Welcome To Wiredville
Fiber-to-the-home networks give builders and developers a competitive advantage--and providers willing to accomodate them.
Source: DIGITAL HOME MAGAZINE
Publication date: 2007-03-12
By Rich Binsacca As Gerald Blessey surveyed the tragic aftermath of Hurricane Katrina in his home state of Mississippi, the developer reflected on the widespread breakdown of basic communications that the storm had caused.
"I began to think about better communications as a necessity, not just as an amenity," says Blessey.
His master plan for Tradition, near Biloxi, was about to get off the boards when Katrina blew through. It suffered an eight-month delay as the Gulf region recovered, but Blessey found a silver lining. He used the time to incorporate the latest generation of communications technology--fiber optics--and position Tradition for the future.
"It needed to go beyond voice, data, and communication," he says, referring to the so-called triple play of basic services. "It's the set of services and offerings beyond those that boosts the value."
Blessey chose fiber-to-the-home (FTTH) networking, which replaces old-school copper wires and co-ax cable with a high-bandwidth, fiberoptic bundle that can carry tripleplay services and more. The plan is to extend those communication pipes to every lot and building on the plat. That's 15,500 residential units of mixed housing, plus all the retail and commercial space within the boundaries of Tradition--and perhaps beyond.
Blessey isn't alone. More developers and builders are learning that fiber communities can be good for business and enablers of the digital home lifestyle. And although building in a fiber community takes planning and partnerships, there are enough projects in the works that builders can start realizing the benefits today.
See The Light
Although Blessey was inspired to add FTTH by a hurricane's wrath, he and other developers and builders are seeing the bigger picture behind the technology. Fiber-optic networks afford them myriad ways to deliver more to their buyers and to stand out from their competition.
"Our primary focus is delivering high-quality services in all areas, and with our fiber network, we achieve that," says Shelby Weimer, vice president of information technology for Tamarack, a new, four-season resort community northeast of Boise, Idaho. "Most people who purchase or stay here are impressed with the bandwidth and services."
Developers and builders that have invested in the technology say FTTH gives them a distinct sales advantage, allows them greater control over service providers and costs, and boosts land and property values.
"It's the best amenity we offer," says George Kiser Jr., managing partner of Kellswater Bridge Development and its mixed-use master plan under way in Kannapolis, N.C. "If you're trying to get into the shoes of a home buyer considering a community with fiber or a legacy network, which way would you go?"
So far, though, such visionaries are in the minority. According to the Portland, Ore.-based FTTH Council, 99 percent of all U.S. residences remain tethered to copper wires and cables. More than a thousand communities, representing about 6 million homes nationwide, are under contract to offer FTTH, although fewer are up and running.
"We're far behind Japan and Korea," says Diane Kruse, CEO of Zoomy Communications in Glenwood Springs, Colo., one of the new generation FTTH infrastructure providers targeting greenfield developments, including Tradition and Tamarack (www.zoomyco.com). Kruse is also chairman of the board for the FTTH Council, which is lobbying Congress and the Federal Communications Commission to enact policies that inspire and enable greater access to the technology. On a domestic scale, she says, "not only do developers and builders see it as a competitive edge, but municipalities are pushing it as an economic development strategy."
Kruse and other FTTH proponents say a variety of factors will drive developers and builders toward the technology. Chief among them are continued proliferation of structured wiring (and, on the horizon, fiber networks) within new homes, insatiable consumer demand for the latest electronics and digital services, burgeoning home-based business and telecommuting trends, and a more competitive housing environment that cries out for valueadded features.
"Builders and developers are deploying FTTH to create smarter homes and communities," says Leif Kolflat, director of corporate marketing for Connexion Technologies in Cary, N.C., another provider focused on greenfield projects, including Kellswater Bridge, Tributary at New Manchester outside Atlanta, and others (www.cnxntech.com). "A revolution is under way."
Perks of Partnership
If there's a revolution fomenting around FTTH, its militia is the growing ranks of relatively small, nimble, fiber-network providers willing to accommodate the nuances of developers and their communities.
When it comes to costs and installation schedules, builders and developers are often at the mercy of legacy triple-play service providers. But they're finding willing, flexible partners among FTTH companies that let them customize everything from financing the network to choosing whose services ride the pipe.
"We elected to own everything on the resort, including the conduits and services, delivered to our headend for us to distribute," says Weimer.
Such an arrangement can be difficult and politically charged when dealing with legacy providers. Not so with Zoomy. Although the provider prefers to own and manage its fiber network-- it will even design and install the network at cost for developments with at least 200 single-family units per year for five years--it's also willing to hand over the reigns to project partners.
"There's an opportunity to serve developers that are looking for a turnkey solution, where we own and operate the network with a full suite of services," says Kruse. "But we also enter into contracts as a professional services company." These contracts provide for design, engineering, and project management, as well as any training the developer needs to manage the network.
For Rockfire at the Lake, a new master plan in Topeka, Kan., developer Karl Capps chose Zoomy to install, manage, and service an FTTH network. But he financed it himself, an investment he'll make back through a larger bundle of services and higher homeowners association (HOA) fees.
"We're in control of the system, content, and costs," says Capps. "We're not reliant on copper and cable companies or limited by their technology and services."
At Tradition, owning the fiber will give the HOA a chance to profit from extra services and applications as they're added to the network's ample bandwidth, says Blessey. He also sees potential to extend the fiber to a 20- mile radius around the community, making it a hub serving 70,000 people--nearly twice the expected capacity at Tradition.
"In addition to being cutting edge technology and a marketing tool for Tradition, it has profit potential for the HOA and the community," says Blessey.
Being able to pick and choose the service providers on the FTTH network is another measure of control that developers and builders can look forward to. Next-generation FTTH companies have little interest in actually providing triple-play services. They'd rather contract with existing voice, data, and TV providers. This way, they can negotiate better terms, offering developers, builders, and residents not only a superior bundle of products, but also the potential to swap out underperforming providers.
"Our service contracts are stringent and guaranteed," says Kolflat. "If [providers] don't meet those standards, the HOA can switch to a better one."
Zoomy takes that concept a step further with OASYS, a proprietary, open-access network that lets homeowners select their service providers beyond even those that were negotiated by the network. "It allows competition among providers and options for us and our homeowners," says Capps. It also keeps Rockfire at the Lake in compliance with a recently enacted Kansas law requiring open access to such services.
The competition also lowers the cost of the bundle delivered to each home in the community. "Most homeowners may not understand the performance differences between fiber and legacy networks in a home-sales conversation," says Kiser, "but they understand saving 30 percent on those services."
Another attractive feature of FTTH: after-sale services. In addition to accommodating a developer's production schedule and then opening the pipeline to competitive services, fiber providers have focused on the need to train salespeople and hand-hold residents to realize the benefits of FTTH.
On-site troubleshooting and concierge services are common, as are line protection packages, wireless hubs and hotspots, sales training, and merchandising aids.
"Having a customer service rep on the premises and each unit ready for residents as they move in makes for an easy postclosing transition," says Lee Hodges, vice president for The Related Group, a high-rise multifamily developer in Miami that contracted with Connexion for five buildings.
800-Pound Gorillas
Though compelling in their approach to the market, most fiber providers so far have managed a small but increasing market share of FTTH deployments.
Connexion, for instance, has contracts with about 85 greenfield communities representing 80,000 units--a number the company hopes to grow to 400,000 by year's end. Kruse puts Zoomy about fifth in line among its competition.
The overwhelming market share leader, at least for now, is an old schooler: Verizon. Its FTTH technology, known as FiOS, is widely deployed. FiOS Internet serves more than 520,000 customers in 16 states, with a target of 7 million users by 2010. FiOS TV is available in 10 states and serves nearly 2 million households, with projections of 15 million by decade's end.
The bulk of these installations are for existing Verizon customers. About three years ago, however, Verizon launched its Enhanced Communities Group (communities.verizon.com) to target greenfield developments, albeit within the telco's regulated service areas.
"Our goal is to align with those of the development community," says Dan O'Donnell, the group's national sales director. "We're tracking development trends and seeking out partnerships."
More recently, AT&T started a fiber program to deliver its U-verse digital services to greenfield developments. To date, AT&T has secured contracts to deliver fiber to more than 300,000 housing units in new master-planned communities, the largest being Bridgeland, a 20,000-unit community near Houston.
Like its competitors, Verizon targets large-scale projects where it can install a fiber network and bundle services at an affordablerate, paid by HOA fees. O'Donnell says the company is willing and able to customize its marketing and service packages, including co-branding, sales center kiosks and demonstrations, and aftersale customer services. He insists Verizon will not limit developers to its own services. "We want a relationship with every developer within our footprint," he says.
Builders, Be Aware
While FTTH is the real deal with a decades-long track record, taking fiber to the porch entails changes in easement ownership, in-house low-voltage wiring schemes, and potential cost hikes for small-volume and individual builders.
"It's really no different than installing any other conduit in a trench," says Capps. "But there are licensing regulations and theestablishment of private [versus public] easements" as part of the entitlement process that enables a fiber network.
There can also be a fair amount of resistance to such network privatization among governing agencies and legacy providers that might prefer the status quo of public-access rights of way maintained by the municipality.
"We sell municipalities on the economic development potential of a fiber network," says Kruse. "And because we offer open access that fosters competition, there are no fairtrade issues."
At Tamarack, when Weimer asked legacy providers to bring their services to his headend so Zoomy's crew could distribute them, he had to convince the phone company and regulators that the network was for the community only, not a harbinger of a larger deployment. "Once they realized we wouldn't offer competitive services outside the resort, they settled down," he says.
Inside a fiber development, builders and installers must plan for the technology. Fiber providers take the cable to the house; from there, they rely on the in-house contractors to set up a wiring package to optimize the fiber's bandwidth.
Home-run structured wiring, therefore, is required, sometimes with a minimum number of multiport outlets in each room. "It's a reasonable requirement," says O'Donnell, one that typically costs $300 more than a daisychained layout. "We provide specifications and guide the installation to ensure the performance benefits of the fiber."
That performance would be enhanced even more with an end-to-end fiber network that extends inside the home. Though in its infancy, fiber-inthe- home schemes for high-frequency digital signals promise to fulfill the true expectations of today's toys, and enable future evolutions or technologies of those devices and services (see "Home-Spun Fiber," below).
And builders should know that building in a fiber community can mean more money, but also higher returns. While firms such as Zoomy and Connexion are willing and able to finance a turnkey FTTH solution for new developments when it suits their business models, the cost to a smaller builder might be prohibitive, at least for now.
Kolflat estimates a per-lot installed cost of about $2,000. Industry experts warn of costs that go beyond the scope of most proposals and upfront capital expenses, namely recurring operating costs, including access and service management expenses, licensing fees based on activity, and monthly updates to electronic programming guides.
That said, the FTTH industry often cites research that indicates an increase up to $7,000 in per-lot value in communities with FTTH, and a 30 percent return on investment for developers within five years of deployment. RVA Render & Associates, a research and consulting firm in Tulsa, Okla., says home buyers will pay as much as $4,300 more for a home with fiber.
"We made a seven-figure investment, but it will easily increase lot value by $4,000 to $7,000," says Capps.
Future-Proof
FTTH providers point to several oncoming technologies, applications, and services, not to mention lifestyle trends, that will drive the market for fiber networks over the next 15 years.
"There's demand for faster access to information and entertainment," says Kruse. "HDTV is a bandwidth hog, and interactive IPTV and the doubling of Internet use every year is something networks can't support today."
Predicting the future is usually a fool's venture, but that's not what FTTH providers are proposing. Rather, they hope to encourage and inspire developers and builders to plan for the unknown.
"No one knows what's coming," says O'Donnell. "Plan for that."
HOME-SPUN FIBER
By putting fiber optics in the wall, builders undo the last broadband bottleneck.
That high-definition television you're watching? It's not really HD, at least not the way the manufacturer might claim. That's because the signal that copper and co-ax wiring takes from the curb--or even the optical network terminal of a fiber network--can't completely handle the 1080i (or 1080p) mode that the latest HDTVs were designed to deliver.
"The weakest link is the local, in-premise environment," says Brent Ware, CEO of Tenvera, a fiber-in-the-home (FITH) startup in Franklin, Tenn. (www.tenvera.com). "The only thing that hasn't been done is to finish off the promise of fiber optics with an end-to-end solution."
Designed to manage highfrequency signals while structured wiring focuses on products at the lower end of the scale, Tenvera's FITH network is built for residential settings and installed by company-certified electricians or systems integrators. Ware claims it installs 70 percent faster than home-run structured wiring; the pre-terminated fibers run from a hub to outlets that enable a variety of devices, including HDTVs and personal computers.
The network is scalable, letting builders rough-in a larger backbone and buyers choose how much to connect and grow the network's capability. That said, Ware admits the cost is probably prohibitive on projects of less than 5,000 units, estimating an in-house system to be "two or three times" the expense of a structured wiring install.
To date, Tenvera is among the only companies offering a residential, FITH network. It is targeting high-end homes, primarily though large-scale condominium developers, but also greenfield master plans, and is somewhat shadowing the efforts of FTTH providers to create synergy. Ware expects to rake in $1 billion in revenue within 14 months.
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