According to a recent report from Deloitte, “deep fiber” is critical to support the evolution to 5G. There’s truth in this view—I think it’s clear that fiber is critical to 5G success. The questions are whether “deep fiber” is the kind of fiber that’s critical, whether fiber is a sufficient guarantee of 5G, and what might get both fiber and 5G to where they need to be.
The first of the questions is two-part—is the term correct and is fiber critical. The first is easy to answer based on the report itself. Deloitte departs from normal practice by saying that “deep” means “toward the edge” when normally it’s taken to mean “toward the core”. If we substitute some terms here, we could paraphrase the report by saying that “the United States is not as well prepared to take full advantage of the potential [of 5G], lacking needed fiber infrastructure close to the end customers, at the network’s edge. The second, I think, is also easy.
Anything that proposes to increase access bandwidth significantly is going to have to rely on fiber closer to the network edge. One of the elements of 5G that operators tell me is most interesting to them is the notion that 5G could be used in wireline deployments as a kind of tail connection to fiber-to-the-node systems. In that role, it would replace copper/DSL. Whatever happens to 5G overall, I am hearing that this element is going to move forward.
With a credible high-performance tail connection, FTTN deployment becomes a lot more sensible, and that would of course drive additional fiber deployment. However, fiber to the prem (FTTP, usually in passive-optical network or PON form) is arguably the logical strategy for deployment of consumer and business broadband to any area where CATV cable is not already in place. Even in some CATV-equipped areas, FTTH/PON might be required for competitive reasons (or not, as we’ll see). Thus, edge fiber doesn’t depend on 5G as a driver, though unquestionably it would benefit.
However, edge fiber at the edge is a necessary condition for 5G. Is it a sufficient condition, meaning that nothing else matters? Probably yes in the limited sense of 5G as a tail circuit for FTTN, but not for all the rest. In fact, it’s not clear whether 5G is really the driver here or just radio tails to FTTN. It’s the fact that operators associate that mission with 5G that makes it a 5G mission, not the technical requirements. That’s why the rest of 5G isn’t pulled through by the FTTN tail mission, and why we still need broader 5G drivers for the rest.
If all this is true (which I think it is), then it’s really the need to deploy more edge bandwidth—mobile and wireline—that’s the driver for more fiber. Is that the only driver? I don’t think so. At the same time as we see an increased need for edge bandwidth, we also see a growing need for the deployers of that bandwidth to monetize that which they are doing. That’s where carrier cloud, edge computing, and process interconnection come along—all topics of recent blogs.
Access deployment is dominated by consumer broadband. Consumer broadband is dominated by asymmetrical bandwidth needs—more upstream toward the user than in the other direction. Process interconnection tends to be symmetrical in terms of its requirements, and because latency in a process connection impacts QoE broadly, it’s more important to avoid it. I think process interconnection will be a more significant force in fiber edge deployment than consumer broadband, and certainly both will be more than enough to drive a lot of new fiber at the network’s edge or very near to it—in the process edge.
The main point of the Deloitte report is one of the main report headings: “The current wireline industry construct does not incent enough fiber deployment.” There, they have a point. I’ve blogged a lot about the declining profit-per-bit problem, which means there’s a problem with return on infrastructure investment. Even if you don’t believe my arguments, it’s hard to argue with the fact that network equipment vendors (except price-leader Huawei) have been facing difficult quarters revenue-wise.
Could opex savings from infrastructure modernization help? The report notes that operations expenses are typically five to six times capex; this aligns fairly well with my surveys that show that on the average operators are spending about 18 cents of every revenue dollar on opex, another 18 cents returned as profits, and the remainder as operations and administration. They suggest that modernization of legacy TDM networks, which are expensive to operate, has a lot to do with that. My surveys don’t bear this out; only about 30 cents of every revenue dollar are associated with “process opex” meaning the cost of network operations and network-related administrative costs, and only about four and a half cents are pure network operations. A TDM-to-packet transformation would therefore not impact much of the total OAM&P costs at all.
I’m a believer in reducing opex, and if you looked at the total process opex pie (30 cents per revenue dollar) and could reduce it by about half (which operators say is credible) you’d almost equal the total elimination of capex in terms of bottom-line impact. The problem is that most of the savings come from service-level automation, not from improving network technology. As a fiber driver, I don’t think modernizing out of TDM cuts the mustard.
Regulatory policy may hold the answer, according to the report, and I agree at the high level but disagree on what policies might help. The report talks about fairly esoteric measures like encouraging cross-service deployments. In a related section, it proposes improving monetization by encouraging OTT partnerships or even joint ownership of OTTs. I think the answer is a combination of those points. If you want operators to deploy more fiber, you make it profitable to do so. If you want to make it profitable, you wring out operations costs through service-layer lifecycle automation, and you eliminate barriers to Internet settlement for QoS and traffic handling.
I think there’s a lot of good stuff in the report, but I also think it misses a major truth. Any large-scale change in network infrastructure is going to require large-scale benefits to justify. That’s true of edge fiber and it’s just as true of 5G. We are forever past the phase of networking where a technology change can be seen as self-justifying, meaning it’s the “next generation”.
Fiber at/near the edge is, I think, a given because there are plenty of things that are driving it, and those things in turn have clear benefits. 5G is still proving itself on a broad scale, and it’s likely that its fusion with FTTN is going to be essential in making it a success.