Material | August 03, 2007

Discovering Gold in Copper

Telcos around the world are getting their dose of fiber, as they invest billions of dollars to upgrade their networks with optical technology that can handle the higher data rates demanded by new video services. But does this mean that the days of copper are coming to an end? The answer is no, iSuppli Corp. believes.
In fact, there is a strong likelihood that Very High Speed Digital Subscriber Line (VDSL) technology, which employs copper lines to achieve fast data transmission, could enjoy surprisingly strong demand in the coming years.

Copper's demise greatly exaggerated

Questions have arisen over the longevity of copper due to concerns over its bandwidth limitations. With telcos planning to offer video services including multiple channels of High-Definition Television (HDTV), many have expressed uncertainty over whether the old copper telephone line, the twisted pair that has been around for more than 100 years, can meet these demands.

Fiber keeps things moving
In contrast, fiber offers virtually unlimited bandwidth. Because of this, several major telcos—-such as NTT in Japan, Verizon in the United States and France Telecom—have made commitments to replace their existing copper plants with fiber.

But fiber comes at a cost. The expense required to deploy fiber from the central office to the subscriber is considerable. For NTT and Verizon, this cost is mitigated by the fact that most of their deployments utilize aerial transport, i.e. stringing the lines above the ground--sometimes using existing utility poles. Because of this, aerial transport is relatively inexpensive compared to digging new trenches to install fiber.

France Telecom has a similar situation. It can utilize the extensive sewer system of Paris to deploy fiber from the central office to the subscriber, in the case of that major city. However, for most of the world, these alternatives are not available and therefore the cost of fiber deployment from the central office to the subscriber is very high.

Leveraging copper
“In light of these high costs, the telcos would like to milk their existing copper plants to the maximum extent for the longest possible time," said Steve Rago, principal analyst for networking and optical communications with iSuppli Corp. “The telcos' investment in these plants has been extensive over the years, with 1.3 billion copper subscriber lines in use today.

The Asymmetric Digital Subscriber Line (ADSL) technology used now has evolved to the point that the existing copper plant theoretically could support downstream data rates approaching 24Mbits/Sec. over copper loops. With VDSL 2, downstream speeds of 100Mbits/Sec. could be supported, theoretically. However, copper has an Achilles' heel: the length of the loop. The longer the loop, the less bandwidth it can support."

Loops as short as 1 kilometer equipped with the latest ADSL technology can accommodate downstream rates of only 12Mbits/Sec. and upstream rates that less than 1Mbit/Sec.

For many regions of the world, 12Mbits/Sec. would be adequate for Internet Protocol Television (IPTV). But as more HDTV is deployed and more upstream applications come on line, speeds of 12Mbits/Sec. downstream and 1Mbit/Sec. upstream will not be sufficient, iSuppli believes.

Jumping on the bandwidth

Telcos are wrestling with the challenge of how to offer their subscribers high-bandwidth data services, i.e. faster than 20Mbits/Sec. Should they pursue a hybrid ADSL and fiber deployment, migrate to a hybrid VDSL fiber deployment, or deploy fiber all the way to subscribers using Fiber to the Home (FTTH)? Telcos' decisions on this issue could determine their very survival--and that of their suppliers.

There will be no common answer for all subscribers. Variations on the deployment architectures described above all will be deployed, iSuppli believes. The migration from an ADSL to a VDSL solution will be slow, taking several years. Despite this, there are several factors that could generate a positive inflection point in demand for suppliers of VDSL equipment and component.

Catching VDSL
Several telcos today are betting that hybrid ADSL deployments will be adequate for IPTV. If this proves not to be the case, these telcos are likely to rapidly shift their deployments to VDSL.

Furthermore, as upstream applications such as peer-to-peer video sharing gain momentum, the telcos may be forced to transition quickly to VDSL to support the bandwidth required.

For most of the world, hybrid VDSL deployments require less capital spending than FTTH. Hybrid VDSL also has sufficient bandwidth capability, both downstream and upstream, to support IPTV and other applications that will emerge over the next several years.

iSuppli expects VDSL to be a mainstream access technology for the next 10 years at least. Perhaps over the next 25 years it will be replaced by FTTH, but for now, VDSL should continue to generate healthy sales growth for both OEMs and silicon suppliers.
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