Fiber follies

Reading through the details of the FCC’s unbundling decision more carefully, the "broadband deregulation" section has a scary loophole. Supposedly this is about fiber to the home deployments, which would deliver massive bandwidth. But the FCC order also eliminates unbundling requirements when the Bells put any fiber at all into the loop that can carry packet traffic. The only caveat is that they need to preserve voice-grade access for competitiors.

What does this mean? The "local loop" is the circuit from the phone company office to your home. Typically, what comes into your house is a copper wire. But the phone companies have for many years been replacing portions of loops with fiber, which plugs into the copper lines at a "remote terminal" or "digital loop carrier" box somewhere in the middle. They do this because the fiber is cheaper to run and gives them more capacity to handle greater traffic. There is more of this going on than you may think. Legg Mason quotes an estimate that 25-30% of US homes already have some fiber in the loop.

So all the Bells have to do is "packetize" the fiber (which just means sticking a router on the back of it) and poof! For a quarter of the US, the only thing they have to share with competitors is the basic voice-capacity circuit. No UNE-P, no data competition at all.

It gets worse. While the FCC was trying to incent fiber to the home buildouts, the Bells’ strategy is bound to be "fiber half-way to the home." Putting in some fiber is much cheaper than putting fiber all the way to the home, especially since it gives them other benefits. However, it doesn’t change the services available to consumers. And remember, any fiber in the loop is a "get out of sharing free" card. So the Bells may start putting fiber terminations ten feet away from their central offices, or even inside the offices but ten feet from the "main distribution frame" that terminates the loop. Heck, why not?

If this scenario plays out, here’s what we’ll get:

  • All the dangers people worried about with FCC Chairman Powell’s original plan, because there will effectively be no unbundling.
  • None of the DSL competition Powell wanted to keep through line-sharing.
  • Bell fiber investment directed toward regulatory arbitrage and away from new services.
  • The routers hooked to the partial fiber drops become the gateways to prevent anyone from running VOIP, video, or anything else competitive and innovative over the Bell broadband connections.

Help me, Obi Wan Wireless… you’re our only hope!