Commentary: Telco pipe dreams

By Kathie Hackler, Gartner Analyst

The holy grail for local phone companies has always been (and continues to be) putting voice, video and data into consumers' homes through one pipe--a pipe that they provide, own and control, naturally.

	See news story: SBC looks to fiber for superfast Net speeds

Since their divestiture from AT&T in the mid-1980s, the big, incumbent phone companies have been experimenting with technologies to bring about this "pipe dream." First, the answer was a fiber-coaxial cable hybrid that proved too costly for payback. Then, the solution was said to be digital subscriber line (DSL), which brought about its own problems, such as lower-than-advertised speed and slow service rollout. Now, the "one true way" is to deploy cable to the home--but the telcos can't justify the huge cost to wire U.S. cities and suburbs.

There is a more prudent, if indirect approach--via Gigabit Ethernet, where the home-market effort can be piggybacked with networks in the business market. This approach will give SBC Communications and other big local phone companies the opportunity to target a select few residential areas where the payback would justify the investment. The trick will be staying ahead of the oncoming commodity evolution of the Gigabit Ethernet market--a market that Gartner Dataquest expects will have its own problems in infrastructure and deployment. Ethernet has proved its mettle for data, but not for voice and video.

Fiber to the home does make sense in new housing developments. A sticky issue, however, will be providing services comparable to those in other neighborhoods at a reasonable cost. Gartner doubts that will happen--there's a dearth of compelling revenue opportunities. Another concern is regulatory oversight. Will regulators compel SBC and its fellow incumbent phone companies to share their cable infrastructure with competitors? If that's the case, there's little motivation to make the investment, as in the case of the curtailing of SBC's Project Pronto plans in Ameritech territory.

Entire contents, Copyright ? 2001 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.