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Most of the available bandwidth on major transport routes throughout the United States will be consumed within three years, according to findings in a new study released Monday by telecom consulting firm TeleChoice.
The study, which was done with cooperation from major network carriers, examined 22 routes between the 12 largest cities in the United States, and concludes that the so-called “bandwidth glut” is largely a myth.
Among the studies findings:
- 63 percent of the fiber optic routes between major cities are “at or near capacity now.”
- On 14 of those routes the networks operate at 70 percent of their capacity.
- Only four major routes show an excess or “glut,” of capacity.
The studys conclusions challenge popular wisdom on Wall Street and within the telecom industry that a vast over-capacity of fiber optic cable is already in the ground, and that most of it wont be used for years to come. That view has affected decisions on capital availability for network expansions as the economic downturn has deepened.
“The assumption has been that there is so much fiber in the ground, that we could never use it all,” said Russ McGuire, chief strategy officer for TeleChoice. “But we found that, with some reasonable assumptions, we could use it all as early as 2003 or 2004.”
Jeff Kagan, an independent telecom analyst, agrees with the TeleChoice findings. “We are in a transition right now. Lots of companies that have an investment in the way things were are the ones who say we have a bandwidth glut. And the realities of Wall Street are not the realities of communications and technology marketplace. Bell South had an announcement today about a voice recognition platform, in which consumers are going to be speaking directly to databases to obtain information. That kind of technology requires a tremendous amount of bandwidth.”
McGuire said the study evolved out of client work done earlier this year. He said a major telecom carrier asked the consultants to take a look at where it should spend its money on infrastructure, given the tight capital markets and a lack of information on where there was an excess or shortage of long-haul transport capacity.
Tagged the Model for Advanced Capital Planning (MadCap) — the study was expanded over the past several months to apply the analysis of supply and demand issues to planning needs for equipment vendors as well as other long-haul carriers. The company began marketing the study Monday at a base price of $2,500.
It concludes that the telecom industry will need widespread upgrades in network capacity over the next several years, and that “several routes require upgrading immediately.”
McGuire said the study looked at three possible economic scenarios that long haul and local transport carriers, and equipment vendors, need to consider in adjusting their business plans to the fiber capacity issues:
- Capital markets remain closed to long haul and local-metro networks, in which case demand continues to be constrained by bottlenecks. Demand would continue to grow, but not at the explosive rates anticipated by increased capacity.
- Capital markets reopen rapidly to all infrastructure telecom development, breaking the bottlenecks and allowing supply to increase faster than demand.
- Capital markets reopen for local infrastructure development – the last mile access – but not for long haul infrastructure. This vastly increases demand on the long-haul networks. Under this scenario, the study anticipates that major carriers would upgrade existing networks rather than take on new, large construction projects, and would keep capacity only slightly ahead of demand.
The study looked at routes between Atlanta, Boston, Chicago, Dallas, Denver, Houston, Los Angeles, Miami, New York, San Francisco, Seattle and Washington, D.C. The study said it focused on “the demand for capacity that the service networks place on transport networks, and the supply of capacity that exists on those transport networks.”
The study looked at 28 demand applications that used network capacity, which included web browsing, email, music downloads, film distribution, instant messaging, interactive gaming, mobile wireless voice long distance and mobile wireless data, hosted network data applications, teleconferencing, television back-haul, and others.