Too little, too late, for the local loop?

The news this week that Canberra-based TransACT was going to start rolling out fibre-to-the-home (FTTH) services it announced in May, was at first intriguing.

Hearing that TransACT will go live with the service by the end of the month, I believed for a split-second that this was the flood to break Australia's fast-broadband deadlock.

Like the proverbial Ferrari, I imagined rivals following suit by pouring funding into their own FTTH rollouts. After all, if Canberra can do it, surely other areas around the country can manage it as well?

Then I read about the scope of TransACT's little project. Although it's offering cutting-edge technology, the company only expects to offer that technology to 1500 homes in the new suburb of Forde by 2013.

That's 214 homes, or fewer than 500 people, connected to these services on average per year. That kind of rollout isn't going to break any kind of drought at all -- especially if download speeds over the network are limited to 10Mbps, as TransACT describes.

I've had a 10Mbps cable connection for many years now, so I have to ask: Why is the undeniable promise of a proper FTTH rollout being compromised by such lackadaisical specifications?

To be fair, TransACT is also talking about a 30Mbps service, but this and faster speeds, as I pointed out recently, are already attainable over less expensive cable networks, which combine fibre and cable-based last-mile connections to carry data at up to 100Mbps.

Assuming that fibre is more expensive than cable and copper on a per-kilometre basis, where's the business case for an FTTH rollout that doesn't deliver anything other technologies already can?

Even Telstra this week showed that fibre isn't the only way to get higher bandwidth, after confirming it would upgrade 1.7 million cable services to support 30Mbps connections by year's end.

Of course, this does little for anyone who doesn't already have Telstra cable, since the company isn't expanding its cable network's reach so much as upgrading infrastructure to provide more speed to people that are already online.

Not that there's anything wrong with that -- but building layer upon layer of similarly specced data services doesn't really seem like the way to service new markets.

TransACT's fibre-based approach could potentially offer lightning-speed connections, but that carrier's extremely modest ambitions will relegate that project to irrelevance for anybody outside of a few square kilometres of the Canberra suburb.

The worst part about all of this is that technology-driven announcements like these mask the real problem: carriers simply aren't spending on wired networks, still a mandatory service for billions of people, like they used to.

Telstra has made no secret of its desire to tie further network investment to its ability to get the regulatory environment it wants, and its latest full-year results confirm it's not just a bluff. Overall capital expenditure increased from AU$4.303 billion in fiscal 2006 to AU$5.982 billion in fiscal 2007, the increase was explained by AU$1.015 billion spent on the new Next G and Next IP networks, and AU$449 million on "intangibles mainly due to development and acquisition of IT software assets".

In other words, Telstra is spending basically nothing on its existing networks, shifting capital to newer, closed services. What we haven't heard, until recently, is that Telstra's position may be less unusual than we think: an Ovum report out this week found that North American telcos are also slashing their wired network spending. My unsettling conclusion: the landline is well and truly on the way out.

That's a harsh future for a technology that has served the world for a hundred years, but it reflects the shifting market realities that carriers face.

Sure, xDSL technologies will continue to run over the local loop for some time, but that local loop will continue as a patchwork assemblage of old services rather than a completely new local loop. If you can't already get xDSL, it appears, the odds are that you never will.

It won't happen overnight, but with this kind of treatment the copper loop will simply fade away into obscurity, with customers forced onto better-funded mobile networks for broadband and phone services -- not because they're better, but simply because they work.

Here we are, then, between a rock and a hard place: FTTH works great but it's too expensive for a general rollout. Mobile networks have their appeal, but they honestly were not designed as a full-term replacement for the local loop. What, then, is the best way forward? Or, more worrying, is there even one?