Optical networks hit the suburbs

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By Stephen Lee

(IDG) -- With the economic downturn forcing companies to reduce expenses, some are fleeing their big-city offices in favor of cheaper real estate in suburban areas. But some are finding that fiber service is scarce in the suburbs. To address this deficit, several carriers are lining up to deliver optical connectivity to those areas.

The last-mile problem: Getting fiber from the local exchange into specific buildings is far worse in the suburbs than in metropolitan areas, says Sterling Perrin, an analyst at IDC in Framingham, Mass.

"As you move from Tier 1 cities to Tier 2 cities and rural areas, fiber becomes far less available," Perrin says. "A great deal of work needs to be done to get the fiber out even within the urban environment, and it's a compounded problem to get it out further."

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Gannett, the news giant that owns USA Today, is a case in point. The company is building a new headquarters for its USA Today operations in Tysons Corner, Va., a suburb some 15 miles from Washington.

"The cost [of moving to the suburbs] is driven by whether or not there happens to be fiber nearby already," says Eric Kuzmack, Gannett's CTO, and a member of InfoWorld's Corporate Advisory Board. "In our case, we were lucky. There was some fiber nearby, so they didn't have to string 40 miles of new fiber for us."

But in many cases, companies in the suburbs have little choice but to sign up for service with the ILEC (incumbent local exchange carrier). And according to Joe Cecin, COO at Cambrian Communications, an infrastructure provider based in Fairfax, Va., the lack of competition hurts customers.

"Verizon [the ILEC in many of Cambrian's target markets] takes a long time to deliver high-bandwidth services [in suburban areas]", says Cecin. "Their networks were optimized for voice only." Moreover, because of the lack of competition in suburban markets, charges for optical transport in suburban markets are much higher than in big cities, according to Cecin.

Cambrian has built a Cisco-based optical network covering the East Coast corridor to serve companies that flee cities such as New York and Philadelphia. The company's network, which has not yet been activated, will extend from Boston to Washington, servicing several Tier 2 markets in between.

The time is right for fiber in the area, according to Fronda Cohen, director of marketing at the Baltimore County Department of Economic Development in suburban Baltimore, one of Cambrian's key markets.

"A lot of companies are heading our way," Cohen says. She cited Baltimore-based investment firm T. Rowe Price and consumer-goods maker Procter and Gamble, with headquarters in Cincinnati, as examples of two companies that have recently moved to Baltimore County.

Cohen also said that businesses typically do not consider networking issues when they decide to move. "We're not seeing that companies are relocating because of fiber or a lack thereof," she says. "And there's significant business here already that needs to upgrade their [optical] capability."

Gannett's CTO Kuzmack agreed, saying that his company's decision to move to Tysons Corner was made independently of whether or not optical cable was available there.

"A technology company would probably move where the technology infrastructure is best. But for a traditional corporation, you move where the business dictates you need to move," Kuzmack says.

Cecin also claimed that laying cable in suburban areas is politically easier than in big cities. "Unlike in the Tier 1s, where you have six people tearing up the streets and the municipalities getting in an uproar, the communities that we're building into are happy to have us because they see it as an opportunity to bring new companies, jobs, and infrastructure to communities outside the core of the city," Cecin says.

But some observers disagree. For example, Steve Young, an analyst at The Yankee Group in Boston, says that construction permits are often more difficult to obtain in suburban or rural areas than in the metro core. He also noted that wiring office parks, the most common real estate for businesses in Tier 2 cities, is a lengthy, expensive process.

Even so, the demand for optical bandwidth in the suburbs is high enough to support a number of players. American Fiber Systems, in Rochester, N.Y., lays claim to one of the country's most ambitious suburban network buildouts. The company delivers optical transport to 131 midsize cities across the country, spanning such areas as upstate New York, California's Central Valley, and sparsely-populated states like Iowa and Nebraska.

To some, suburban networks represent a sound business strategy. "Carriers are saying, 'Let the big guys fight it out over the Tier 1 customers, and we'll go into these suburban areas. Instead of having a national footprint that will require a lot of capital, we'll win city by city, area by area,' " says T.J. Fitzpatrick, president and CEO of Valiant Networks, a network consulting firm in San Jose, Calif.

Others believe that suburban buildouts are simply the result of financial troubles in the carrier market. "It's being driven by the scarcity of capital to do aggressive buildouts [in metropolitan areas]," IDC's Perrin says.