Depreciation Lives for Fiber Optic Cables in the Local Exchange

• Today's embedded standard single mode fiber cables are already obsolete for high-density, long-haul applications and may also become so in the local exchange.
• There are three types of advanced fibers available today that have significant advantages when CWDM or DWDM are utilized.
• TFI forecasts that approximately 95% of U.S. households will be online by 2020, and almost all of these will be broadband users.
• Presently, there is very little fiber in the distribution plant. The timing of placing distribution is late enough that, in all likelihood, it will be advanced fiber. With long-haul fiber already using advanced fiber and newly placed distribution fiber also being advanced fiber, a bottleneck will be created in the middle of the network that contains the most outdated single-mode fiber.
• TFI forecasts that, by 2010, ILECs will provision one-third fewer access lines than today, and that, by 2015, less than half as many. Competition will strand large quantities of network equipment — including fiber cables, reducing the economic life.
• TFI continues to recommend a projection life of 15 to 20 years for non-metallic cable.

• Incumbent local exchange carriers
• Competitive LECs
• Interexchange carriers
• Internet service providers
• Telecom equipment manufacturers
• Regulatory personnel
• Depreciation professionals

Chapter One: Introduction and Executive Summary

Depreciation Background

Physical Mortality

Technology Obsolescence

Technology-Driven Substitution

TFI Recommendations for Non-Metallic Cable Depreciation

Chapter Two: Mortality Analysis

Aging

Hazards

Mortality Curves

Chapter Three: Competitive Factors

Competition from CLECs

Competition from Cable Television

Wireless Competition

Competition from Broadband

Forecasts for Competition in the Local Exchange

Chapter Four: Technology Obsolescence

Background

Technical Issues

Advantages of Advanced Fiber

Full Spectrum Fiber

Chapter Five: Demand-Driven Substitution

Background

Demand-Driven Forecasts

Chapter Six: Technology-Driven Substitution

Chapter Seven: Conclusions

Appendix: Forecasting Methods

Example

Impact of Competition

Estimation of Depreciation Lives

Contrast with the Mortality Approach

List of Exhibits with Featured Graph

Figure 1.1 Age-Survivor Curve for Fiber Optic Cable

Figure 1.2 Survivor Curve (Installed Base)

Figure 1.3 Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable — Based on Distribution Fiber Adoption Scenarios

Figure 1.4 Mortality and Technology Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions (Not Accounting for Competitive Impacts)

Figure 1.5 Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Middle Scenario Distribution Fiber Adoption

Figure 1.6 Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable — Based on Interoffice and Feeder Fiber for Metallic Substitutions

Figure 1.7 Mortality and Technology Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions (Not Accounting for Competitive Impacts)

Figure 1.8 Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions

Figure 2.1 Age-Survivor Curve for Fiber Optic Cable

Figure 2.2 Survivor Curve (Installed Base)

Figure 3.1 U.S. Residential Switched Access Lines (Narrowband), Millions of Lines by Type

Figure 3.2 U.S. ILEC-Provisioned Residential Switched Access Lines (Includes UNEs and Resale), Millions of Lines — Narrowband and Broadband

Figure 4.1 North American Data-Rate Projections

Figure 5.1 U.S. Broadband Households — TFI 2002 Forecast

Figure 5.2 Analog Modem and Broadband Data Rates

Figure 5.3 U.S. Broadband Households by Data Rate

Figure 5.4 Broadband Minimum Availability — 24 Mb/s & Above

Figure 5.5 Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable — Based on Distribution Fiber Adoption Scenarios

Figure 5.6 Mortality and Technology Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Middle Scenario Distribution Fiber Adoption (Not Accounting for Competitive Impacts)

Figure 5.7 Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Middle Scenario Distribution Fiber Adoption

Figure 6.1 Substitution of Advanced Fiber for Standard Single-Mode Fiber Optic Cable — Based on Interoffice and Feeder Fiber for Metallic Substitutions

Figure 6.2 Mortality and Technology Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions (Not Accounting for Competitive Impacts)

Figure 6.3 Combined Survivor Curves for Standard Single-Mode Fiber Optic Cable — Technology Substitution Based on Interoffice and Feeder Fiber for Metallic Substitutions