According to Deloitte, the United States requires an investment of $130 billion to $150 billion in fiber infrastructure over the next five to seven years. The research house believes that investment in deep fiber (i.e., fiber in the access network closer to the end customer) can unlock the full potential of the opportunities associated with fifth generation mobile network (5G) while also enhancing broadband competition and rural broadband coverage.
Deloitte says a 5G-ready communications infrastructure could dramatically stimulate economic productivity in the United States. The research house stresses the need for new investment and monetization models to support rapid and massive fiber investment.
"Network infrastructure is among the key factors in a nation's economic growth potential and status as an innovator, and ultimately in propelling our economy's gross domestic product and job growth," said Craig Wigginton, vice chairman and telecommunications sector leader, Deloitte & Touche. "We see a 5G-ready U.S. infrastructure as critical to enabling a range of other adjacent industries to compete globally and safeguard our digital economy."
For carriers to support the projected fourfold increase in mobile data traffic between 2016 and 2021, deep fiber will be critical, Deloitte says. Despite the expected demand and potential economic benefits of fiber deployment, the U.S. currently lacks the fiber density in access networks to make the bandwidth advancements necessary to improve the pace of innovation and economic growth.
The research house says deep fiber deployment will not only increase broadband service choice for residential customers, but it will also be key for the national infrastructure needed to provide consumers high-speed broadband connections no matter where they live at prices they can afford to help close the "digital divide."
"It is essential that fiber gets deployed closer to the customer to enable next-generation wireless and to ensure affordable high-speed connectivity across urban, suburban and rural geographies," said Dan Littman, principal, Deloitte Consulting. "Motivating this investment requires the removal of legacy regulations, faster migration to IP networks, and new monetization mechanisms that allow carriers and investors to justify upfront investment in fiber."
Deloitte says fiber currently passes less than one-third of U.S. homes, and only 39% of consumers have access to more than one broadband provider of at least 25 Mbps service. Approximately 10 million rural homes and 3 million urban/suburban homes do not have broadband of at least 25 Mbps. In rural communities, only 61% of the population have access to 25 Mbps wireline broadband, and when they do, they can pay as much as three times more than suburban customers.
The research house says failure to motivate investment in deep fiber could result in negative consequences, including insufficient network densification to support wireless traffic growth, 5G deployment and associated use cases, lack of choice for consumer broadband, and the widening of the digital divide.
In addition to establishing deep fiber as a top priority investment for the long term, carriers could enhance their ability to realize cost savings by adhering to a transformation program that creates industry standards for IP product mapping to substitute legacy products, and investing in digital processes aimed at faster product development and provisioning.
Deloitte believes U.S. policymakers should consider:
- Eliminating regulatory barriers that prevent carriers from operating a single IP network, impede deployment of additional fiber assets, or restrict the types of services that may be offered
- Avoiding regulation that limits carrier innovation in creating new monetization mechanisms
- Reforming the Universal Services Administrative Company internal operations to meet broader goals of expanding fiber infrastructure and addressing rural Internet access to close the digital divide
The research house says IP migration and regulatory reforms, while important, will not be enough to create the case for fiber deployment. Wireless, wireline and cable require creative new ways to monetize "last mile" access as an incentive for massive fiber deployment. Deloitte suggests three potential models:
- Synergies between deep fiber and adjacent services in an "unlimited" world: Gartner predicts that affluent households will have up to 500 connected devices by 2022. In some cases, IoT services offer the prospect of new revenue. However, most connected devices will require low bandwidth or be WiFi-enabled and, therefore, may not provide carriers with incremental revenue. In such cases, carriers have an opportunity to increase revenue by offering integration, network security and traffic management services within the increasingly complex mix of IoT devices and ecosystems.
- Partnership between carriers and OTT players to fund deep fiber: As limited fiber availability constrains increased wireless densification and fiber broadband, over-the-top (OTT) players may choose to fund fiber deployment, including owning assets or forming partnerships with carriers.
- Deep fiber as a financial investment: Insufficient supply of deep fiber and overwhelming demand growth are strong fundamentals for fiber investment. As interest grows from nontraditional fiber investors, Deloitte expects shared infrastructure models to emerge for last mile fiber access. Fiber as leased real estate could allow carriers to maximize asset utilization.
