Answer: The unbundled market for communications service providers in the U.S. is unique in the world. There are over 1,000 established service providers across the country. And also, hundreds of service providers are in a position to compete for broadband subscriber relationships.
As a result, the U.S. has seen the greatest amount of fiber optic deployment imaginable—from small businesses to large corporations, from mansions to cell towers, and in both hot and cold environments. We have over 800 fiber optic customers in the U.S. alone. Most of them are capable of delivering Gigabit services today. Some are selling Gigabit services to residential customers as well as business customers.
The biggest drivers of fiber optic deployment in the U.S. today are competitive advantage and strategic transformation, where service providers see fiber optics as the most cost-effective technology to meet future service demands. The main challenges revolve around the regulatory framework for service providers, which remains unclear. The Federal Communications Commission is still in the midst of transitioning from the decades-old Universal Service Fund (USF), focused on subsidizing voice services from service providers, to the new Connect America Fund (CAF), which plans to offer equity incentives for broadband deployment.
Q: Calix has been involved in successful rural deployment projects in the US. What made these successful, and what are the differences and similarities compared to European projects?
A: Calix has been involved in projects through various types of service providers, ranging from traditional carriers and competitive overbuilders to cable operators, electric cooperatives, and municipal entities. Virtually all of these projects achieved, in part, the success of becoming a fiber-enabled community thanks to community support—from local government and businesses to its citizens.
This brings us directly to the key contributors to larger fiber business cases: the combination of best-in-class service and time to market. Wherever European projects have been able to leverage this community support, they have been successful. However, some rural European fiber projects have stalled because they lacked a dedicated local service provider option for deployment. As a result, they rely on a large, incumbent carrier to prioritize their efforts, which is often not available. In other cases, regulatory requirements, such as difficult access to high pole fixing fees or taxes on right-of-way, add complexity to the implementation model, challenging the fundamental principles of the business model.
Q: Who are the fiber optic leaders in Europe? What could other European countries learn from their markets and attitudes toward FTTH?
A: European fiber optic leaders appear to have emerged from three distinct areas. The first group of service providers has emulated the US model, with a common foundation of community support. These have quickly capitalized on high adoption rates and ease of right-of-way, resulting in positive business returns. The second group, often emerging in countries where right-of-way issues can be more challenging, has focused initially on reaching multi-dwelling units (MDUs) and hospitality markets. This has minimized their exposure to widespread regulatory hurdles while they concentrate on marketing and serving their target markets. The third group has emerged in Eastern Europe, which benefits from greater regulatory flexibility, and has found success largely by focusing on high-value businesses and residential customers willing to pay for a superior fiber optic experience.
The lesson for other European countries is clear: FTTH thrives in markets where regulatory hurdles are low and communities of interest can easily organize and make their interests known to local service providers. These two elements together form the basis of a promising business model and easy deployment.
Q: The US National Broadband Plan is supposed to deliver 100 Mbps to 100 million Americans by 2020. However, actual deployment figures are falling short. What should the government do regarding education, legislation, and stimulating entrepreneurial activity? What do you think should be the role of European policymakers in stimulating the rollout? How can they support this with direct action?
A: Reaching 100 million Americans with 100 Mbps of bandwidth requires deploying fiber optics in suburban and urban areas, which have been served primarily by large fiber access service providers with limited aspirations. The US Rural Entity Broadband Loan Program has been very successful in encouraging fiber access deployment by offering favorable loan rates that allow service providers to invest strategically with a long-term view of their investment. Another best practice in the US has been to complement fiber optic access investment commitments with matching funds. Governments that take an active role in facilitating right-of-way issues, such as granting easy access to utility poles and expediting environmental approvals, will pave the way for fiber optic success. European regulators can learn from these same policies that address the fundamental economic challenges currently discouraging service provider investment.
Q: How do you see the future of fiber optics in Europe?
A: We are optimistic about the worldwide rollout of fiber optic access. The trends driving the need for fiber optics are clear, and it's here to stay. Mass fiber optic deployment is going to happen in Europe. Competition for advanced services will either develop and stimulate growth or crush laggards. Furthermore, governments are realizing that a country's broadband infrastructure is as fundamental to its ability to compete on the global stage as its other strategic infrastructures, such as transport or energy. In fact, a country's broadband infrastructure can be the key factor in improving its other strategic infrastructures by increasing efficiency or displacing them. The promise of fiber optics is too powerful to ignore—it's only a matter of time.
Q: What role does FTTH play in your future market strategies?
A: Our business is based on adapting to service providers to help them transform their copper networks to fiber optics, and in doing so, transform their businesses to become the broadband service providers of choice for their subscribers. We believe these transformations are fundamental and essential to their success. Calix, as a company, focuses solely on access; it's easy to see that FTTH is fundamental to our long-term market strategy.
