LONG DISTANCE

The long distance application for telecom operators has seen a number of growth periods over the last twenty-five years. The first period of strong growth in LD was in developed markets in the 1980s. The second growth period was during the telecom boom of the mid to late 1990s to 2001. For example, the installed base of the US LD application in 1990 was 4.5 million fibre-km; in 2000 the cumulative base had increased to 28 million fibre-km. The accompanying slide comparing cabled-fibre deployments in the long distance and local applications shows annual demand the same from 1993 through 1997. Beginning in 1998 through 2000 long distance outpaced local telecom highlighting the effect of dozens of new long distance network construction.

What factors underlay LD growth?

Whereas historical voice traffic grew at annual rates of around 7%, the transmission of Internet traffic on backbones elevated growth rates to 100% or higher. In the 1990s most of the infrastructure such as routers and servers were located in the US; overseas Internet traffic had to be routed to the US and back overseas. The growth forecasts began to attract investors, who decided to build nationwide and regional backbones to compete with AT&T, MCI and Sprint.
This investment frenzy also produced at least thirty pan-European backbone networks. The combined impact of these installations as well as long-distance construction in other regions contributed to the effect shown in slide 2.

Long Distance Starts to Wane

Unfortunately the timing of such investment neither fully accounted for the influx of new systems using higher bandwidth fibre nor the introduction of WDM systems. All the new capacity that came on stream caused backbone capacity pricing to collapse and made debt servicing for the new network operators untenable. 

LD Developments since the Boom

The cabled-fibre contribution of the long distance segment in developed markets since the telecom boom has been minimal in comparison to the boom years, although there were pockets of construction by operators such as Eurofibre in Benelux, and Global Connect in Denmark. Since the telecom collapse in 2001 most long-distance construction has been in emerging markets. A current example is the decision by three alternative operators in South Africa: Neotel, Vodacom and MTN to share construction costs of a 5,000 km backbone. In the latter half of this decade most cabled-fibre installations in the long distance application are on the behalf of alternative or wireless operators that are building their own infrastructure because the existing capacity is insufficient or they want to reduce their operating expenses by eliminating leased capacity.

LD Operators Prefer WDM Upgrades

Operators with infrastructure in place have preferred to upgrade their capacity through another technological innovation of the 1990s: wave division multiplexing (WDM). With WDM operators can increase capacity by switching out lower bit equipment and increasing the number of wavelengths used to transmit traffic over a given fibre.

The Re-Emergence Of The Local Exchange Carrier

We recall a comment made in 1998--at the beginning of the mania over long distance network construction—by an industry consultant who proclaimed that the “RBOC was  dead.” Those words were certainly premature, as carriers with so-called last mile access are best positioned to offer high-bandwidth Internet and video services.
By the time the telecom bubble burst there still was no discernible movement towards fibre-to-the-home (FTTH) with the exception of NTT and KT, both of whom had begun aggressive FTTH programs with strong governmental support.

Regulators Inhibit FTTH but not FTTx

The primary factor blunting such initiatives outside of Asia was regulatory. National telecom regulatory agencies such as the FCC, intent on insuring a competitive landscape mandated that incumbent/dominant local carriers unbundle network elements to allow competitors to offer DSL over the incumbents' copper lines. Some local operators had been installing fibre; SBC, now AT&T, installed significant volumes of fibre in the late 1990s to extend fibre's reach into the local loop to offer higher speed ADSL service. From 1998 through 2002 Japan and the US accounted for 59% of all cabled-fibre installations in local telecom applications.