The 1-Gig Reality Check: Do We Need That Much Speed?Google Fiber and other broadband systems would break both download records and the bank 6/10/2013 12:01:00 AM Eastern
It has been more than three years since Google announced
that it would test a one-gigabit- per-second (Gbps) broadband system, and more
than a year since the company unveiled plans to first deploy the fiber-optic
broadband network Google Fiber in Kansas City.
The project has helped fuel interest in many fiber-to-the-home (FTTH)
deployments around the country and has made very high-speed broadband
connections one of the hottest topics in the multichannel world. Yet there
remains a great deal of confusion and many unanswered questions about these
superhigh- speed connections. Do they make economic sense? What are some of the
emerging business models? And do consumers even need them?
Based on interviews B&C conducted with people involved in 1-gig
rollouts in Kansas City; Chicago; Seattle; Lafayette, La.; Lawrence, Kan.;
Vermont and other markets, here are some preliminary answers.
What are the realistic prospects for a nationwide rollout of 1-gig
services in the next few years?
While Google recently announced the expansion of its Kansas City offering into
Austin, Texas, and other locations, a nationwide service seems unlikely, given
the potential costs, according to analysts and experts.
Mark Ansboury, president and CEO of Gigabit Squared (which is involved in 1-gig
fiber projects in specific neighborhoods in Chicago and Seattle) is a staunch
advocate of these smaller-scale projects. But Ansboury cautions that building a
nationwide fiber-to-the-home network might cost $300 billion to $400 billion.
Even with the recent announcements to expand Google Fiber into Austin and other
markets, that would put this service in roughly 600,000 households or only 0.4%
of all the U.S., says Dexter Thillien, senior analyst for multiplay at IHS.
Thillien believes high costs will continue to limit 1-gig deployments by Google
and others to relatively small areas.
Do many people really need a 1-gigabit connection for video?
Fiber deployments have already found many innovative uses in health care,
education, post-production and other fields. But if you look at these rollouts
purely from the perspective of the TV industry and the delivery of video into
the home, it becomes harder to justify the need for a continuous 1-Gbps
Currently, a 50 megabits-per-second (Mbps) connection is more than enough to
handle 8 Mbps streams of HD movies to five different TVs or devices, says John
Chapman, Cisco Fellow and CTO of Cisco's Cable Access Business unit. Even
UltraHD, which would probably eat up 30 Mbps a stream, wouldn't fill a 1-gig
pipe. "People really don't need more than 50 Mbps for video," Chapman says.
Despite the rapid proliferation of mobile devices, Internet-connected TVs,
over-the-top video services and greatly increased video traffic, this is
unlikely to change in the next few years. A recent report from Cisco predicts
that the number of Internet-connected devices in North American homes and the
amount of video traffic will soar. Yet as average broadband speeds increase
from 13 Mbps in 2012 to a projected 38 in 2017, only 2% of all connections will
have a 100 Mbps connection or faster in 2017, Cisco predicts.
The ability to provide 1 Gbps in short bursts-as opposed to a sustained
connection-could, however, have very appealing consumer applications by dramatically
reducing download times and improving video streams, says Tom Cloonan, Arris
chief technology officer. "The next wave of performance is about latency and
the ability to provide bursts of speed," Cloonan says.
What do these deployments mean for the cable industry?
Much of the discussion around Google Fiber seems to assume that cable companies
would have to make massive investments to compete with fiber deployments. In
fact, the MSOs have operated hybrid fiber coax (HFC) networks since the 1990s,
and in recent years they have developed technologies that offer blazingly fast
During the 2011 Cable Show, Comcast chairman and CEO Brian Roberts demonstrated
a 1 Gbps connection using DOCSIS 3.0 that downloaded an entire season of 30
Rock in 1 minute 39 seconds. The industry is well-advanced on developing a
DOCSIS 3.1 specification that will handle 10 Gbps.
Cable also has a number of relatively lower-cost ways of boosting speeds. These
include moving the fiber in cable HFC networks closer to the home and bonding
more QAM-the format that encodes digital cable channels for cable
transmission-channels together. "This gives cable the ability to increase
speeds in a way that is less costly than building a new fiber network," Cloonan
Are these deployments economically viable?
The ability of cable to respond to offer higher-speed services and the costs of
achieving a large footprint would seem to indicate these projects have an
uncertain economic future.
In fact, a close look at many of these projects indicates that new business
models, reduced costs, government incentives and other factors can make these
projects self-sustaining. They also provide very important, though less
measurable, benefits in economic development.
A 2009 FTTH deployment offering 1-gig speeds in Lafayette, La., went cash-flow
positive in February 2012 and is expected to be profitable in 2014, says Joey
Durel, president of Lafayette City/Parish.
Heather Burnett Gold, president of the FTTH Council, adds that there are
currently about 20 fiber-to-thehome deployments offering 1-gig speeds and that
their approaches vary widely.
Some of these projects, such as the 1-gig rollouts by VTel, are bundled with an
IPTV offering; other projects, such as the Wicked Broadband deployment in
Lawrence, Kan., are based on the idea that consumers will cut cable services
for over-the-top video providers.
"Everyone always asks what the killer app will be, and what we are seeing is
that it will be all kinds of different applications," Gold says.
The diversity of those approaches can be seen in interviews regarding
a number of different projects from around the country.
Chicago and Seattle
As operators look for ways to create sustainable business
models for these deployments, a notable example of some of the newer approaches
can be found at Gigabit Squared's planned rollouts in Chicago and Seattle.
In both cases, the company is using new approaches to reduce
costs while partnering with local institutions to improve its revenue
prospects, explains Ansboury.
In Chicago, Gigabit Squared got a $2 million grant from the
state of Illinois and is partnering with the University of Chicago and local
communities to rollout gigabit fiber and wireless. Construction is about to
begin on the project, which when completed will cover nine neighborhoods in
Chicago's South Side, reaching around 100,000 households and 11,000 businesses,
In Seattle, it has partnered with the city of Seattle and
the University of Washington for a network that will eventually hit about
80,000 households in 14 neighborhoods.
"Through these partnerships with the universities and other
institutions we are creating an affiliate system that aggregates demand and
capacity" to bring in customers, Ansboury says.
He also believes that the architecture they are using for
the network and the way they are deploying services will significantly reduce
costs. "We can drive the cost of connectivity down until we connect someone and
when we do connect them, we are connecting them at a lower cost," he says.
By constructing an "open-access network," they can sell
excess capacity to outside companies. For video, that means outside companies
could lease capacity on a wholesale or retail basis to supply over-the-top
channels and video.
VTel: The $35 Gig
While rural areas have generally been the last to get
advanced telecommunications services, some very notable 1-gig deployments have
been taking place in smaller communities.
These deployments have been fueled by both government
subsidies and a push by rural telcos to revamp their operations.
Both trends are in play at VTel, a small-family owned rural
telco serving about 17,500 homes in 21 Vermont communities that has rolled out 1-gig
services for only $35 a month.
VTel chief executive Michel Guité says he first became
intrigued with the idea after hearing a presentation about a fiber project in
Singapore. After researching the idea, VTel applied for a federal grant for an
FTTH deployment several years ago.
That was turned down, but after Google announced its fiber
plans, the company reapplied and received one of the largest federal broadband
stimulus grants on record, around $94 million. VTel put up about $40 million of
its own capital, which when combined with other government grants, produced a
$151 million investment for the FTTH and 4G/LTE wireless rollout.
Guité estimates that the FTTH portion cost around $75
In moving to a fiber infrastructure, Guité notes that costs
of fiber equipment have dropped significantly and that going to fiber will reduce
long-term maintenance costs.
In terms of video, VTel is currently testing a
state-of-the-art 500-channel package of programming, including 120 HD channels,
which it hopes to offer to the public after July 4.
Currently, VTel has about 700-800 1-gig customers, Guité
estimates, and is charging $35 for each connection.
Pricing hasn't been set for the video bundles, but he
expects that quad-play packages of phone, 1-gig Internet, video and wireless
will start at around $95, which is less than Comcast's triple-play offerings in
The project is an important test case for rural telcos,
which have been losing wireline phone customers in a period when federal rural
phone subsidies are coming to an end. Guité estimates that those trends could
push 500 of the 1,200 independent phone companies out of business in upcoming
"We are hoping this will be an example to other places," he
says. "But we are building it with 70% federal subsidies, which makes it a lot
easier for us to become self-supporting. It is not clear if the guy who doesn't
have those can make it pay."
Since those subsidies are not being greatly reduced, future
FTTH deployments will have to find ways to cut costs and improve their revenue.
LUS Fiber Eyes
The rollout of a fiber 1-gig infrastructure in Lafayette, La.,
at the parish's publicly owned utility is an example of the challenges these
build-outs face, as well as some of the potential-payoffs.
The parish began exploring the idea after Durel became
president of the Parish but faced several years of litigation from the
incumbent telco and cable operator, BellSouth and Cox Communications, before
eventually rolling out the service in 2009, which currently reaches about
43,000 homes and businesses.
The LUS Fiber Project was funded with a $140 million bond
Only a handful of customers have taken the full 1-gig
service, which is priced at $999.99 with offers for a variety of lower cost Internet,
video and phone packages that have proved popular, including a $34.95 15 Mbps
Durel also says the operation, which is well on track to
become profitable next year, has played an important role in attracting
businesses. For example, the movie Secretariat
was shot in the town and the visual effects house Pixel Magic has set up a
studio in the area because of the fiber connectivity to Hollywood.
"We wanted to do something to give Lafayette a competitive
edge and it has achieved that goal," Durel says.
Wicked Broadband rolled out a service a few years back that
offered 1-gig connections to larger complexes, such as apartment buildings, and
fraternities and sororities in the college town of Lawrence, Kan. and the
company is now beginning a pilot project to offer services to individual
residences, reports Joshua Montgomery, the company's owner.
Montgomery plans to eventually deploy the services to about
36,000 homes totaling a population of around 90,000. Currently about 1,800 people
use the network every day.
In the pilot program, Wicked Broadband is offering three
broadband speeds of 20 Mbps for $49.98, 100 Mbps for $69.98 and 1 Gbps for
While the company currently offers a bundle with Dish's
video packages, Montgomery says he has no interest in developing an IPTV
service because he believes traditional multichannel services have limited
"We encourage users to cut the cord and buy a couple of Roku
boxes," he says, adding that Aereo is planning to roll out its service in the
area. "Then users can access Netflix and other content on Roku and get the
broadcast channels on Aereo."
Montgomery sees the video industry evolving to a model where
consumers have a direct relationship with the content holders, who will sell
their services directly to subscribers. "I don't have any interest in launching
a Morris code telegraph system or a cable system," he quips.
The company is laying down extra fiber so that other
companies could offer services over their network. That would allow Google to
lease the excess capacity if Google Fiber expands from Kansas City into nearby
So far, Montgomery has financed the network with private
capital but he has applied to the city of Lawrence for an additional grant to
help build out the network. "Broadband access will be for the 21st
century what roads were for the 20th and the railroads were for the
19th," he says. "Communities who get on board and install it will
have a lead in that race."
Lessons From Google
Much of the attention on Google Fiber in Kansas City has
revolved around whether or not Google plans a nationwide multichannel service.
But the project is probably much more notable for Google's cost cutting efforts
and its economic impact on the city.
One tactic that is now being emulated by other FTTH rollouts
is Google's requirement that people preregister for the service. This enables
an operator to gauge interest in certain neighborhoods and plan its revenue.
Another important development has been efforts to cut costs
by reducing regulations and working closely with a local government.
Kansas City mayor pro tem Cindy Circo explains that they
haven't provided Google with "major tax breaks" and that their overall
financial help has been small.
The city has however, worked closely with Google to reduce
construction costs by speeding up the permitting process, creating a single
point of contact and offering some office and storage space in public
There are also six staffers who provide Google with help on
a part-time basis and Google was also allowed to place some fiber huts on
Permitting fees were waved, but Circo's office estimates
that those wavers have not amounted to more than $120,000 per year.
In exchange, the city got 200 free 1-gig hookups for
schools, hospitals and other locales. It has also seen a pay-off in terms of
developers and businesses moving to the area. Government agencies, educational institutions,
local groups and corporations are also funding and setting up a "Digital
Sandbox" to encourage developers and startups.
"We're even seeing an uptick in tourism with app
developers and gamers wanting to come here," Circo says.