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February 12, 2010

Maximizing the Stimulus Funding

By Dr. Alan Solheim,

The first round of the stimulus funding announcements are out, and reading through the project descriptions one sees frequent reference to fiber based technologies, but very little of other technologies.
While it is good news that the stimulus funds are finally being allocated, the focus on fiber leads one to wonder if the monies are being used as efficiently as possible. Surely a combination of technologies, both wireline and wireless, would result in the most economical network. If we look at other countries deploying broadband networks to provide services in underserved areas, we find that fiber is only the dominant technology where local labor costs are so low that fiber installation is virtually free, or where the economy is controlled centrally and not driven by market forces to deliver the most economical solution.
A good example of this tradeoff is the comparison between fiber and microwave as technologies for middle mile solutions. Perhaps it is worthwhile here to review the basics. The extension of a fiber network is dominated by the construction cost of the fiber build – the digging of the trench, stringing the aerial cable or threading the cable through a pre-existing duct. Of these, digging a trench is the most expensive and using pre-existing duct work is the least expensive.
Typical fiber build-out costs start at $30,000 per mile in rural deployments and can be more than 10 times this ($200/ft) in dense urban deployments. The fiber equipment costs can vary dramatically from a few hundred dollars for a PON terminal to tens of thousands of dollars for a higher capacity router or SONET add/drop multiplexer. For longer fiber lateral builds, the construction costs tend to dwarf the cost of the equipment that is required on the end of the fiber to enable broadband data transmission. The cost to purchase and install the fiber optic equipment and any ongoing right of way or maintenance costs would be in addition to this.
In contrast, a packet microwave link has certain startup costs related to the equipment and installation, but does not change with distance up to the limit of the system reach (typically five to 10 miles, depending on a number of factors). In addition, the packet microwave system has some on-going costs required to lease space for the antenna on the tower or building and pay for the spectrum license.
The Net Present Value for the total cost of ownership for a packet microwave link, including capital, installation and space and spectrum lease will range from $25,000 to $35,000 (five-year NPV, 15 percent discount rate, 2 ft antennas, <500 Mbps connection). Again, maintenance costs would be in addition to this, just like the fiber case. Packet microwave solutions can deliver hundreds of Mbps per end site, or Gigabits per connection in the middle mile or aggregation layer of the network. It seems clear that where the connection lengths are more than a few thousand feet (i.e. in the underserved rural markets that are the target of the stimulus funding) that packet microwave is a significantly more economical way to deliver broadband middle mile and access connections.
Similarly, wireless access solutions can provide a much lower cost broadband connection than Fiber to the Premise and are able to serve both fixed and mobile/nomadic users. Given the advances in radio access solutions such as WiMAX, HSPA+ and LTE (News - Alert), the user experience can meet all of the funding objectives. For low teledensity areas, these technologies are even more desirable as one can increase the cell radius at relatively low cost in order to include more subscribers, whereas the installation cost for fiber is linear with distance. The issue here is access to spectrum for the access layer.
Again for underserved regions, spectral congestion should not be an issue, but access to that spectrum may require some sort of open access legislation, similar to the open access rules for the traditional copper wireline plant controlled by the large ILECs.
As the projects funded by the stimulus program move from approval to implementation, there needs to be a renewed focus not only on speed of deployment, but on efficient use of public money. The objective of the broadband stimulus programs should be to provide not only a short term construction boom, but a long term sustainable broadband infrastructure that can have a significant impact on the competitiveness of the underserved areas of the country.
An appropriate selection of the best technology for any given application can deliver more bang for the buck and push the broadband network much further into the underserved regions. The winners in the stimulus lottery do have freedom in the technology they choose to deploy. Building the most economical networks makes not only good use of public money, but will ultimately make their businesses more profitable.

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Edited by Amy Tierney