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Don't expect video to exhaust fiber glut

Bandwidth prices stabilizing based on additional factors, consolidation

By , Network World
February 15, 2007 12:12 PM ET

Network World - Cisco says that in 2010, just 20 homes using the latest broadband technology to access video content will generate enough traffic to equal the entire load on the Internet in 1995.

Juniper says YouTube already generates traffic equal to the entire Internet load in 2000.

Indeed, the widely held assumption is that the explosive growth of video across the Internet will quickly exhaust excess capacity and spike bandwidth prices that have dropped almost 60% per year for the past three years. But so far, this has yet to prove out.

Not everyone believes the widely reported “fiber glut” of the late 1990s and early 2000s will be exhausted by video, prompting a spike in the price of retail and wholesale bandwidth. Some believe video will hardly make a dent in excess capacity but that pricing will stabilize based on other factors, such as industry consolidation creating fewer suppliers.

“In long haul, there is still plenty of fiber,” says Andrew Odlyzko, director of the Digital Technology Center at the University of Minnesota. “If you look at the total Internet traffic in the U.S., it could be squeezed down one or at most two fiber strands. And on most routes you have hundreds of strands.”

David Rusin, CEO of American Fiber Systems, a Rochester, N.Y., provider of lit and dark fiber resources, agrees that fiber is plentiful. “Now what’s happening with consolidation, which affects supply. . . that could have an impact if [carriers] no longer provide dark fiber.”

Insight Research did a study back in 2001 of fiber utilization among 13 major long-haul carriers. Data was culled from fiber pairs in 24 major cities.Only 7% to 8% of the total capacity was used, and of that only 3% to 4% was actually lit, says Robert Rosenberg, president of Insight Research. Historically, utilization has been more like 30% to 40%, he says.

“It was really a small percentage of the capacity in the ground," Rosenberg says "You said to yourself, ‘Gosh, this thing is never going to go away.’”

Tracking traffic

Couple with that the slowing growth of Internet traffic. Even though the rate of video growth has been increasing – Level 3 says 50% to 60% of the traffic across its IP backbone is video, compared with 5% to 10% five years ago – the overall growth of traffic on the Internet has slowed to 50% per year from 100% or more in the heady days of the bubble.

“Back in those days, everybody was putting in as much as they could and it made sense,” says Clif Holliday, an analyst with Information Gatekeepers Inc. (IGI). “There’s probably an awful lot of excess fiber in the ground.”

According to IGI, Internet traffic is expected to grow 45% to 50% per year until 2010. The major feeders of traffic on the Internet backbone will be high-speed DSL and cable modem broadband access lines, international transactions and fiber-to-the-premises (FTTP) lines.

File sharing is a major component of high-speed traffic, and the largest segment of file sharing is video, according to IGI. But video file sharing will be dwarfed by FTTP traffic in the form of IPTV, especially high-definition IPTV, Holliday says.

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