The Next Scarcity Crisis

“While Congress and the watchdog groups focus on solving the crisis in energy scarcity,” notes one of our small-cap chaps, Greg Guenthner, “a sleeping problem is creeping up from behind — bandwidth scarcity.

“Already, the information networks that carry your television programs, phone calls and e-mails are nearing capacity… and without investment today, AT&T expects the Web to reach full capacity by 2010.

“And that’s nothing — we’re already projecting bandwidth needs to increase 100-fold by 2015… These important deadlines are creeping up on everyone involved in the bandwidth biz. Giants like AT&T and Verizon are prepared to lay down mountains of money to increase Internet capacity across the country. Unlike a decade ago, they won’t be doing it by laying traditional metal wires. The future is in fiber optics.

“Fiber optics are superior in nearly every way to the metal wires that likely feed data to your home. Fiber-optic cables carry more data than traditional cables, and they do so farther, at a lower cost and with less interference. Instead of running electrical signals through a metal wire, fiber optics work by carrying pulses of light through flexible glass or plastic fibers.

“Of course, the transition to fiber optics isn’t cheap. Verizon’s footing a $23 billion installation bill for the cable required to connect 18 million homes to its FiOS service by 2010. Verizon’s money — and that of the other utilities and municipalities who are laying fiber lines — will be gushing into companies ready to take advantage of this trend.”

The Daily Reckoning