ARTICLE ARCHIVE
The cable lie
Despite the huge growth in cable capacity, the individual consumer is being passed by. Angus Kidman looks at the alternatives for an online planet.
March 26 2002
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Despite the quick fix, the event provided a stark reminder that the internet age is still far from being the wireless age. Communications technology is still based largely around the concept of wires running undersea and underground to connect nations, even if the volume of data able to be carried by those cables has increased steadily.
Connecting up the world in this way is not a recent phenomenon -- the first attempt at an undersea data link took place in 1858 when a line connecting Newfoundland and Ireland was put into operation (it failed after a month). Those early cables were designed purely for telegraph transmissions; widespread networks carrying voice calls did not emerge until after World War II and voice networks remained the main building activity for 40 years.
However, two new factors have jointly driven the creation of new global networks in the past decade. The most obvious has been the rapid development of internet technologies, now deployed almost universally within business and available widely in homes. Because the internet is founded on a globally agreed set of standards, take-up has been rapid, despite the continuing emergence of new technologies in the field. That continued acceptance has seen a dramatic upturn in usage; the International Telecommunications Union estimates there are more than 366 million internet users worldwide.
The second has been a growing move towards the deregulation of telecommunications markets, which has seen competing telcos driven -- either by government ruling or business necessity -- to build better networks to support existing customers and attract new ones. Parallel to this has been the increasing dominance of a few global carriers such as BT and AT&T that wish to control the networks in all the countries where they operate.
The result has been a rapid expansion of the connections between different nations; there are more than 60 major submarine cable systems deployed around the globe, most of which are less than a decade old. As well, new capacity continues to be rolled out; Southern Cross plans to double the capacity of its trans-Pacific network early next year while the benchmark for the world's longest cable system continues to shift. (It is now held by the China-US cable system, which runs for more than 31,000km.)
Satellite technology has played an important role in extending the availability of network services to locations that can't easily accept cables. However, the emergence of high-speed fibre optic cables as the data communications medium of choice has meant that cables continue to play an important role.
Fibre-optic systems can transmit information at the speed of light; by "multiplexing" various light frequencies, it's possible to further increase the amount of data fibre they are capable of carrying. A broad rule of thumb states that fibre's capacity is 10,000 times that of the highest radio frequencies. More importantly, multiplexing has seen fibre capacities increase fourfold every year since 1995, a rate of change that makes Moore's Law seem tardy by comparison.
The first commercial undersea fibre-optic cable was rolled out only in 1988, with a capacity of about one gigabit per second. Today, fibre-optic capacities run to hundreds of gigabits a second. As well as the submarine cables used to link continents, billions of dollars have been invested in underground fibre-optic links and in enhancing copper-wire networks installed for standard telephone services. Capital spending on fibre topped $US71bn ($136.6bn) in 2000, according to research group Robert Stevens.
While fibre-optic networks can carry high volumes of voice traffic, the expansion of networks is motivated far more by the necessity of carrying increasing volumes of data. Most global telcos already have more resources devoted to data capacity than to voice services, both because of increasing demand and because the potential for profit from data is seen as greater than the competitive, price-driven voice-call market. Concerns over issues such as security and uptime allow telcos to charge a premium for high-capacity data services.
Not all attempts to create global infrastructure run smoothly even in the construction stage. Motorola's Iridium network of satellites -- designed to provide a universally available mobile phone service -- flopped badly at its launch and was within days of being blown out of the sky when it was rescued by a consortium of companies that bailed it out of bankruptcy for $US25m.
A less visible but more insidious problem is the growing volume of "dark fibre" or excess fibre-optic cable installed as part of a major rollout but not activated. Telcos argue that because it can be difficult to get regulatory permission to install underground cable in the first place, and disruptive to dig up the ground and put it in, it makes sense to set up additional unused lines. Various estimates calculate that less than 10% of installed fibre is actually in use. The rest is dark.
The regulatory concern may well be valid. In Australia, for instance, the rollout of high-speed cable by both Telstra and Optus was curtailed when local councils complained about the installation of overhead cabling.
However, it isn't yet clear that the business case has emerged for the extra capacity to be taken up. Many providers of high-speed networking equipment blame a decline in revenues in 2001 on a slowdown in deployments by telcos that had decided to cut back on the creation of new networks, and some observers believe that the dark fibre is likely to soon become dead fibre. The lingering effects of the 2000 tech-stock bloodbath also mean that investment funds for new networks are somewhat harder to come by. Figures from Bank of America and Epoch Partners found that capital spending on telco infrastructure fell 6%-9% during 2001.
Oddly, while there may be a surfeit of capacity on major international routes, gaining a high-speed connection is nowhere near as easy for the average individual as that surfeit might suggest. "The so-called glut of bandwidth is so overblown that it nearly qualifies as an urban legend," Gartner analyst John Mazur wrote in a recent commentary.
Large business customers are often wooed heavily; the first high-speed services launched in most countries centre around the CBD, where there is a large concentration of data-hungry customers in a small area. However, individuals and smaller corporations are often likely to face no more than a handful of choices for data services, many of them based around essentially the same networks. The advantage of vast global connections is often enjoyed more by the telcos than their customers.
The main problem is that many telcos are reluctant to invest in the expensive equipment required to link individual customers to high-speed local exchanges -- a phenomenon referred to as the "last-mile" problem -- if they can't see a clear path to profitability. Telcos that have formerly enjoyed a market monopoly may also be reluctant to provide equitable access to those services for rivals, especially if they have invested large sums in modernising exchanges and other elements of the network.
As an OECD investigation into broadband networks last year concluded: "The inheritance of many decades of monopoly provision of access networks is that there is usually only one, or at best two, networks passing most homes and businesses." Without competition to sell access to that line, pricing is unlikely to appeal to consumers, it said.
Arguments over what constitutes broadband are rife, but for most practical purposes it implies an access speed of more than 200 kilobits per second to the home (about four times faster than a conventional dial-up internet connection). The leading technologies for implementing broadband access are DSL (digital subscriber line), using an enhanced version of the existing copper phone network; cable, using the same networks as pay-TV services; and, a distant third, satellite-based systems.
In 1999, cable was the dominant medium, accounting for 84% of broadband connections globally, according to OECD estimates. But DSL is gaining ground rapidly; by the end of last year, it accounted for 49% of all installations and is expected to overtake cable this year. Other alternatives are possible.
In Australia, digital television has been suggested as a possible means of providing high-speed services, but that option isn't considered viable virtually anywhere else in the world. Sweden's dominant technology is local ethernet networks linking apartment buildings.
Whatever the technology, regulation is seen as central to encouraging broadband adoption, especially in markets where the service is controlled by a formerly dominant telco. Governments have been keen to encourage the uptake of broadband, largely via price regulation of broadband services, but that process often fails to keep pace with technological change.
Locally, Telstra has pledged to make DSL-class services available to 90% of homes by next year (compared with the 34% of homes that can access cable services). Yet existing customers of the DSL service complain that it is quite spectacularly unreliable, while rival telcos have resorted to the Australian Competition and Consumer Commission in a bid to see access prices lowered so that they could launch their own services.
The federal government has proposed a broadband advisory group to stimulate broadband demand, but detail remains sketchy. Australia's unusual status of having a dominant telco that is still half-owned by the government reduces the odds of stronger measures being imposed to allow rivals to sell broadband at discounted prices. The end result has been a flurry of lawsuits flying between Telstra, Optus and other telcos.
DSL is seen as particularly susceptible to last-mile politics since it relies heavily on existing infrastructure. Communications analyst Mark Main, of Ovum, predicts that despite these barriers, there will be more than 200 million installed DSL lines globally by 2007. Innovative solutions can be found; in New York, retired water mains were used to provide fibre-optic connections to existing apartment buildings.
The biggest problem with broadband isn't technological, however; it's that no one knows how to make any real money out of it. Leading US residential broadband provider Excite went broke last year, while other competitors have been forced to file for bankruptcy and radically restructure in a bid for profitability. Locally, Telstra has defended recent unpopular price rises and capacity limitations for broadband services on the grounds that they won't be profitable otherwise.
A rare example of success in the broadband arena has been South Korea, which has more than 11 subscribers per 100 inhabitants, by far the highest adoption rate in the world. The country's high uptake has been attributed principally to vigorous competition between network providers, although a largely apartment-bound population making it easier to launch new networks and the widespread use of broadband IP telephony services for cheap telephone calls are seen as beneficial local factors.
That geographic and social makeup may be hard to emulate but competition is easier for governments to encourage. If others want to emulate South Korea's performance, it is clear that networks will have to continue to be built -- and the political will found to encourage equal access to them.