going to be numerous locations in a community that are going to require a fiber connection. None of us knows yet how these future revenue streams will be priced, but we know these are all revenue opportunities and that they are all coming in the not-too-distant future.