Transforming the Local Exchange Network, Third Edition

by: Lawrence K. Vanston, Ph.D. & Ray L. Hodges

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Transforming the Local Exchange Network: Third Edition

Description
Sampling of Key Findings
Who Should Read this Report?
Table of Contents
Figures and Featured Graphs
Pricing/Ordering information
Sponsored by TTFG

Description [back to top]

According to TFI's new report, incumbent local exchange networks (ILECs) have no choice but to invest in new technology and offer high-speed broadband and video to stay in the game. This report presents the latest TFI forecasts for the North American local exchange network, covering switching, circuit equipment, and outside plant. The report also 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.

Sampling of Key Findings from this Latest TFI Report [back to top]

Technology change, competition, and the growth of broadband have accelerated their impacts on the local exchange network.
The local exchange telecommunications industry is transitioning 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, but probably not much before.
Increasing bandwidth is now mandatory for ILEC, but the best way to do it depends on a number of factors and the ultimate winner is still unclear to the dispassionate observer.
Depreciation lives that fully take into account technology change and competition are still generally consistent with those used by ILECs for financial reporting and those previously recommended by TFI. They imply that property tax valuations may be too high in some jurisdictions.

Who Should Read this Report? [back to top]

Incumbent Local exchange carriers
Competitive LECs
Cable TV companies
Internet service providers
Telecom equipment manufacturers
Regulatory personnel
Depreciation professionals
Property tax professionals.

Table of Contents [back to top]

Chapter 1: Introduction and Summary

Network Architecture Options

How Fast?

Impacted Investment

Drivers for the Transformation of the Local Exchange Network

Competition

Broadband Evolution

IP Television

VoIP

Network Technology Forecasts

Switching Equipment

Circuit Equipment

Metallic Feeder Cable

Metallic Distribution Cable

Non-Metallic Cable

Summary of 2005 TFI Depreciation Life Recommendations

Chapter 2: Competitive Impacts on ILEC Access Lines

Current Status

Access Line Forecast

Forecasting Approach

Key Forecasts

Impact of Wireless, Broadband, and Non-Carrier VoIP on Wireline Access Lines

CLEC Market Share

Impacts of Cable Telephony

Broadband Growth

Comparison to Previous Forecasts

Chapter 3: VHS Broadband

Status and Forecast for Broadband Access

Drivers for Higher Bandwidth

Forecast of Households with Very-High-Speed Broadband Access

Forecasts for Broadband Video

VHS Broadband Availability Requirements

Summary

Chapter 4: VHS Broadband Architectures

PONs

BPON

EPON

GPON

Fiber-to-the-Curb

Fiber-to-the-Node

Active Ethernet

VHS Broadband Deployment in Korea and Japan

Chapter 5: Switching Equipment

Switching Technology Transitions

Circuit Switching

Packet Switching

Forecast for the Substitution of Packet for Circuit Switching

Depreciation Recommendations for Digital Switching

Depreciation Background

Depreciation Approach for Digital Switching

Survivor Curves and Lives

Chapter 6: Circuit Equipment

Circuit Equipment Transitions

Depreciation Recommendations for Circuit Equipment

Depreciation Background

DLC and T-Carrier Transport

ATM, WDM and SONET Transport Equipment

DSL Equipment

Test and Miscellaneous Equipment

Consolidated Survivor Curves and Lives

Chapter 7: Metallic Cable

Metallic Feeder Cable Forecast

Forecast of Fiber Feeder Availability

Forecast of Conversion to Fiber Feeder

Metallic Carrier Displacement

Correction of Prior Historical Data

Metallic Distribution Cable

Forecast of Conversion to Distribution Fiber

Comparison of Feeder and Distribution Fiber Conversion Scenarios

Depreciation Lives for Metallic Cable

Chapter 8: Non-Metallic Cable

Physical Mortality

Technology Obsolescence

Non-Zero Dispersion Shifted Fiber

NZDSF Large Effective Area Fiber

Coarse Wavelength Division Multiplexing and Full Spectrum Fiber

Technology Substitution

Substitution Based on Distribution Scenarios

Substitution Based on Historical Analogies

Architectural and Topological Obsolescence

TFI Recommendations for Non-Metallic Cable Depreciation

Depreciation Background

Summary of Non-Metallic Depreciation Recommendations

List of Figures with Featured Graphs [back to top]

1.1 ILEC Narrowband Access Lines and Broadband Connections

1.2 Broadband Households by Nominal Data Rate, Percentage of Households

1.3 TFI Forecast of U.S. Households Using High-Definition IP Video

1.4 Minimum Availability of Very-High-Speed Broadband

1.5 Number of ILEC Narrowband Access Lines on Circuit and Packet Switching (Base Forecast)

1.6 Combined Survivor Curves for DLC and T-Carrier Transport--Middle Scenario

1.7 Substitution of Fiber Cable for Metallic Cable in the Feeder Plant

1.8 Distribution Fiber Scenarios

1.9 Homes Passed by Distribution Fiber versus Homes Converted to Fiber from Metallic Cable

1.10 Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable--Alternative Scenarios

2.1 Forecast Narrowband Access Lines by Carrier Type

2.2 Forecast ILEC Narrowband Access Lines and Broadband Connections, Including Resale/ UNE

2.3 Residential Narrowband Access Lines per Wireline Household

2.4 Forecast CLEC Percentage of Residential and Small Business Access Lines

2.5 Forecast CLEC Percentage of Other Non-Residential Access Lines

2.6 Cable Telephony Share of Residential Wireline Access Lines

2.7 Forecast Residential Broadband Connections, Percentage of Households

2.8 Forecast Total Broadband Connections, Standard and Very High-Speed

2.9 Forecast Total Broadband Connections by Access Technology

2.10 Comparison of 2003 and 2005 TFI Forecasts of Narrowband Access Lines by Carrier Type

2.11 Comparison of 2003 and 2005 TFI Forecasts of ILEC Narrowband Access Lines and Broadband Connections, Including Resale/ UNE

3.1 Forecast Broadband Households, Percentage of Households

3.2 Adoption of Various Consumer Communications Products and Services

3.3 Broadband Households in the United States and South Korea

3.4 Forecast of HDTV Households

3.5 Broadband Households by Nominal Data Rate, Percentage of Households

3.6 Trend in Residential Access Data Rates

3.7 Forecast Adoption of Standard and Very-High-Speed Broadband, Percentage of Households

3.8 TFI Forecast of U.S. Households using IP Video

3.9 TFI Forecast of U.S. Households Using High-Definition IP Video

3.10 Comparison of High Definition IP Video and 24 Mb/s Broadband Bandwidth Forecasts

3.11 Minimum Availability of Very High-Speed Broadband

4.1 PON Architecture

4.2 BPON Architecture

4.3 FTTC Architecture

4.4 FTTN Architecture

4.5 Worldwide Packets Active Ethernet System

4.6 Active Ethernet Implementation

4.7 Alternative Architecture Bandwidth Comparatives

4.8 Speed of Broadband Access--National Targets

5.1 U.S. Local Switching Technologies, 1950-2020

5.2 Generic Local Switch Architecture

5.3 Voice Versus Data Traffic

5.4 Substitution of Packet Switching for Circuit Switching for ILEC Voice Access Lines

5.5 Substitution of Packet Switching (ATM/IP) for Circuit Switching for ILEC Voice Access Lines (2003 Forecast)

5.6 Number of ILEC Narrowband Access Lines on Circuit and Packet Switching (Base Forecast)

5.7 Number of ILEC Narrowband Access Lines on Circuit and Packet Switching (Base Forecast)

5.8 Replacement of Successive Generations of Switching Equipment

5.9 Survivor Curves for Digital Circuit Switching--Base Forecast

5.10 Survivor Curves for Digital Circuit Switching--Late Scenario

6.1 Adoption of Optical Transport and Access Network Equipment

6.2 Combined Survivor Curves for DLC and T-Carrier Transport--Early Scenario

6.3 Combined Survivor Curves for DLC and T-Carrier Transport--Middle Scenario

6.4 Combined Survivor Curves for DLC and T-Carrier Transport--Late Scenario

6.5 Surviving Value and Depreciation Lives for ATM, DWDM, and SONET Transport Equipment

6.6 Life-Cycle for DSL Equipment Based on Adoption of 24 Mb/s Broadband and Distribution Fiber (Late Scenario)

6.7 Combined Survivor Curves for DSL Equipment

6.8 Price Trend for DSL Equipment

6.10 Composite Survivor Curves for Circuit Equipment Categories--NOT Accounting for Competitive Impacts

6.11 Composite Survivor Curves for Circuit Equipment Categories--Accounting for Competitive Impacts

7.1 Substitution of Fiber for Metallic Cable in the Feeder Plant--Trend (Not a Forecast)

7.2 Minimum Fiber Feeder Availability Requirements--Percentage of Access Lines

7.3 Substitution of Fiber Cable for Metallic Cable in the Feeder Plant: Access Lines Converted to Fiber Feeder

7.4 Relationship Between Fiber Feeder Minimum Availability and Metallic Conversion Scenarios

7.5 Feeder Access Lines by Serving Technology: Middle Scenario

7.6 Multiple Substitution Analysis of Feeder Access Lines by Serving Technology: Middle Scenario

7.7 Comparison of ARMIS Fiber Feeder Data and Corrected Data

7.8 Distribution Fiber Scenarios

7.9 Comparison of the Early Distribution Fiber Scenario and the Required Availability of Very-High-Speed Broadband

7.10 Comparison of the Middle Distribution Fiber Scenario and the Required Availability of Very-High-Speed Broadband

7.11 Comparison of the Late Distribution Fiber Scenario and the Required Availability of Very-High-Speed Broadband

7.12 Homes Passed by Distribution Fiber versus Homes Converted to Fiber from Metallic Cable

7.13 Access Lines Converted from Metallic Cable to Fiber as a Percentage of ILEC Access Passed by Distribution Fiber

7.14 Access Lines Converted from Metallic Cable to Fiber: Comparison of Distribution and Feeder Scenarios

7.15 Survivor Curves and ARL for Metallic Feeder Cable--Early Scenario

7.16 Survivor Curves and ARL for Metallic Feeder Cable--Middle Scenario

7.17 Survivor Curves and ARL for Metallic Feeder Cable--Late Scenario

7.18 Survivor Curves and ARL for Metallic Distribution Cable--Early Scenario

7.19 Survivor Curves and ARL for Metallic Distribution Cable--Middle Scenario

7.20 Survivor Curves and ARL for Metallic Distribution Cable--Late Scenario

8.1 Age-Survivor Curve for Fiber Optic Cable

8.2 Survivor Curve (Installed Base)

8.3 North American Data-Rate Projections

8.4 Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable?Based on Distribution Fiber Adoption Scenarios

8.5 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)

8.6 Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable--Technology Substitution Based on Middle Scenario Distribution Fiber Adoption

8.7 Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable?Based on Interoffice and Feeder Fiber for Metallic Substitutions

8.8 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)

8.9 Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable--Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions

Pricing/Ordering Information [back to top]

March 2006, 150 pages, ISBN 1-884154-25-5

Sponsored by the TTFG

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1.1	ILEC Narrowband Access Lines and Broadband Connections
1.2	Broadband Households by Nominal Data Rate, Percentage of Households
1.3	TFI Forecast of U.S. Households Using High-Definition IP Video
1.4	Minimum Availability of Very-High-Speed Broadband
1.5	Number of ILEC Narrowband Access Lines on Circuit and Packet Switching (Base Forecast)
1.6	Combined Survivor Curves for DLC and T-Carrier Transport--Middle Scenario
1.7	Substitution of Fiber Cable for Metallic Cable in the Feeder Plant
1.8	Distribution Fiber Scenarios
1.9	Homes Passed by Distribution Fiber versus Homes Converted to Fiber from Metallic Cable
1.10	Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable--Alternative Scenarios
2.1	Forecast Narrowband Access Lines by Carrier Type
2.2	Forecast ILEC Narrowband Access Lines and Broadband Connections, Including Resale/ UNE
2.3	Residential Narrowband Access Lines per Wireline Household
2.4	Forecast CLEC Percentage of Residential and Small Business Access Lines
2.5	Forecast CLEC Percentage of Other Non-Residential Access Lines
2.6	Cable Telephony Share of Residential Wireline Access Lines
2.7	Forecast Residential Broadband Connections, Percentage of Households
2.8	Forecast Total Broadband Connections, Standard and Very High-Speed
2.9	Forecast Total Broadband Connections by Access Technology
2.10	Comparison of 2003 and 2005 TFI Forecasts of Narrowband Access Lines by Carrier Type
2.11	Comparison of 2003 and 2005 TFI Forecasts of ILEC Narrowband Access Lines and Broadband Connections, Including Resale/ UNE
3.1	Forecast Broadband Households, Percentage of Households
3.2	Adoption of Various Consumer Communications Products and Services
3.3	Broadband Households in the United States and South Korea
3.4	Forecast of HDTV Households
3.5	Broadband Households by Nominal Data Rate, Percentage of Households
3.6	Trend in Residential Access Data Rates
3.7	Forecast Adoption of Standard and Very-High-Speed Broadband, Percentage of Households
3.8	TFI Forecast of U.S. Households using IP Video
3.9	TFI Forecast of U.S. Households Using High-Definition IP Video
3.10	Comparison of High Definition IP Video and 24 Mb/s Broadband Bandwidth Forecasts
3.11	Minimum Availability of Very High-Speed Broadband
4.1	PON Architecture
4.2	BPON Architecture
4.3	FTTC Architecture
4.4	FTTN Architecture
4.5	Worldwide Packets Active Ethernet System
4.6	Active Ethernet Implementation
4.7	Alternative Architecture Bandwidth Comparatives
4.8	Speed of Broadband Access--National Targets
5.1	U.S. Local Switching Technologies, 1950-2020
5.2	Generic Local Switch Architecture
5.3	Voice Versus Data Traffic
5.4	Substitution of Packet Switching for Circuit Switching for ILEC Voice Access Lines
5.5	Substitution of Packet Switching (ATM/IP) for Circuit Switching for ILEC Voice Access Lines (2003 Forecast)
5.6	Number of ILEC Narrowband Access Lines on Circuit and Packet Switching (Base Forecast)
5.7	Number of ILEC Narrowband Access Lines on Circuit and Packet Switching (Base Forecast)
5.8	Replacement of Successive Generations of Switching Equipment
5.9	Survivor Curves for Digital Circuit Switching--Base Forecast
5.10	Survivor Curves for Digital Circuit Switching--Late Scenario
6.1	Adoption of Optical Transport and Access Network Equipment
6.2	Combined Survivor Curves for DLC and T-Carrier Transport--Early Scenario
6.3	Combined Survivor Curves for DLC and T-Carrier Transport--Middle Scenario
6.4	Combined Survivor Curves for DLC and T-Carrier Transport--Late Scenario
6.5	Surviving Value and Depreciation Lives for ATM, DWDM, and SONET Transport Equipment
6.6	Life-Cycle for DSL Equipment Based on Adoption of 24 Mb/s Broadband and Distribution Fiber (Late Scenario)
6.7	Combined Survivor Curves for DSL Equipment
6.8	Price Trend for DSL Equipment
6.10	Composite Survivor Curves for Circuit Equipment Categories--NOT Accounting for Competitive Impacts
6.11	Composite Survivor Curves for Circuit Equipment Categories--Accounting for Competitive Impacts
7.1	Substitution of Fiber for Metallic Cable in the Feeder Plant--Trend (Not a Forecast)
7.2	Minimum Fiber Feeder Availability Requirements--Percentage of Access Lines
7.3	Substitution of Fiber Cable for Metallic Cable in the Feeder Plant: Access Lines Converted to Fiber Feeder
7.4	Relationship Between Fiber Feeder Minimum Availability and Metallic Conversion Scenarios
7.5	Feeder Access Lines by Serving Technology: Middle Scenario
7.6	Multiple Substitution Analysis of Feeder Access Lines by Serving Technology: Middle Scenario
7.7	Comparison of ARMIS Fiber Feeder Data and Corrected Data
7.8	Distribution Fiber Scenarios
7.9	Comparison of the Early Distribution Fiber Scenario and the Required Availability of Very-High-Speed Broadband
7.10	Comparison of the Middle Distribution Fiber Scenario and the Required Availability of Very-High-Speed Broadband
7.11	Comparison of the Late Distribution Fiber Scenario and the Required Availability of Very-High-Speed Broadband
7.12	Homes Passed by Distribution Fiber versus Homes Converted to Fiber from Metallic Cable
7.13	Access Lines Converted from Metallic Cable to Fiber as a Percentage of ILEC Access Passed by Distribution Fiber
7.14	Access Lines Converted from Metallic Cable to Fiber: Comparison of Distribution and Feeder Scenarios
7.15	Survivor Curves and ARL for Metallic Feeder Cable--Early Scenario
7.16	Survivor Curves and ARL for Metallic Feeder Cable--Middle Scenario
7.17	Survivor Curves and ARL for Metallic Feeder Cable--Late Scenario
7.18	Survivor Curves and ARL for Metallic Distribution Cable--Early Scenario
7.19	Survivor Curves and ARL for Metallic Distribution Cable--Middle Scenario
7.20	Survivor Curves and ARL for Metallic Distribution Cable--Late Scenario
8.1	Age-Survivor Curve for Fiber Optic Cable
8.2	Survivor Curve (Installed Base)
8.3	North American Data-Rate Projections
8.4	Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable?Based on Distribution Fiber Adoption Scenarios
8.5	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)
8.6	Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable--Technology Substitution Based on Middle Scenario Distribution Fiber Adoption
8.7	Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable?Based on Interoffice and Feeder Fiber for Metallic Substitutions
8.8	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)
8.9	Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable--Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions