The opportunities for structured cabling professionals in the burgeoning home market are endless, assuming, of course, that they know how to provide cradle-to-grave installations for triple-play data, voice and video services. If not, they are surely to miss out.
March 1, 2007
The race to the front door has finally begun in earnest. The construction of that last mile needed for broadband delivery of all of the Web’s bounties to the home has been inching along for years. While carriers worry about their build-out strategies, the pressure is mounting. Consumers want more and more bandwidth-gobbling goodies: HDTV, video streaming, digital music, interactive gaming.
So what will the impact be on the structured cabling sector when the floodgates open?
Technology soothsayers have been predicting a surge in demand for high-end broadband services for years.
However, a chicken and egg situation has prevailed: carriers have dragged their feet about building big pipes to homes, waiting for spikes in consumer demand to justify spend; but without big pipes to deliver premium services, consumers are not interested in paying more money.
Several trends indicate this impasse will change dramatically in the near future. In the U.S., the Federal Communications Commission (FCC) has sounded the death-knell for analog television, mandating a switch to digital broadcasting by 2009. “There is no edict here in Canada, but we’ll follow the U.S. market,” says Carmi Levy, senior research analyst at London, Ont.-based Info-Tech Research Group.
Industry insiders say this will set the stage for mass adoption of HDTV, which in turn will spur demand for more broadband access. Currently, cable leads in broadband delivery in North America, and pressure is already reaching critical mass.
At the of Cable Telecommunications Engineers ‘s 2007 Emerging Technologies show held in Houston in January, cable companies said a new bandwidth crunch is coming from the surge in HDTV, which requires almost four times as much bandwidth as standard digital TV. Panelists also cited the sudden rise of YouTube, which serves 120 million video streams per day and draws more than 34 million users per month.
The crunch will continue to intensify. In the U.S. for example, sales of large LCD televisions were spectacular last Christmas, spiking at 297%t in unit sales on Black Friday, according to consumer research by the NPD Group.
And these first-generation models are evolving. “High-definition is defined as one million mega-pixels, but the models coming out in 2007 have two million — and the human eye can detect 20 million,” says Richard Smith, the Moncton, N.B.-based director for BICSI’s Canadian region.
Entertainment is a key driver in demand for more bandwidth as a fundamental shift is underway, says Levy. “We’re moving from using the Web for simple surfing to using it as the basis for a richer, interactive media experience. It is now the place where we spend most of our free time, instead of television, radio or the movies. Consumers are starting to see what convergence really means.”
Consumers also have pragmatic considerations as they grow more educated about digital services, says Michael Cai, research analyst at Parks Associates, a Dallas, Tex.-based research consultancy.
“There are certain appli-cations they don’t realize are supported by broadband, for example, VoIP. They may not want to get broadband, but want VoIP to save money on voice services.”
Teleworking is a growing trend that also fuels demand. A major shift is underway in the workplace as more and more people work from home. In a 2006 survey conducted by Harris Interactive, 16% of hiring managers said they would allow workers to telecommute.
Levy points out that Canada’s economy is driven by SMB enterprises, so home offices will take root sooner than in the U.S. “This is how people will work in the future, and they’ll need the infrastructure to support that,” he says.
Interest in “smart” automated buildings that connect home systems and appliances to a central control hub is also on the rise. Often perceived as luxury technology, this area is becoming more affordable. “Only .001% of consumers want this to turn on their hot tubs remotely, but there are thousands of practical applications,” says Ron Zimmer, president of CABA (Continental Automated Buildings Association), an Ottawa-based industry organization that supports and promotes smart building automation.
He says one growing area that is providing hard-nosed incentives is home energy management. People are feeling the pain of skyrocketing energy prices.
Levy agrees, adding that, “this will probably be the first killer app in this space. Consumers get it — this will save them money.” AT&T has already launched a remote home-monitoring service this year to let users control home lighting and appliances via live video for $10 per month.
Video streaming is also starting to serve home purposes beyond entertainment. “The future is security,” says Zimmer, pointing out that security cameras are relatively inexpensive and more easily networked today. From checking up on baby to letting the delivery guy into the house remotely from a home office, home security cameras can save time and worry on a number of fronts, he says. Home monitoring for the elderly is also starting up as more and more people sandwiched between generations look for solutions in providing home care.
Demographic change will also play a major role in spurring broadband. As Mike Capuano, a senior marketing manager with Cisco Systems Inc. puts it, “There are more consumers coming into world who need broadband than exiting it.”
Smith, meanwhile, says the MTV generation is growing up on all this whiz-bang technology: “I look at my 12-year-old daughter who MSNs dozens of friends, while watching HDTV with headphones on listening to iTunes — and she’s just one person in the house. The hunger younger generations have to interact with friends, devices and systems is not going to diminish. It never has in my lifetime.”
Who will rule the waves?
While Canada leads other G7 countries in broadband penetration, there is still a huge untapped market. About 22% of Canadians have broadband, with cable modem access leading over DSL by a slim margin, according to a 2006 OECD study.
What that means is that telcos and cable companies are locked in a ferocious battle for supremacy. “Whoever controls that last mile, controls the rules of the entire game,” says Levy, pointing out utilities are also butting into this space with broadband over power line (BPL) offerings. Wi-MAX, an untested but much-hyped wireless technology with a range of about 30 miles, is also a contender.
Both telcos and cable companies have fiber-optic backbones, but cabling to homes is largely twisted-pair and coaxial, which are still good enough for most of today’s services. But bigger pipes will be needed to deliver future bandwidth-gobbling applications. “If you look at bandwidth consumption, studies show it’s almost doubling every 24 months,” says Trevor Smith, program manager for FTTX solutions at Eden Prairie, Minn.-based ADC Telecommunications Inc. “So if carriers are planning a network to support 30 Mbps, they many find that’s obsolete in five years.”
Carriers face a strategic dilemma, he says. They must guesstimate what their bandwidth requirements will be for the next five to 30 years to attract customers, then decide what strategy they’ll adopt to build out their networks: extending their existing copper and coaxial bases, laying fiber to the home (FTTH), or laying it somewhere in-between to nearby nodes to edge closer to consumers.
But investors will cast a baleful eye on infrastructure investments that won’t show a return for many years. While FTTH is the most future-proof option, it is also the one that is most expensive and takes the longest to deploy, says Smith.
To complicate matters, the CRTC is considering legislation that will force incumbent telcos to share their fiber with cable companies and other competitors. Telcos have protested, pointing out they’ll have no incentive to expand their fiber infrastructure if they cannot recoup their investments.
This is a worldwi
de issue, says Joe Savage, president of the FTTH Council, an advocacy group based in Portland, Ore. In the U.S., it was resolved by a Federal Communications Commission (FCC) ruling that allows carriers who invest in new access infrastructure to retain sole control — which means other carriers will have to duplicate fiber for home access instead of sharing one infrastructure. “Verizon and other carriers said, hot dog, so fiber deployments are really taking off in the U.S.,” says Savage.
In Canada, a similar boom may occur depending on how the CRTC rules and other developments. “From the market reports I’ve seen, I think the Canadian boom for FTTH is probably in the 2008-2010 timeframe,” says Smith.
He says there is a relationship between increased broadband and home networks. More broadband piped into homes leads to more home network implementations to shuttle the signals throughout the house.
Many families have two or more home computers and televisions, and want the option to work or access entertainment in any room.
Also, the concept of networking is moving from the office to the home to enable families to share a range of peripherals such as back-up servers, printers and cameras, says Levy. Broadband sharing will be the driver for increased home network adoption as multimedia applications become more widespread, according to a 2006 IDC study.
New home buyers are expressing interest when developers present wired infrastructure as an option at the construction phase, particularly if the costs are factored into the mortgage, says BICSI president John Bakowski.
Info-Tech’s Levy agrees. “I see a strong business in the new home market — but not much in retrofitting,” he says, pointing out these homeowners typically opt for Wi-Fi since it’s much cheaper and easier to install.
According to Frank Koditek, a product marketing manager with Belden Inc., cabling for new homes is still primarily copper.
Copper and coaxial can deliver about the same amount of bandwidth as fiber, but only over short distances of about 100 meters, he says. While the costs of the actual cabling for copper and fiber are fairly close, the electronics and termination equipment needed for fiber are more expensive.
But consumer awareness that fiber is a better and more future-proof option is catching on, says Savage.
He says fiber received the highest rating for quality in broadband delivery in a recent survey conducted by Consumer Reports magazine. Fibered communities are more attractive to homebuyers, and landlords can charge higher rents for fibered multi-dwelling units.
Research shows that growth in home wiring will be steady but not dramatic, says Cai. In the U.S., the number of households with a data network increased from 2.5 million in 1998 to more than 20 million in 2006. “Growth will be in new homes and wealthy people who can afford retrofits. The majority either can’t afford wiring or have alternatives like Wi-Fi or Broadband over powerline (BPL),” he says.
Fiber to the curb
Carrier and home network build-up for broadband will have salutary effects on the structured cabling sector, but it also comes with some challenges for ITS specialists.
In the U.S., high-tech installers are in great demand, particularly in the urban centres of the North-east and South where carriers are focusing their efforts, says Bakowski.
But there is less activity in the more sparsely populated North, which is similar to Canada. “I’ve noticed cable companies are installing a lot of fiber to the curb in Canada, but fiber for the last mile — I can only see that happening in new sub-divisions in the near future,” he says.
But he sees good prospects in the home technology market. If people are going to pay more for HDTV and premium services, they are going to want the best signals they can get via high-performance home networks, he says.
For these installations, consumers prefer to deal with only one specialist who does the entire job, says Adam Welch, a manager at Everett, Wash.-based Fluke Networks, which provides testing tools. But many are using electricians or security alarm installers who may not necessarily have the right expertise.
To establish themselves as the best providers in this space, installers need to upgrade their skills to provide cradle-to-grave installations for triple-play data, voice and video services. “They need to know all the design parameters that will give the customer the optimum performance for what they’re paying,” says Bakowski. This means understanding all related technologies — copper, fiber, wireless and BPL, evaluating the home’s physical infrastructure and environment, and learning how to troubleshoot problems.
One key departure from an installer’s traditional approach is the need to understand electromagnetic (EM) fields and how they can interfere with data flows, warns BICSI’s Smith.
As more and more devices get plugged into systems, current flows create more magnetic fields around electrical conductors. “For example, a jack in the bedroom carrying both voice and Web, if those wires pass through a magnetic field created by some old fridge motors, it will destroy the data signal,” he says. Installers can no longer rely on physical elements they can see when they’re installing wires; they need to analyze and test the room’s EM environment with tools.
Industry insiders say accounts of botched installations are accumulating, as are stories of sub-contractors who inadvertently cut through wiring after successful installs.
To protect installers, there are tools that test and document to ensure the cabling performs to standards and worked properly when installed. “So installers are protected from the liability of others coming in and messing up their work,” says Welch.
Another issue is that many existing computers are calibrated for slower speeds. When dealing with fiber networks, installers must expect to spend time ensuring computers work at higher speeds, as these will not magically adjust for broadband, says Savage. “Verizon made a decision that technicians don’t leave the house until the computer operates at 10-15 Mbps,” he says, pointing out this means fiddling with Windows, Ethernet cards and other network elements until the system operates at the speed at which the access arrives.
Demand for skilled installers, particularly good ones, will continue to grow, says Bakowski. “It’s an exciting time to be involved in this area, but five years from now there will be new stuff so installers must keep up.”
Rosie Lombardi is a Toronto freelance writer. She can be reached at firstname.lastname@example.org.