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Transforming the Local Exchange Network Review & Update Lawrence K. Vanston & Ray L. Hodges Description Key findings Who should read this report? Table of contents Exhibits Featured Graph Pricing/Ordering information Sponsored by TTFG

Description  [back to top]

This report reviews recent TFI forecasts for the North American local exchange network, covering switching, circuit equipment, and outside plant. The TFI forecasts provide a reasoned, realistic view of the technological and competitive changes occurring in the communications industry. The report includes TFI's latest recommendations on depreciation lives for local exchange telephone plant, accounting for technology displacement and loss of access lines due to competition.

Key Findings From This Latest TFI Report  [back to top]

• Technology change, competition, and the growth of the Internet are having major impacts on the local exchange network.
• The local exchange telecommunications industry has begun the transition from a narrowband network of circuit switches and copper cables to a broadband network of packet switches and fiber optics. This transition will largely be complete between 2015 and 2020.
• Competition has arrived in the local exchange. Competitive LECs (CLECs) have captured over 10% of the access line market. Residential and small businesses are abandoning second lines for cable modems and DSL (digital subscriber line), while wireless and cable telephony are displacing wireline usage and access lines.
• Depreciation lives that fully take into account technology change and competition are generally consistent with those used by ILECs for financial reporting and somewhat less than lives often prescribed by regulators. This difference is primarily explained by the over-reliance of traditional depreciation methods on accounting retirements.

Who should read this report?  [back to top]

• Incumbent Local exchange carriers
• Competitive LECs
• Interexchange carriers
• Internet service providers
• Telecom equipment manufacturers
• Regulatory personnel
• Depreciation professionals

Table of Contents  [back to top]

Chapter 1: Introduction

Key Findings

TFI Depreciation Life Recommendations

Chapter 2: Technological Change

Outside Plant

Circuit Equipment

Switching Equipment

Forecast Summary

Chapter 3: Competition

Competition from CLECs

Competition from Cable Television

Wireless Competition

Competition from Broadband

Forecasts for Competition in the Local Exchange

The Changing Focus of Competition

Chapter 4: Forecasting Methods

Example

Impact of Competition

Estimation of Depreciation Lives

Contrast with the Mortality Approach

Chapter 5: Switching Equipment

Depreciation Background

Factors Affecting Switching Lives

Modular Upgrades to Circuit Switches

ATM/IP Switching

Packet Switching for Cable Telephony

Impact of Competition on Digital Switching Lives

Depreciation Life Recommendations for Digital Switching

Chapter 6: Circuit Equipment

Depreciation Background

Key Transitions in Circuit Equipment

Pre-SONET Optical Transport

Digital Loop Carrier and T-Carrier Transport

ATM, WDM, and SONET Transport Equipment

DSL Equipment

Test and Miscellaneous Equipment

Recommendations for Circuit Equipment Depreciation Lives

Chapter 7: Metallic Cable

Depreciation Background

Factors Impacting Metallic Cable Depreciation Lives

Feeder Metallic Cable Forecast

Metallic Distribution Cable

Drivers for Higher Bandwidth

TFI Recommendations for Metallic Cable Distribution

Chapter 8: Non-Metallic Cable

Depreciation Background

Physical Mortality

Technology Obsolescence

TFI Recommendations for Non-Metallic Cable Depreciation

Appendix A: Introduction to Technology Market Forecasting

Processes and Patterns of Technology Adoption

Mathematical Models for the Adoption of New Technology

Using Technology Market Adoption Models for Forecasting

Forecasting Quantities of Old and New Technologies

Using Substitution Models to Estimate Additions and Sales

Forecasting Growth Rates

Experience with Forecasting with Substitution Models

Conclusion

List of Exhibits With Featured Graph  [back to top]

2.1	Substitution of Fiber Optic Cable for Metallic Cable in the Feeder Plant
2.2	Substitution of Fiber Optic Cable for Metallic Cable in the Distribution Network
2.3	Substitution of Advanced for Standard Single-Mode Fiber Optic Cable
2.4	Adoption of Optical Transport and Access Network Equipment
2.5	Substitution of ATM/IP for Local Circuit Switching
3.1	U.S. Residential Switched Access Lines (Narrowband), Millions of Lines by Type
3.2	U.S. ILEC-Provisioned Residential Switched Access Lines (Includes UNEs and Resale), Millions of Lines- Narrowband and Broadband
4.1	Percentage of Residential Access Lines on Fiber and Metallic Distribution Cable
4.2	Example of Application of Forecasting to the Estimation of Depreciation Lives- Survivor Curves for Metallic Distribution Cable
5.1	U.S. Local Switching Technologies, 1950-2020
5.2	Generic Local Switch Architecture
5.3	Survivor Curves for Digital Switch Modules (Not Accounting for Competitive Impacts)
5.4	Voice Versus Data Traffic
5.5	Substitution of ATM/IP for Local Circuit Switching
5.6	Combined Survivor Curve for Digital Switching
6.1	Survivor Curves for Circuit Equipment Categories
6.2	Substitution of SONET for Pre-SONET Equipment
6.3	Combined Survivor Curves for DLS and T-Carrier Transport
6.4	Surviving Value and Depreciation Lives for ATM, DWDM, and SONET Transport Equipment
6.5	Life-Cycle for DSL Equipment Based on Adoption of VDSL and Other FITL Solutions
6.6	Combined Survivor Curves for DSL Equipment
7.1	Substitution of Fiber for Metallic Cable in the Feeder Plant- Base Scenario
7.2	Substitution of Fiber for Metallic Cable in the Feeder Plant- Comparison of Base and Accelerated Scenarios
7.3	U.S. Online and Broadband Households
7.4	U.S. Broadband Households by Nominal Data Rate
7.5	Broadband Minimum Availability- 24 Mb/s & Above
7.6	Substitution of Fiber Optic Cable for Metallic Cable in the Residential Distribution Network
7.7	Comparison of Distribution Fiber Forecast to Relevant Service Availability Requirements- Early Scenario
7.8	Comparison of Distribution Fiber Forecast to Relevant Service Availability Requirements- Middle Scenario
7.9	Comparison of Distribution Fiber Forecast to Relevant Service Availability Requirements- Late Scenario
7.10	Addition of Fiber in Mixed Fiber/Metallic Systems to the Late Scenario Fiber Forecast
7.11	Combined Survivor Curves for Feeder Cable (Underground)- Base Scenario
7.12	Combined Survivor Curves for Feeder Cable (Underground)- Middle Scenario
8.1	Age-Survivor Curve for Fiber Optic Cable (Physical Mortality Only)
8.2	Survivor Curve for Installed Base of Fiber Optic Cable (Physical Mortality Only)
8.3	Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable- Based on Distribution Fiber Adoption Scenarios
8.4	Mortality and Technology Survivor Curves for Standard Single-Mode Fiber Optic Cable- Technology Substitution Based on Middle Scenario Distribution Fiber Adoption (Not Accounting for Competitive Impacts)
8.5	Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable- Technology Substitution Based on Middle Scenario Distribution Fiber Adoption
8.6	Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable- Based on Interoffice and Feeder Fiber for Metallic Substitutions
8.7	Mortality and Technology Survivor Curves for Standard Single-Mode Fiber Optic Cable- Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions (Not Accounting for Competitive Impacts)
8.8	Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable- Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions

Pricing Information  [back to top]

January 2003, 130 pages, ISBN 1-884154-19-0

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