Powering The Future Internet

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

somewhat interactive).

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

serious momentum.

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.