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Bandwidth Shortage And The Telephone Company
FasterThanLight writes: "This article from USA Today regarding (non)usage of existing fiber and its impact on bandwidth in the semi-near future ... more doom and gloom. Why? Greed, of and by the (surprise, surprise) large telcos." Remember, this story is about a predicted shortage, not a current shortage.
When I see billboards around town suggesting a second phone line for internet use, I suspect the telcos' plan is to get lots of people addicted to having long internet sessions on their modem, after which the telcos will go running to Congress saying that they need to start charging local calls by the minute due to the excessive connect times in the Internet Age.
Why, why am I so cynical? Oh, well. It was fun while it lasted. I now return you to the scheduled rants...
Sheesh, evil *and* a jerk. -- Jade
Well, in the case of your telco, it loooks better on the books not to have capital depreciating, so their move made economic sense, from a business finance perspective.
I have serious doubts about this article though. While they make the single valid point that it costs money to light up a network, there were and still are valid mechanisms for financing that activity. Most of the telcos that have gone under were in debt to the equipment manufacturers like Lucent, Ericson, and Nortel Networks. That is all bad debt now, which causes these manufacturers to cut costs by (among other things) reducing R&D expendatures. This means advances in the industry will not come as fast as they were, but they will still come eventually.
These manufacturers are still willing to finance the lighting of fiber networks, as needed, (in that such activity requires purchase of multiplexing equipment and switches, the sale of which these companies have financed for the past two decades).
When it comes down to it, the industry is returning to a pre-tech-bouble state, not dying completely. The determination of which companies will still be standing will be which are able to adapt quickly enough. Unfortunately, this is made more difficult with a Wall Street backlash against the telecom industry, but such things happen and will be overcome in time.
There will be no shortage because the market is capable of meeting demand. The required financing will become available because it is the only way the manufacturers will stay in business.
In closing, let me just say that I always get my technology news from McPaper because after all they're known for their technical expertise and research prowess.
--CTH
--Got Lists? | Top 95 Star Wars Line
Stop and think about how much bandwidth costs.
It's a lot more than routers and fiber. In fact, compared with the costs of upkeep and support, the infrastructure is almost negligible. That's why there's so much infrastructure already built, but so little utilized.
Why not use it all? Because people are not yet willing to pay for what they get. Standard business practice is to charge the customer 5x the actual cost of a product or a service.
Broadband service is so desparately trying to compete with the low cost of dialup, that it's not making the margin it needs. Of course it doesn't scale linearly, as a 128kb DSL connection doesn't cost 32x a 4kb dialup, but a 128kb DSL connection for only 2x or 3x the cost of that dialup sure isn't making the DSL provider the same margin as the dialup gives the dialup provider.
Bandwidth is expensive, we want -- no, we demand 100% uptime, no slowdowns, this, that, etc. Until people are willing to pay the true cost of this service, none of the greedy Telcos are going to make any money out of this, and will have no motivation to build new infrastructure, make new plans available.
All I want is 1mbit up and down, and no restrictions on what services I can use (ie. servers). Is it too hard for these broadband 'providers' to offer something so simple? Is it so hard?
No, it's not hard, in fact it's pretty easy, though it takes a few weeks to set up.
If you want to run servers, you need to get a real ISP.
You call up bandwidth.com. You say, Hi, I'm Joe Blow and I want a megabit up and down. They will say "great, a T1 is just what you need".
The helpful staff will then compile a list of packages you can buy, ranging from about $800-1600/month for 1.54 Mbits/sec in most areas.
You see friend, in the real world, people have to pay for bandwidth. Your ISP has to do the above when they buy bandwidth, and logically, they can't sell it to you for less than they pay for it, otherwise they won't be in business very long.
They may get a little discount if they can afford a T3, but that's still $20,000-$30,000 a month, and is about the equivalent to 30 T1s.
Are all you people that whine that they want 1Mbit up and down, unrestricted, for $30/month math challenged, or just stupid?
I've had enough abrasive sigs. Kittens are cute and fuzzy.
For every $1 spent to put a fiber in the ground, (Score:1) a company has to spend $20 to attach it to all the equipment, configure it and turn it on.
Sorry, but my bogosity meter is banging against the peg on this one. Anybody have any real figures on this?
That's a reasonable number.
When you're burying the fibers it costs you a bunch to dig a trench. That's because the trench goes around the whole continental USA, plus a few cross-paths. Every major city has to end up with two trenches connecting it to two other cities (so if the fiber going one way gets cut the signals can be rerouted to go around and come in the other way).
It costs you a LOT to dig that trench. If you put the minimum two fibers you need in it, when you need more you'd have to DIG ANOTHER TRENCH. So you put in a BUNCH of fibers. You don't want to dig another trench for a century or so.
The extra individual fibers cost next to nothing compared to the trench, even after you include the cost of the splices. The total cost is still enormous. But once you divide the cost of the trench among all those fibers the cost PER PAIR OF FIBERS is small - approaching the cost of the fiber itself.
But now you go to light them up. This means a box at every city or town along the way where you want to hook up, plus maybe several repeaters in access boxes EVERY MILE along the fiber (the spacing and cost varying according to the type of fiber and what type of signal is going through it - but it's not cheap). For packet switching you need maybe a million bux worth of box in each town for each fiber pair you light up (though lighting extra fibers can be done for maybe a quarter of that by adding cards to existing boxes.) For phone calls and raw pipes, maybe an eighth of that (though that just lights and protection-switches the fibers and hooks them to the local signals with a few fat pipes). And a rule of thumb is that the rack space for the box costs more than the box.
20-to-1? Might be low.
Of course the repeaters and boxes both get better roughly by Moore's law. So if you can hold off lighting a fiber for 18 months, it costs you half as much. So of COURSE you don't buy boxes and repeaters until you're ready to light the fibers.
So the analysts looked at all the dark fibers, forget about all the non-installed boxes, and started prattling about a "bandwidth glut" - as if nobody would buy another box for 20 years.
Meanwhile the tellcos had bought enough boxes to light their first fibers (plus a couple spares). So there was a dip in box purchases while they switched to finding customers to use the bandwidth on the first lit fibers. (One set of fibers has a LOT of capacity, so purchases are lumpy.) And the tellcos got into a price war to get those customers - with the little guys getting squeezed out by the old former monopolies with their buckets of cash.
So the investors paniced. And investment in "telecom" dried up. And without investment the squeezing proved fatal for the new little guys. And without the little guys nipping at their heels the big guys started taking their time (though they're still installing and still filling up their current boxes - plus the ones they got for near-free from the dying little guys). And without investment nobody bought more of ANYTHING, creating a self-fulfilling prophecy and crashing the stock of anything tarred with the name "telecom".
But even with the big guys dragging their feet the boxes ARE getting filled up, just like the article says. Some time soon the surviving companies will need to buy more. And the surviving suppliers will have less competition and ZERO inventory (having long since switched to build-to-order as a belt-tightening measure, and also sold off all their pre-made stuff at fire-sale prices).
After all - do YOU have broadband yet? On slashdot, probaby yes. But don't you know somebody who doesn't, but wants it and can't yet get it?
They're STILL doing the INITIAL buildout - and the "broadband" pipes are still tiny compared to what people WOULD buy if it were available and the price were right. Only a couple percent of the country has broadband. A LOT more people want it, and will get it as soon as it's available. (As of a couple months ago the tellcos expected to install as much DSL this year alone as had been installed since it was invented.)
Seems to me the article is right on. The current "telecom crash" is at least partly due to a panic reaction by investors, and the result will be a bandwidth crunch as the boxes fill up and there is a sudden need to buy more - creating a seller's market for the surviving suppliers.
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