Does High Tech Require High Fiber?

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Such providers risk simply becoming online access pipes as users go out and find the content they want themselves. Even if people do buy the packages, price wars could damage profits. "Everybody is scrambling for differentiation, for unique content, to find out what it is people will pay for," says Savage at the ftth Council. "It's a huge gamble."

Verizon vice president of Internet and technology policy Link Hoewing says that Verizon's triple-play packages will engender user loyalty. He points out that more than 60% of Verizon's fiber customers are buying services that include high-end set-top boxes with digital video recorders (dvrs) and hdtv, and that 80% of its customers who buy TV are also buying phone and Internet services. Verizon seems to be on the right track. Late last month it said it expects to have 725,000 fiber-optic Internet customers by the end of the year and about 7 million by 2010 — a 5-10 percentage point increase from its earlier projections. It also projects that about 175,000 will take TV services this year.

Verizon could also charge extra to either content providers or end users who would gain access to special high-speed products like video games, a prospect that alarms some people who claim it begins to shut off the open Net to which users have become accustomed. In the U.S., Verizon has faced several regulatory battles. Oregon Democratic Senator Ron Wyden, for instance, is holding up a telecom reform bill sponsored by Republican Senator Ted Stevens of Alaska. Wyden wants to assure that Verizon and others keep their networks equally open to all and don't favor users or content providers who are willing to pay a premium. European regulators have similar concerns.

For those and other reasons, many big telecom providers are staying out of the fiber game. No one is questioning the need for faster speeds, but companies including BT in the U.K. and Deutsche Telekom in Germany are continuing to improve their use of copper by deploying variations of dsl that can deliver speeds of between 24 and 50 Mbps — or as fast as fiber in some cases. And cheaper wireless Internet technologies like wi-fi and a stronger version called WiMax could also help lessen the need for fiber.

Jonathan Coham, a London analyst with telecom market-research firm Ovum, says Eastern Europe, for example, will avoid fiber altogether through 2010 in part because wireless technologies will be more affordable. Although BT is putting fiber into new housing developments where construction companies are digging water, gas and other utility trenches that can easily accommodate it, the British carrier is not spending to run fiber all the way to existing copper-wired homes. "When we look at what applications justify it, we have yet to find one,'' says Petri Allas, BT Group's corporate strategy director.

Whichever technology wins out, fiber providers can take heart in knowing that their users care. "How can you not be satisfied that Free is stirring things up?" says Free user Roy in Paris. "Fiber optics at 50 Mbps can only make people happy." Now someone needs to figure out how to make it pay.