ICON BROADBAND TECHNOLOGIES

ICON BROADBAND TECHNOLOGIES

A Division of Icon Engineering, Inc. 6745 BELLS FERRY RD. WOODSTOCK, GEORGIA 30189 TEL 770-592-9797 FAX 770-592-7363

A Full House (FTTH) Beats HFC Every Time By Michael Bowers, P.E. Principal Icon Broadband Technologies www.IconBroadband.com

This whitepaper has been prepared for the Fiber to the Home (FTTH) Council and presented at the FTTH Conference in Orlando, October 2004.

TABLE OF CONTENTS
A FULL HOUSE (FTTH) BEATS HFC EVERY TIME. ................................ 2 INTRODUCTION ....................................................................................2 Basic ConceptsAnalog vs. Digital....................................................2 HISTORICAL ........................................................................................4 HFC..............................................................................................4 FTTH ............................................................................................6 HOW THEY WORK .................................................................................7 FTTH ............................................................................................7 HFC............................................................................................ 11 WHERE EACH TECHNOLOGY IS HEADED ..................................................... 18 FTTH .......................................................................................... 18 HFC............................................................................................ 21 WHAT THEY COST TO BUILD AND OPERATE ................................................. 22 SUMMARY ........................................................................................ 32 INDEX ............................................................................................. 33

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A Full House (FTTH) beats HFC every time.

Introduction
This paper is designed to provide an introduction to the concepts and technology associated with HFC and FTTH technologies. It is not intended to provide in-depth coverage of any single topic, but rather to provide a brief overview, which will hopefully assist non-technical managers and elected officials in making hard decisions about expending monies and supporting their constituencies.

Basic ConceptsAnalog vs. Digital

Having stated that this paper will be non-technical in nature, we will start with a brief technical discussion, which goes to the core of the differences between HFC and FTTH and the type of signals or information that is transmitted over each type of network. The significance will be discussed in subsequent sections. An analog signal can have any value. For technical reasons when analog signals are discussed, they are usually presented in the context of sine waves. A sine wave (Figure 1) is a mathematical function which varies between minus one and one. If you have ever watched a tuning fork or a bass guitar string in motion, its movement follows a path back and forth that is sinusoidal.
signal

time, sec

Figure 1: Sinusoidal signalIf you were to look at the signal at any number of different locations along the time scale (x axis), you would see that each has a different signal value (y axis) corresponding to the value being transmitted.
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Electrical signals formed into combinations of sine waves can be used to transfer sound, color or brightness information that could be converted into, for example, the picture on a television set (more about this later under HFC video). Electrical signals sent over distances lose strength and begin to change slightly in form (Figure 2). In our example where the information was used to construct a television picture, the changes would appear as random dots or snow on the television set. Equipmentamplifiers-can be used to boost the signal in strength back to its original level, but this amplification also boosts the strength of the snow. Since the analog signal can have any value, there is no way to remove the snow and return the signal to its original quality.

Figure 2: The original signal degrades (gets small and irregular in shape) as it is transmitted from the location where it was generated to the location where it will be used.

Digital signals differ from analog signals in that they can only have certain values. Take the example of the television signal which changes slightly causing snow to appear in the picture. The digital signal starts to change in appearance just as the analog one did, but it does not create the same problem. Why is that? Because the digital signal can only have certain values, we can correct it back to its original form (Figure 3). Thus digital signals can be amplified and be just as good as the original signal. More about all of this later.
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Regenerated Data looks as good as original

1 0

Decision Threshold

1 0

0 value crossed decision threshold and could be read as 1

1 0

Decision Threshold

1 0
Possible Data Error

Figure 3: A digital signal degrades as it travels farther from the source, but can be recreated to be just as good as when it was generated until the signal crosses a decision threshold. At that point the signal is lost.

There are limits on how far the digital signal can be corrected. If the digital signal can have only the values 0 and 1, a zero can reach up to one-half and still be read as a zero. One-half is the point, or decision threshold where it impossible to tell whether the original value was a zero or one. If the signal degrades to the point that a zero is read as 0.51, it will be read as a one and the original data will have been lost. This is why digital video signals look excellent even when the signals are very weak. It is also why when this decision threshold is reached, a digital video transforms from excellent to unusable.

Historical
HFC
HFC (hybrid fiber coax) was originally designed to transport television channels to many homes without home mounted antennas. It started as a method of providing cable television to rural areas and places where reflections from many tall buildings created problems with television reception. Large antennas where used to capture strong signals from local stations which were then sent over coaxial cable to as many homes as could be served. The signal degraded in strength and quality as the distance from the antennas increased (resulting in increasing amounts of snow and other viewing troubles). Because the signal was reamplified many times, it gradually became so distorted that the picture produced was not marketable.

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Fiber optic cable was introduced in the early 1990s because technology had advanced to the point that the same signals carried over coaxial cable could be generated economically with lasers. These signals could now be transported within fiber optic cable in which the signal degraded at a much slower rate than it does in coaxial cable. The combination of the television signal carried over light to an intermediate location (node) where the signal is returned to an electrical signal and carried over coaxial cable (copper) to the home is the basis for the name hybrid fiber coax (Figure 4).

Figure 4: While coaxial cable consists of an outer protective jacket and various shielding and insulating materials, the signal transmitting portion at the heart of coax is the copper wire at the center (10 times magnification).

Because the technology was developed to send television signals to homes with only a limited amount of information sent back from the home to the antenna end (now called the headend), the signal carrying capacity or bandwidth in the downstream direction (headend to home) was designed to be much greater than the upstream carrying capacity. This attribute has carried forward to the current state of HFC.

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The primary method by which HFC systems have increased their capacity has been through increasing the amount of bandwidth over which signals were carried. Over the past twenty years, the bandwidth has increased in steps from 216 Megahertz (MHz) to the current 870 MHz with a corresponding increase in the amount of content that may be transmitted. In the last few years, digital techniques have allowed digital signals to be superimposed on a primarily analog transmission method that allows more content to be transmitted within the same amount of bandwidth.

FTTH
HFC technologies have more similarities than differences. On the other hand, FTTH (Fiber to the Home, also called FTTUser or FTTPremises), technologies share the fiber and laser basis of the HFC system, but utilize different protocols and technologies for transferring data. The various FTTH vendors have as many differences as similarities between their various products. The major variants are built on protocols for transferring data from the simplest, Ethernet, to the more complicated but traditionally more robust, asynchronous transfer mode (ATM). The basis of all FTTH architectures is digital. FTTH was developed independently by a number of different companies as a means to transport all of the major data streams voice or telephone, data and Internet, and cable televisionover a single transport mechanism, fiber optic cable. A strong impetus was the Telecommunications Act of 1996, with its emphasis on increased competition. Conversely, the incumbents opposition to major investments in markets where they have monopoly or near monopoly status, has led many municipalities to adopt this technology on their own. The first municipal-wide deployment of FTTH did not occur until 1999, but more and more cities, their utilities and other entities are employing these networks as the prices of equipment drop and the capabilities increase. One irony of most FTTH deployments is the use of what is called a radio frequency (RF) overlay for the delivery of video. In essence the technique takes the same video used on comparable HFC systems and transmits it over fiber all the way to the home. This was done because the technology for providing digital video to many homes

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simultaneously was not entirely ready. These problems have been mostly worked out (more under IP video).

How They Work

FTTH
As the name implies, fiber to the home uses fiber optic cable (Figure 5) to transmit signals from the source, usually the headend, to each home or business. Each single mode fiber is made of glass about 125 microns in diameter (a micron is one-millionth of a meter), which is about the thickness of a human hair. The properties of the glass vary chemically so that light shined into the center of the fiber at one end stays within that fiber until it reaches its destination, either a box at the end users home (sometimes called an ONT, Figure 6, or optical network terminal) or at some other piece of electronics within the outside plant (the fiber and electronics between the headend and the end user).

Figure 5: Fibers are grouped into color coded tubes containing twelve fibers each (left at 7 times magnification). Individual fibers (30 times magnification to right) are also color coded for identification.

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Figure 6: ONT Mounted On Homethey often have the appearance of a telephone company box serving the same function as a transfer point between the utility operated network and the homeowner operated appliances.

The signal loss through fiber optic cable (decrease in strength as the light travels farther and farther from the headend) is typically about one percent of the loss in coaxial cable (used in HFC). While this rate is much lower than in coaxial cable, it still limits the maximum distance from the headend to the end user. Any light source could be used to generate the signals used in FTTH, but to maximize the number of customers that can be served (or the maximum distance from the headend at which a user can receive a viable signal), lasers are commonly used. Lasers and other light sources can be designed to provide different wavelengths of light. There is a direct relationship between frequency and wavelengththe length of a single wave times the number of waves per second or the frequency, equals the speed of light. The speed of light varies depending on what it is passing through (fiber optic cable in this case), but is approximately constant. Because the
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absorption properties of fiber optic cable glass vary with wavelength, some wavelengths will travel farther than others. For this reason several wavelengths, most notably 1550, 1310 and 1490 nms are commonly used in FTTH networks. Signal transmission of voice and data information is normally sent as a series of 0s or 1s. If every hertz transmitted could be read as either a zero or one, the potential data rate would be equal to the light frequency--over 100,000 gigabits per second of data throughput (Figure 7). This highlights a major difference between FTTH and HFCdata transport rates for FTTH are not limited by the physics of data over fiber, but rather by the electronics currently in use. In this regard fiber optic technologies are often called future-proof.

Figure 7: Light travels at a constant speed through fiber. If the wavelength being used is known, the frequency can be easily calculated.

The electronics at either end of the fiber differ in the type of network technology employed and in other details. The most common method of differentiating between types of FTTH networks is the somewhat artificial differentiation of active and passive or PON (passive optical network). Active systems have powered, electronic devices between the headend and end user; passive systems have none. Passive optical networks are so named because they have no electronics (active devices) between the headend and the end users homes. In the most common variation, a single fiber optic cable and fiber signal or PON carries the network information for up to thirty-two homes or businesses. At an aggregation point (Figure 8) in the neighborhood to be served, the fiber is split with one fiber entering the
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splitter and thirty-two coming out, one connecting to each home. Again in the most common variation, 622 Mbps (million bits per second) of information is split between a maximum of thirty-two users (with a reduced 155 Mbps upstream). The maximum distance from the headend to the end user varies based on the optics or laser used, but is usually in the range of five to seven miles. If the network must serve users farther from the headend (more than seven miles), electronics must be placed in remote locations in addition to the central office or headend. Several vendors offer variations on this type of network. The most common type is called BPON which is based on ATM (asynchronous Figure 8: While PON systems do not have transfer mode) protocols. active devices in the outside plant, they ATM was developed for often split the fiber from one in to thirtytwo out. the telephone industry and is characterized by low levels of jitter (data arrives on a regular basis making it ideal for voice transmission). Based on the total amount of data a PON system can handle, the limitations for maximum bandwidth are the following: The maximum bandwidth that can be delivered if every customer is provisioned identically is approximately 20 Mbps downstream and 5 Mbps upstream The maximum bandwidth available to a single customer will be when only one user is used on each PON (622 Mbps down/155 Mbps up) Most HFC and FTTH networks are oversubscribed. Oversubscription takes advantage of the extreme unlikelihood that all customers will be using the network at the same time allowing for every customer to

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have more bandwidth than would be predicted by dividing the total available bandwidth by the total number of users. Using oversubscription each user might easily be given several times the above calculated bandwidth with little possibility that anyone would be shortchanged. Active systems are based on Ethernet protocols. Instead of using splitters in the outside plant, active systems use concentrators which require power. These devices are analogous to Ethernet switches used in conventional local area networks. Unlike PON networks, the networks are more modular. Additional switches can be added to existing concentrator points to increase the capacity of individual areas of the network. Typically end users will have 10/100 Mbps data ports or even gigabit connections to the headend. The advantages of this type of system are that the distance from the headend to the end user can be much farther than in PON systems. Because the concentrators are located near the end user, the return path optics (lasers) can be less expensive than those used in PON systems. Both types of systems are designed to handle voice, data and video. After an ONT is connected to the home, all vendors products have provisioning software that enables new customers to be added or changes in the services offered without additional trips to the home. Currently most new systems still use an RF overlay for video (discussed further under HFC), but IP video (individual video channels sent to one or more homes) is serving an increasing number of homes in Grant County, Washington. Another major deployment utilizing IP video is scheduled to begin construction shortly in Provo, Utah. Major improvements have been made in all of the vendors FTTH products, but kinks continue to be worked out in the area of IP video, backup powering for VoIP (Voice over IP), standards for third party vendors, and provisioning of bandwidth. A deployer will do well to look critically at his or her needs and carefully at each FTTH vendor before making a selection.

HFC
To understand how HFC works, it is helpful to understand how traditional television works and how HFC was developed to allow for transmission of analog cable television signals. The changes that have

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been made to incorporate digital cable TV, voice and data transmission can then be understood and why the technology developed as it has. It is also important to understand that in most fiber to the home deployments, the cable signal is sent using the same techniques and even some of the same equipment utilized in HFC systems. To simplify the discussion, we will begin by examining how a black and white picture is developed. Traditional television picture tubes have a fluorescent coating. When a beam of electrons is focused on a point on the coating, that area will glow and then quickly fade to black as the beam is moved. If the beam is moved rapidly across the screen, dropped slightly and the process repeated many times, light and dark areas can be created based on how intensely the beam is focused. The standard television signal creates 480 visible horizontal lines across the television screen, which are repeated thirty times per second. Each time the 480 lines are created (called a frame) a photographic image composed of the light and dark areas is created. Changes in the signal modify each frame so that changes in the images are made. At this rate of change, the human eye perceives the action as continuous. The total of 480 lines times 30 frames per second equals the approximately 16,000 waves formed each second. Given even this simplified background on analog video, it is still easy to understand conceptually how an electronic signal varying in strength could be used to adjust the strength of the electron beam and create the light and dark areas on the screen (Figure 9). For standard video transmitted in the United States and for various technical reasons, the actual frequency utilized is 15,734 Hertz (Hz). This means that every second, 15,734 waves formed into a continuous signal are transmitted, each one corresponding to how bright the picture is on one of the lines on the video screen. For our purposes we will simply accept that sound and color can be added to the signal in a similar manner.

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Figure 9: Analog video creates a varying signal of the intensity of light which corresponds to a line drawn on the television screen. The lines are repeated approximately 480 times each one corresponding to a portion higher or lower than the one shown.

The beauty of analog cable television is the way in which many channels can be transmitted at once. While it is easy to understand how one movie or channel can be transmitted in 15.73 kHz (the frequency actually used), it is conceptually more difficult to understand how many signals or channels can be transmitted at once, called broadcasting. Our discussion will be qualitative, designed to provide only a conceptual appreciation of the process. The first concept to understand is that it would not be possible to simply add together or combine 80 or more analog channels, each transmitting similar information at the same 15.73 kHz rate. The strong signal information at one channel would simply add to the strong signal information on another. With enough channels combined the total signal would create an all white or all black screen. To send

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all channels at once (to broadcast), various changes to the original signal must be incorporated and when received, that information video signal must be returned to its original form. The first step in this process is to convert a single signal into a different format. The method uses fundamental mathematical formulations applied to radio frequency (RF) signals to generate an entirely new signal. The principal relates to the mathematic properties of sines and cosines and is applied in the following way: A carrier frequency, for example, a continuous sine wave repeating approximately 259 millions times per second (259 MHz is the frequency of channel 30 on a standard cable transmission) is multiplied by a second signal The second signal is the one we are interested in viewing, (our video picture at 15.73 kHz) The resulting signal has been shown mathematically and practically to consist of many narrow bands of frequencies surrounding the carrier frequency. Each band is a multiple of 15.73 kHz with spaces between each band. The process is called amplitude modulation. While theoretically these bands will surround the carrier frequency to include all possible frequencies (0 to infinite cycles per second), practically the information required to produce a high quality image on the users television can be held within a 6 MHz bandwidth (for channel 30, all of the information required to produce the picture is included between 258 MHz and 264 MHz). Since all of the information required to send a single channel is incorporated within a 6 MHz band, other channels can be produced in the same way using different carrier frequencies. The entire broadcast signal is produced by adding together all of the individual bands, producing a combined signal encompassing the information for all channels. The final step in the process occurs at the residential home. While we have created a composite signal which somehow includes all of the original channel information, it would be of little use if we could not recover the original information. This is done in the following manner: When a user tunes to a particular channel, filters are used to remove the entire signal except for the 6Mhz band incorporating the channel we are interested in viewing.

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The same mathematical relationships between sines that created our combined signal can be used to recreate the original signal. It can be shown that by multiplying the filtered signal by the carrier frequency, two sets of signals are produced, one of which is the original 15.73 kHz signal that represents our television channel information. HFC was originally designed as a means of providing video signals to residences. For this reason, the transmitters which send the signals to the headend had limited upstream capacity, encompassing the transmission band up to 40 MHz. The rest of the capacity--from slightly greater than 50 MHz up to the maximum frequency broadcast-is used for downstream (headend to resident) communications. This method of organization of the transmission spectrum has not changed. There are several important implications relating to all HFC transmissions and FTTH cable (RF video) which result from this method of transmission. HFC transmission, whether for analog or digital signals, is divided into 6 MHz channels. The most modern deployed HFC systems have a spectrum of 870 MHz, of which approximately 800 MHz is devoted to downstream signals. Divided into 6 MHz slices, this means that the maximum number of downstream analog channels which can be transmitted over a current HFC system is about 135. On the upstream transmission path some of the bandwidth is associated with operating the system. Taking that limitation into account, only about 20 Mhz is available for any type of upstream communication or data. FTTH systems delivering RF video are limited in the same way. While upstream communications is usually handled digitally over other communication wavelengths and is not limited like HFC, the maximum downstream capacity for analog channels is limited to the same approximately 135. To this point we have discussed only analog signals for video. In recent years the total number of channels which can be broadcast has been increased by encoding the video information into a digital format, which is then combined or modulated onto the carrier signal for transmission. These techniques continue to evolve. Currently ten or more digital channels can be placed within each 6Mhz analog channel bandwidth. There are two issues relating to how many digital channels can be placed into a single analog channel spacing. The first deals with digital compression techniques. These include:

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limiting the information sent to that which is most perceptible to the eye; sending only the information that changes from frame to frame (a frame is one entire picture), and maintaining previous frame information which is helpful in generating future frames when there is foreground movement on a static background. The second issue deals with how the final digital video information is transmitted within the 6 MHz channel spacing. The latter topic is also important in data transmission and will be considered in more detail. The issue of digital video compression will not be discussed further. Digital data transmission is an important part of current HFC technology. It has only developed within the last ten years and is continuing to evolve. An understanding of the methods used, however, allows one to understand the limitations of HFC systems. Digital data transmission conforms to the same basic principles that control the HFC video process. In the video case a series of zeros and ones representing a television picture are combined into an irregular sine wave signal. Since the mathematical value of a sine varies from 1 to +1, the maximum value (+1) might be the symbol one and the minimum value (-1), the symbol zero. This data is then multiplied or modulated onto a carrier signal which confines all of the necessary information into a 6 MHz channel. When the information reaches the end user, it is reconverted to the original video signal. The entire process is conceptually the same as with analog video with one exception. In the analog video case, a continuously variable signal represents how light or dark the screen will be. In the digital case, ones and zeros representing a compressed image are strung together into a sine wave-like signal which is modulated onto a carrier signal. The method just described when used to generate a data signal is called BPSK (or biphase shift keying). It is the simplest method of data transmission used widely in HFC systems providing a maximum one bit of information transferred for every hertz of bandwidth in the channel (6 Mbps per channel). The technique works well but uses the available bandwidth poorly (the efficiency of transmission is only one bit/hertz). More complicated transmission methods utilize different levels of the signal to allow more than one bit per hertz. Examples of this are QPSK

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(2 bits per hertz), QAM-16 (4 bits per hertz) and QAM-256 (8 bits per hertz). This increase in throughput is accompanied by more complicated equipment and the requirement for a better signal (higher ratio of signal strength to noise) for the system to work properly. Various protocols (DOCSIS) have been developed for HFC that specify the method of dividing the bandwidth into data channels and the methods of compression to be used. Common parameters for version 1.1 (most common) and the deploying 2.0 are shown (Table 1).

Table 1: HFC Data Bandwidth Availability Direction Channel Size, Modulation MHz Method DOCSIS 1.1 Upstream Downstream DOCSIS 2.0 Upstream Downstream

Data Transmission Rate, Mbps/sec 10.24 30.3/42.9 12.8 30.3/42.9

3.2 6.0 3.2 6.0

16-QAM 16-QAM/256-QAM 64-QAM 16-QAM/256-QAM

DOCSIS 2.0 added a number of improvements other than data rates. The overall data throughputs are spread over all users on each individual node (the node is the location where the signal is converted from being transmitted over fiber optic cable to coaxial cable). The number of customers served by each node varies widely with the age and bandwidth of the system, but approximately 250 homes served per node is typical. While there is considerable spectrum available on the downstream direction for data transmission, the available bandwidth upstream is very limited. Since that bandwidth is split among all users, the dedicated bandwidth available to each user is only a fraction of that available overall (Table 2).
Table 2: Dedicated Bandwidth Available per User Customers/Node Maximum Bandwidth Maximum data Available rate/Customer (Approximate) Mbps Downstream 100 20 MHz 0.8 250 0.32 500 0.16 Bandwidth Available using Dialup Modem (for comparison)-- 0.056 Mbps

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As bandwidth requirements requiring high speed (upstream and downstream) symmetric bandwidth are rapidly developing, HFC systems will face increasing problems meeting the demand.

Where Each Technology is Headed

FTTH
Fiber-to-the-Home is a new technology compared to HFC. While HFC developed as a television delivery mechanism, FTTH implementations arrived via the telephone, data and cable industries. Different vendors products draw on techniques used in the particular industry from which their developers were trained. Each one continues to make changes to improve on their delivery mechanisms in other areas and to meet the demands of new technologies. The one area where historically HFC has had an edge over FTTH has been in first cost. While neither product has a significant advantage in headend equipment costs, HFC has been significantly cheaper for the outside plant construction. This historical advantage has now disappeared. Four years ago, fiber optic cable manufacturing capacity was inadequate and prices were very high. Today prices for two fiber drop cable are under $0.20 per foot and significant count backbone fiber can be bought for under a dollar per foot. Another area where costs have dropped significantly is in fiber splicing. For a single fiber system (one fiber per home), on average more than two splices are required between the headend and the residence. Fusion splicing, where the ends of the glass are melted and fused together, is the method of choice because the resulting splice loses very little of the signal. Four years ago splicing costs averaged over $50 per splice but have dropped approximately forty percent since that time. Probably the biggest drop of all in cost has been in the ONT, the Optical Network Termination. In HFC systems, the entire signal stream is brought into the home over a single coaxial cable. If the customer receives only analog video, there is no other hardware. Set top boxes for digital cable and cable modems for data reception are only added if the customer purchases additional services.

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FTTH on the other hand has the ONT or box on the house which for most vendors has been designed to receive all services. It must have connectors for voice, data and video and often the computer capacity to transform the transmitted signal either to or from the native networking protocol used by the FTTH vendor. Back-up powering must be provided if traditional voice service is to be offered. If the ONT is attached to the outside of the home, the box must be environmentally hardened (resistant to weather) and the electronics must be capable of enduring extremes of temperature and humidity. If the ONT is mounted indoors in the home, the operator will be unable to service the equipment unless the homeowner is available. Given the requirements for the ONT, it is no wonder that the prices have been high, starting at well over $1,000 per home passed (year 2000). The news, however, is not all bad. The municipality or other entity providing service would normally install the outside plant gear during build-out. The service drop and ONT would only be added when the resident wished to purchase service. Even so, it might well be several years before the cost of the equipment was recouped. The high cost of ONTs has been a major impediment to wholesale deployments of FTTH networks. Better news is that the prices of ONTs are beginning to tumble as deployments increase and as some RBOCs start to purchase and deploy FTTH as well. Prices for hardened ONTs are or will soon be below $700; prices for some non-hardened units may soon be below $400. The result is that in a typical deployment, the initial costs of HFC versus FTTH will be equal when approximately twenty percent of homes passed are actually served (ONT and drop completed, customer receiving services). For lower percentages of homes served, FTTH home deployments will be less expensive; for higher percentages of homes passed, HFC will be less expensive. Additionally, over the lifetime of the project, required equipment and outside plant upgrades will erode the remaining first cost advantage that HFC holds (more about this later under What They Cost to Build and Operate. The changes to FTTH will not be simply in the costs to build. Changes are also being made to the standards that vendors use to design their networks. The current BPON standard defines the downstream (622 Mbps) and upstream (155 Mbps) capacities of many PON networks. A newer variation called GPON has been deployed by one vendor and will undoubtedly be deployed by others in the future. It incorporates a number of new features and standardizes higher speeds (622 Mbps

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and 1.25 Gbps (1250 Mbps) in both upstream and downstream directions). Also on the horizon for FTTH is the increasing use of IP video. While one might say this is an integral part of all FTTH applications, there are only limited deployments currently. The largest of these is the Grant County deployment where the number of homes served is reaching 3,000. There have been several reasons why IP-video has had limited deployments. First because all of the channels are digital, the standard television tuner will not work and hence all televisions must have set top boxes. This alone adds at least $250 to serve an expanded basic only customer. Another problem is that the data will most probably be routed through the home via Cat5 cable rather than coaxial cable. For locations already wired with coax, additional cost is required to rewire the home. Finally there is the technical complexity associated with multicasting digital to many subscribers at once. Multicasting differs from broadcasting in that the program is only sent when there is a demand for it. If no one is watching a program, then unlike in broadcasting, it is not being sent over the network at all. On the other hand if all thirty-two users on a PON system were viewing different programs, thirty-two different programs would have to be sent simultaneously. The programming must be received with low latency and the packets or cells must be received in the correct order or there will be problems with the picture. In Ethernet systems, the problem is even more complex because the concentrators (actually switches) may have to further distribute the programming between different users. The good news is that many of the problems have been worked out and a second major deployment in Provo, Utah is preparing for construction. A third in Crawfordsville, Indiana is expected to begin in late 2004. Other technical changes in both materials and electronics affecting FTTH have begun and will impact costs and system performance far into the future. The change on the materials side has to do with the absorption properties of fiber optic cable. Various properties of the glass (fiber optic cable) cause light to be attenuated or degraded as the distance from the headend increases. Very good transmission occurs between about 1300 and 1350 nm and between about 1450 and 1550 nm. This good transmission area sets the commonly used wavelengths in FTTH applications. The problem between 1350 and 1450 nm has been greatly reduced in new fiber optic cables (called zero water peak fiber). Most fiber manufacturers have incorporated

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these changes in their fiber at no increase in price. It opens the door for additional bandwidth utilization for network transmission. Combined with the increase in good transmission areas is the move by at least one FTTH vendor to add coarse wave division multiplexing (CWDM) to their product line. Using CWDM, wavelengths spaced 20 nm apart can be used to transfer more data without increasing the complexity of the electronics used. Currently the costs are considerably higher to add the additional wavelengths making it economical only when the cost of adding additional fiber are very high (e.g. where there is some existing fiber in an urban environment, but the cost to trench and repair to add more fiber make alternatives attractive). This cost will come down over time.

HFC
HFC has an entirely different problem than FTTH technologies. Where FTTH vendors are continuing to make major improvements to a new industry, HFC is old by electronics standards with all of the easy improvements already made. Nevertheless there will continue to be evolutionary changes and improvements to electronics that will enable the HFC providers to continue to dominate markets without competition. One of the changes will be an increase in the bandwidth from 870 MHz to 1000 MHz, with the equipment commercially available in 2005. While this might seem to be an inexpensive way to increase bandwidth, it still has two major problems. First the available bandwidth for upstream communications has not been changed. For various technical reasons and the original decisions which made HFC a video broadcast technology, the upstream capacity is limited to the range of approximately 5-40 MHz. A second problem with increasing broadcast bandwidth has to do with design issues associated with HFC. HFC outside plant designs evolved over time and standardized on equally spaced amplifiers each of which boosted the signal by the same amount. Noise generated between amplifiers sets the maximum number of times the signal can be amplified, but within this limitation, the same general design criteria for laying out the spacing between amplifiers in the coax cable portion of the outside plant is followed from amplifier to amplifier. The signal coming into a particular amplifier is boosted by a given amount. The signal degrades (becomes weaker) as the distance increases from the

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amplifier, and at approximately the same distance from the second amplifier it must be boosted again. Unfortunately for an HFC cable provider, there is a problem with simply removing old amplifiers and replacing them with higher bandwidth oneshigher frequency bandwidths attenuate more rapidly then do lower ones. The spacing between amplifiers that was acceptable with an 870 MHz system may well be unacceptable should the operator increase the bandwidth to 1000 MHz. Other changes to the design can be made, but it is not unusual to have to replace twenty percent of the existing coaxial cable when an upgrade in bandwidth is made. Other changes, which can and are being made, are to decrease the number of customers per node. The effects of this on the available downstream bandwidth were previously shown (Table 2). Since the number of users per node changes, the entire outside plant layout has to be examined to minimize the overall cost. The changes will provide some benefits to upstream available data bandwidth per customer and may be helpful in providing Video on demand (VOD) services where downstream bandwidth is in short supply. Another way to increase upstream bandwidth is to aggregate the 5-40 MHz signals from one group of homes to those from another group of homes by upconverting one group of signals into a higher frequency area (e.g. 45-85 MHz). The technology requires additional equipment, probably the use of additional fibers for the return path, and possibly more expensive lasers. It does provide a method to increase the upstream bandwidth without wholesale redesign of the outside plant. One final area of change in HFC systems will be an attempt to provide more business services particularly to medium and large businesses with major bandwidth and voice needs. One way cable operators will do this will be to utilize fiber installed between the headend and node in conjunction with non-HFC equipment to provide voice and data services. They will in effect develop a second network possibly using equipment from the same vendors who currently dominate the FTTH market.

What They Cost to Build and Operate

Following this brief discussion are two models, one HFC and one FTTH which show costs and revenues from each type of network. Table 3 shows the differences in payback between two basically identical networks. Each one assumes the same market share for all residential

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services and offers the same products. The HFC case does not offer broadband services to large businesses but is otherwise identical. Areas where the two differ are in the sinking fund requirements necessary to make future upgrades. Over the last twenty years HFC cable systems have had to make considerable upgrades every few years. Coaxial cable is often considered to have a ten year lifetime while fiber optic cable has a twenty year lifetime. In practice both are understated. HFC systems will require considerable outside plant changes in addition to electronics as a system is periodically upgraded. FTTH systems will not require such expenditures. When a sinking fund is developed to replace twenty percent of the outside plant over ten years in the HFC case and with significant but lower electronics contributions for the FTTH case, Fiber to the Home performs much better over ten years. Because of this advantage, we believe that there is no case to be made for the construction of new HFC systems.
Table 3: Major Results FTTH vs HFC FTTH Homes and Businesses Past 12,038 Capital Equipment Cost (First $20,904,299 three years) Customers Served 6,014 Miles Streets 215 Sinking Fund Upgrades, Year 10 $3,195,126 Bond rate, % 5 Net Present Value (NPV)-10 years ($1,299,137) Internal Rate of Return 3.6 % Payback, Years 11.49

HFC 12,038 $17,473,581 5,988 215 $4,826,193 5 ($3,553,311) 0.6 % 15.26

Note: Payback is defined as the time when sufficient monies have been accumulated by the operation of the network to pay back bond monies borrowed over twenty years

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Now for the models: Both models use the same assumptions for numbers of homes passed (10,800); all offerings are the same in both cases. Percentages taking expanded basic and premium channels are typical of national percentages. Residential Market for Both FTTH and HFC
Year Year 2 Year 3 Year 7 Year 10

Year
Residential Population Residences Passed Single Family Residences Servd-Video Condominium Units Served-Video Single Family Video MTU Units Video Basic (single and MTU) Exp Bas Multiple Family Exp Basic Single and Multiple Family Digital Prem 2 Prem 3 Wir Serv Pay Per Views (per Month) On Demand Pay Per Views (per Month) Internet Voice Primary Line Voice Secondary Line IntraLata Long Distance InterLata Long Distance CLASS features (No of lines) Late Fees/Month Reconnects/Month 256 kbps 2.25 Mbps

10800 8160 480 1428 84 226 1214 72 480 375 180 285 480 720 432 108 1080 75 1231 1231 577 30 150

10837 8239 484 3707 217 588 3151 185 1303 973 467 741 1303 1954 1733 433 2709 379 3088 3088 1544 77 389

10874 8318 489 4574 268 726 3888 228 1680 1200 576 914 1680 2520 2501 761 3262 456 3718 3718 1859 96 480

11022 8640 508 5184 304 823 4406 259 2177 1360 653 1036 2177 3265 2535 771 3306 462 3768 3768 1884 108 544

11134 8728 513 5236 307 831 4451 261 2198 1374 659 1047 2198 3297 2560 779 3340 467 3807 3807 1903 109 549

Market Share Assumptions Total population starting at 10800 and growing at 0.343 percent per year. Total market penetration for video services by all providers is 80 percent. Video market share starts at 35 percent in the first year and grows to 60 percent after four years. Market Share for Internet starts at 10 percent of the homes passed and grows to 30 percent after four years Market Share for telephone service starts at 20 percent of the homes passed growing to 30 percent in year 5

Since the service offerings and pricing are the same in both cases, revenue will be identical as well.

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Residential Revenue for Both FTTH and HFC Case

Year Year 2 Year 3 Year 7 Year 10

Year
Residential Recurring Revenue Dollars Basic Exp Bas MTU Exp Bas Digital Prem 2 Prem 3 VCR Rental Wir Serv P per V ODP per V Internet Level 1 Level 2 Telecommunications Prim Line Telecommunications Sec Line IntraLata Long Distance InterLata Long Distance Class Features Advertising Total Recurring Revenue Non-recurring Revenue Dollars Late Fees & Reconnects Telecommunications Line Install Internet Connect Video Basic Connect Extended Basic Connect Total Non-recurring Revenue

$20,133 $524,016 $24,192 $63,648 $58,500 $58,320 $0 $10,260 $22,752 $30,240 $124,157 $42,768 $155,520 $10,260 $10,045 $12,408 $93,412 $27,000 $1,287,631

$53,878 $1,401,624 $32,185 $177,961 $156,342 $155,847 $0 $26,676 $63,615 $84,530 $513,006 $176,612 $390,096 $51,847 $25,198 $31,127 $249,961 $70,056 $3,660,562

$68,469 $1,781,446 $40,942 $236,335 $198,600 $197,989 $0 $32,904 $84,482 $112,286 $762,562 $319,709 $469,728 $62,381 $30,339 $37,477 $300,957 $86,436 $4,823,042

$87,285 $2,272,750 $52,271 $344,687 $253,330 $252,628 $0 $37,296 $123,214 $163,740 $869,938 $364,563 $476,064 $63,202 $30,747 $37,981 $305,005 $97,974 $5,832,675

$96,361 $2,508,296 $57,681 $380,282 $279,670 $278,590 $0 $37,692 $135,938 $180,677 $959,979 $402,502 $480,960 $63,886 $31,065 $38,375 $308,080 $98,946 $6,338,981

$39,600 $40,425 $0 $4,520 $24,280 $108,825

$102,600 $67,655 $0 $7,240 $38,740 $216,235

$126,720 $22,050 $0 $2,760 $14,740 $166,270

$143,520 $420 $0 $160 $820 $144,920

$144,840 $490 $0 $60 $320 $145,710

In the following model total numbers of businesses are the same, but since high bandwidth Internet and voice service such as PRI lines (PBXs) is NOT available in the HFC case, there is no service to medium or large businesses. This reduces the business revenue by about one-third over the FTTH case.

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Business Customers and Revenue FTTH Case/ Revenue HFC Case

Year Year 2 Year 3 Year 7 Year 10

ICON BROADBAND TECHNOLOGIES

Year
Business Population Total Small Business Total Medium Businesses Total Large Businesses Small Business Served POTs lines (DS0) Fractional T1 (DIA) T1 Dedicated Internet Access Medium Bus. Served Voice (DS1) Fractional T1 (DIA) DIA 2 Mbps Large Bus. Served Voice (PRI) Dedicated Internet Access 2 Mbps DIA 6 Mbps Business Revenue Recurring Revenue Dollars Small Business Voice (DS0) Small Business DIA (256k) Small Business DIA-(1.5 Mb) Med Bus Voice (DS1) Med Bus DIA (512k) Med Bus DIA (2 Mb) Large Bus Voice (PRI) Large Business DIA (2 Mb) Large Business DIA (6 Mb) IntraLata Long Distance InterLata Long Distance Total Rec. Revenue Business Non-recurring Revenue Dollars Small Business Installation Medium Business Installation Large Business Installation Total Non-recur Rev. Business Total Business Revenue FTTH Total Business Revenue HFC FTTH Case

1125 76 37 157 472 135 22 9 9 7 2 7 7 3 3

1141 77 38 216 649 182 34 20 20 15 5 14 14 7 7

1157 78 38 277 832 231 46 31 31 23 7 15 15 7 7

1223 83 40 415 1246 342 73 41 41 24 16 16 16 8 8

1275 86 42 433 1299 356 76 43 43 25 17 16 16 8 8

$266,208 $121,500 $105,600 $45,360 $12,180 $11,400 $56,700 $17,100 $28,800 $22,968 $22,968 $710,784

$375,187 $167,895 $167,280 $103,320 $26,753 $29,213 $116,235 $40,898 $68,880 $39,576 $39,576 $1,174,811

$493,004 $218,425 $231,978 $164,150 $42,046 $41,920 $127,651 $41,920 $70,602 $49,128 $49,128 $1,529,951

$814,968 $356,954 $406,357 $239,639 $48,429 $105,764 $150,296 $52,882 $89,064 $63,864 $63,864 $2,392,080

$914,962 $400,136 $455,585 $270,654 $54,326 $121,015 $161,853 $56,948 $95,913 $65,856 $65,856 $2,663,102

$15,700 $5,400 $6,450 $27,550 $738,334 $531,664

$5,900 $6,600 $6,850 $19,350 $1,194,161 $747,414

$6,100 $6,400 $750 $13,250 $1,543,201 $989,443

$600 $400 $1,150 $2,150 $2,394,230 $1,638,686

$600 $600 $0 $1,200 $2,664,302 $1,833,635

no medium or large business revenue; small business revenue the same

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Since the video offerings are the same, the video costs will be the same also.

Video Programming Expenses FTTH and HFC case

Year Year 2 $35,031 $476,280 $10,490 $16,418 $103,595 $103,268 $0 $82,076 $827,158 Year 3 $45,386 $617,100 $13,574 $22,226 $134,152 $133,739 $0 $111,132 $1,077,310 Year 7 $62,524 $850,242 $18,743 $35,009 $184,805 $184,292 $0 $175,027 $1,510,641 Year 10 $73,105 $994,091 $21,864 $40,918 $216,137 $215,302 $0 $204,589 $1,766,006

Year
Basic Exp Bas MTU Exp Bas Digital Prem 2 Prem 3 VCR Rental Pay Per View (Reg and On Demand) Total Programming Costs

1 Video Costs of Cable Programming $12,852 $174,672 $3,888 $5,760 $38,025 $37,908 $0 $28,800 $301,905

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There are some costs differences between HFC and FTTH. The HFC case will have higher personnel costs because of increased monitoring and maintenance requirements. FTTH will have higher Internet data costs because of the higher bandwidth being sold. Over all the two differ only slightly (FTTH in black, HFC in blue). Network Costs, FTTH case
FTTH
Year 1 Total No. Employees Customer Service Rep Field Technician (lead) Field Technicians Field Technician 2 Installers Sales & Marketing Network Personnel Other Network Charges Pole Charges Vehicle Operation Line Utilities ISP Hosting PRI Lines (wholesale) Residential Internet Transport Business Internet Transport Misc.--supplies Support ISP/Ethernet SS7 Charges/Interconnect Trunks Wholesale DS0 Business Switch Maintenance Total Other Network Total Network $81,842 $15,000 $0 $0 $18,144 $65,279 $66,095 $2,500 $0 $0 $50,976 $0 $515,418 $644,287 $81,842 $46,125 $0 $0 $36,288 $261,766 $114,047 $2,562 $0 $0 $70,092 $0 $1,161,040 $1,448,757 $81,842 $55,158 $0 $0 $38,880 $434,309 $139,920 $2,627 $0 $0 $89,856 $0 $1,532,472 $2,000,485 $81,842 $69,582 $0 $0 $41,472 $440,070 $203,730 $2,899 $0 $0 $134,568 $0 $1,789,362 $2,362,533 $81,842 $74,932 $0 $0 $41,472 $444,574 $210,815 $3,122 $0 $0 $140,292 $0 $1,867,740 $2,494,059 2 $22,602 $27,616 $0 $0 $0 $78,651 $128,869 Year 2 7 $93,120 $49,042 $64,544 $0 $0 $81,011 $287,716 Year 3 11 $127,884 $50,513 $88,641 $41,242 $76,291 $83,441 $468,013 Year 7 12 $143,935 $56,853 $99,766 $92,837 $85,867 $93,913 $573,171 Year 10 12 $157,281 $62,125 $109,017 $101,446 $93,829 $102,622 $626,319

Year

and on the following page the HFC model

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Network Costs, HFC Case

HFC
Total No. Employees Customer Service Rep Field Technician (lead) Field Technicians Field Technician 2 Installers Sales & Marketing Netw ork Personnel Other Netw ork Charges Pole Charges Vehicle Operation Line Utilities Head End Utilities Residential Internet Transport Business Internet Transport Misc.--supplies Wholesale Residential Line CPE repairs/replacements Wholesale DS0 Business Voice Transport Costs Total Other Netw ork Total Netw ork $81,842 $22,500 $19,800 $2,313 $65,279 $45,270 $2,500 $124,740 $15,850 $50,976 $54,925 $81,842 $69,188 $20,295 $2,370 $261,766 $65,467 $2,562 $341,842 $40,211 $70,092 $126,155 $81,842 $78,797 $20,802 $2,430 $434,309 $86,002 $2,627 $421,872 $50,966 $89,856 $153,600 $81,842 $95,675 $22,962 $2,682 $440,070 $132,331 $2,899 $471,930 $87,327 $134,568 $169,264 $81,842 $103,031 $24,727 $2,888 $444,574 $137,760 $3,122 $513,478 $93,474 $140,292 $172,370

Year 1 2 $22,602 $27,616 $0 $0 $0 $78,651 $128,869

Year 2 7 $93,120 $49,042 $64,544 $0 $0 $81,011 $287,716

Year 3 11 $127,884 $50,513 $88,641 $41,242 $76,291 $83,441 $468,013

Year 7 16 $215,902 $56,853 $149,649 $139,256 $85,867 $93,913 $741,440

Year 10 16 $235,922 $62,125 $163,525 $152,168 $93,829 $102,622 $810,191

$485,994 $1,081,789 $1,423,102 $1,641,550 $1,717,558 $614,863 $1,369,506 $1,891,115 $2,382,990 $2,527,750

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Capital Equipment Costs are higher in the outside plant for HFC, but when the higher costs of ONTs in subsequent years are added, the first cost of FTTH is still higher than for HFC. Again FTTH in black and HFC in blue.
FTTH
Capital Expenditures FTTH
Outside Plant Labor exc. Make-ready Make Ready Outside Plant Materials CATV Headend with OSS Central Office Gear CATV towers WDM Video Coupler Configured Rack for P-OLT OLT /w ATM interface & alarms PON Cards for FTTH Solution Miscellaneous Outside Plant Equipment Fiber Splicing per new customer Install Fiber Drops and FTTH units 2 Fiber All Dielectric Drop Fiber FTTH Access Management Server (AMS) Power Supply - Battery Backup Digital Set-tops - ITV Ready FTTH ONTs FTTH-inside wiring Substation Buildings (1 prefab) Voice OSS/Hardware Upgrades Total Capital Expenditures
Capital Associated/w Utility Ops Net Capital Expenditures

Year 1 $4,864,389 $698,784 $2,741,732 $1,694,760 $1,244,693 $200,000 $27,123 $10,726 $44,788 $165,048 $72,000 $144,090 $553,240 $80,050 $39,483 $240,150 $367,625 $1,439,978 $48,000 $25,000 $0 $14,701,659 $2,205,249 $12,496,410

Year 2 $0 $0 $0 $0 $0 $0 $37,429 $9,868 $41,205 $240,748 $173,225 $217,341 $811,001 $120,745 $0 $362,235 $579,071 $1,857,517 $23,575 $0 $0 $4,473,960 $671,094 $3,802,866

Year 3 $0 $0 $0 $0 $0 $0 $11,478 $9,079 $18,954 $100,041 $25,215 $88,883 $338,259 $49,379 $0 $148,138 $244,250 $685,548 $9,456 $0 $0 $1,728,680 $259,302 $1,469,378

Year 7 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,362 $0 $5,949 $23,507 $3,305 $0 $9,915 $9,793 $33,441 $928 $0 $0 $94,200 $14,130 $80,070

Year 10 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,810 $11,664 $1,561 $0 $4,683 $2,609 $11,275 $500 $0 $3,195,126 $3,230,228 $484,534 $2,745,693

Capital Expenditures HFC

Outside Plant Labor exc. Make-ready Make Ready Outside Plant Materials CATV Headend with OSS Central Office Gear CATV towers Voice Switch Equipment-Fusion Splicer Cable Modem Install Coax Drop to Home/Business Install Settop Boxes CATV Settop Boxes Substation Buildings (1 prefab) Voice OSS/Hardware Upgrades Total Capital Expenditures
Capital Associated/w Utility Ops Net Capital Expenditures

$6,013,736 $698,784 $4,280,081 $1,804,760 $686,493 $200,000 $0 $0 $124,430 $317,000 $14,430 $306,000 $25,000 $0 $14,762,839 $2,214,426 $12,548,414

$0 $0 $0 $0 $0 $0 $0 $30,750 $383,330 $479,290 $25,307 $482,885 $0 $0 $1,888,693 $283,304 $1,605,389

$0 $0 $0 $0 $0 $0 $0 $0 $264,842 $194,996 $11,883 $203,242 $0 $0 $822,049 $123,307 $698,742

$0 $0 $0 $0 $0 $0 $0 $0 $3,201 $12,757 $731 $8,246 $0 $0 $32,907 $4,936 $27,971

$0 $0 $0 $0 $0 $0 $0 $0 $3,160 $5,995 $262 $2,007 $0 $4,811,023 $4,826,193 $723,929 $4,102,264

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From a cash standpoint, both the FTTH and HFC cases are cash flow positive in year four. On a payback and NPV basis, FTTH is much better than HFC, with a payback of 11.49 years rather than 15.26 years showing the increased long term advantages of FTTH. FTTH Income Statement Top/HFC Bottom
FTTH
Incom e Statem ent FTTH Total Revenue on Operations Interest on Unallocated Cash Video Costs Total Other Netw ork Direct Costs Bond Financing Expenses General & Administration Operating Income Operating Income Margin Depreciation Earnings Before Interest (EBIT) Interest Paid Gross Earnings Before Taxes Loss Carryover Net Earnings Before Taxes Provision for Taxes Net Incom e FTTH $2,134,790 $0 ($301,905) ($644,287) ($365,500) ($505,992) $317,106 14.9 ($553,754) ($236,648) $868,275 ($1,104,923) $0 ($1,104,923) $0 ($1,104,923) $5,070,958 $177,198 $6,532,513 $47,626 $8,371,825 $131,414 $9,148,993 $276,683 Year 1 Year 2 Year 3 Year 7 Year 10

($827,158) ($1,077,310) ($1,510,641) ($1,766,006) ($1,448,757) ($2,000,485) ($2,362,533) ($2,494,059) $0 ($773,716) $2,198,525 43.4 $819,193 $868,275 ($49,082) $0 ($887,146) $2,615,199 40.0 $859,212 $868,275 ($9,063) $0 $3,634,345 43.4 $1,603,599 $735,248 $868,351 $0 $868,351 $346,840 $521,510 $0 $4,105,502 44.9 ($922,247) $3,183,255 $616,981 $2,566,274 $0 $2,566,274 $1,026,010 $1,540,264 ($995,720) ($1,060,110)

($1,379,332) ($1,755,987) ($2,030,746)

($1,104,923) ($1,154,005) ($1,154,005) ($1,163,068) $0 ($49,082) $0 ($9,063)

Incom e Statem ent HFC Total Revenue on Operations Interest on Unallocated Cash Video Costs Total Other Netw ork Direct Costs Bond Financing Expenses General & Administration Operating Income Operating Income Margin Depreciation Interest Paid Gross Earnings Before Taxes Loss Carryover Net Earnings Before Taxes Provision for Taxes Net Incom e HFC $1,928,120 $0 ($301,905) ($614,863) ($365,500) ($504,624) $141,228 7.3 ($451,464) $868,275 ($1,178,511) $0 ($1,178,511) $0 ($1,178,511) $4,604,125 $164,632 $5,916,628 $109,480 $7,415,655 $118,282 $8,000,073 $141,605

($827,158) ($1,077,310) ($1,510,641) ($1,766,006) ($1,369,506) ($1,891,115) ($2,382,990) ($2,527,750) $0 ($762,067) $1,810,027 39.3 $0 ($873,043) $2,184,640 36.9 $0 $2,654,340 35.8 $0 $2,791,085 34.9 ($985,966) ($1,056,838)

($1,017,725) ($1,182,332) ($1,296,752) ($1,002,818) $868,275 ($75,973) $868,275 $134,033 $735,248 $622,340 $0 $622,340 $248,436 $373,904 $616,981 $1,171,286 $0 $1,171,286 $468,014 $703,272

($1,178,511) ($1,254,484) ($1,254,484) ($1,120,451) $0 ($75,973) $0 $134,033

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While more or less optimistic market penetrations can be selected in different situations, the relative positions of the two technologies will be unchanged.

Summary
FTTH is a new technology while HFC is a mature one. While there will continue to be improvements to HFC as incumbents tweak additional years from aging infrastructure, by electronics standards, HFC is an old technology. FTTH has a number of major advantages which will only improve its position over time including: The increase in deployments of FTTH is causing the prices of Optical Network Terminals or ONTs to drop precipitously. The drop is bringing FTTH deployments much closer to HFC in first cost. When the costs of future upgrades and maintenance are factored into the costs of HFC and FTTH deployments, FTTH is already less expensive than HFC. The tremendous capacity of digital transmission over fiber optic cable, potentially in the terabit per second range, makes FTTH technology far superior to HFC and futureproof from the standpoint of the outside plant. When it comes to planning a new municipal deployment to provide voice, data and video services, a Full FTTHouse beats HFC every time.

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Index
Broadcast A term in cable television parlance, which indicates that all channel signals are sent simultaneously to all customers. It differs from the IP method of transmission wherein a single channel signal is multicast (retransmitted individually to single or small groups customers). DOCSIS -- Data over cable service interface specification. A set of protocols used to determine how data transmission of HFC is organized. Hertz -- Another term for the number of times (cycles per second) than a signal varies. Variations include kHz or thousands of cycles per second and MHz or millions of cycles per second. RBOC - The original Bell Operating Companies formed after the breakup of Bell Telephone. One of these, now named Verizen, is beginning to deploy FTTH in selected markets. single mode fiber - One of two generic types of fiber optic cable differing in dimensions and use. While single mode fiber has a diameter of approximately 125 microns (0.005 inches), only the very center or core approximately 8 microns is used for transmission of light. The rest of the fiber is manufactured (lower refractive index) so that light is reflected back into the core. A colored coating layer is added to the outside. The other type, multimode fiber, is generally used for premises equipment or in localized areas (e.g. campuses) because the maximum transmission distance is much lower. VOD Video on demand requires a dedicated bandwidth per user because the user sets the time the movie starts. In the case of HFC systems, each VOD sale will require utilization of the digital bandwidth required for that movie. In the case of systems with little available downstream bandwidth, if significant numbers of VOD signals are being transmitted at the same time, a user desiring to purchase a particular movie may find that it is unavailable.

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