Wednesday, July 29, 2015

As Access Speeds Climb, Middle Mile, in Many Cases, Remains the Chokepoint

Revenue scale, or market potential, has been, and likely always will be a major issue for Internet service providers in areas with low population density, especially when population areas are highly isolated.

That basic problem exists for remote villages across South and Southeast Asia, Africa and elsewhere, including remote locations scattered across many parts of the Americas.

Bandwidth availability, at lower cost, essentially is a barbell, concentrated at the in-home or in-building level on one end, and then the major wide area network backbones on the other end.

In the middle are the access and regional networks, where ability to share costs is lower, and where free to low-cost local distribution (Wi-Fi, Bluetooth) is not possible. 

Those issues will not change fundamentally as Internet service providers ramp up local access network speeds.

EPB in Chattanooga, for example, says it eventually will offer 10 Gbps over its network, something the DOCSIS 3.1 protocol already incorporates as well. That suggests we are heading for eventual local access bandwidths up to 10 Gbps.

While that might allow a greater match between access and in-building distribution speeds, and where it is possible for backbone capacity on the major routes to scale rather gracefully, the middle mile, where business models are stretched, will become even more stretched.

As always, any significant bandwidth change anywhere in the end-to-end chain has repercussions in the rest of the network.

In-home or in-office distribution has not been a major issue for many decades, as local distribution tends to be the part of the network with the greatest capacity and the lowest cost to supply.

Backbone wide area network bandwidth on the major routes, historically, has been easier to supply, as the costs are shared very broadly across the complete set of potential customers. And sharing means lower cost.

All that means the access, middle mile and regional networks will continue to face upgrade issues, as we might well assume that local distribution within a premises or building will not be an issue, while the cost of adding lots of capacity to wide area networks is relatively simple.

As always, the access plant --with the least possibilities for sharing--is where the majority of cost lies.

Middle mile communications network costs are similar to costs faced in the airline industry, where the big city hubs are most efficient, and small towns the most-costly type of facilities.

The same economic problem exists in both industries: some lower-density locations represent difficult business models, since the destinations lack user scale, and therefore revenue scale.

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