companies going bankrupt. But they also often do drive innovation faster and faster, and the sheer overcapacity that they spur-whether it is in railroad lines or automobiles-can create its own unintended positive consequences.
That is what happened with the Internet stock boom. It sparked a huge overinvestment in fiber-optic cable companies, which then laid massive amounts of fiber-optic cable on land and under the oceans, which dramatically drove down the cost of making a phone call or transmitting data anywhere in the world.
The first commercial installation of a fiber-optic system was in 1977, after which fiber slowly began to replace copper telephone wires, because it could carry data and digitized voices much farther and faster in larger quantities. According to Howstuffworks.com, fiber optics are made up of strands of optically pure glass each “as thin as a human hair,” which are arranged in bundles, called “optical cables,” to carry digitized packets of information over long distances. Because these optical fibers are so much thinner than copper wires, more fibers can be bundled into a given diameter of cable than can copper wires, which means that much more data or many more voices can be sent over the same cable at a lower cost. The most important benefit of fiber, though, derives from the dramatically higher bandwidth of the signals it can transport over long distances. Copper wires can carry very high frequencies too, but only for a few feet before the signal starts to degrade in strength due to certain parasitic effects. Optical fibers, by contrast, can carry very high-frequency optical pulses on the same individual fiber without substantial signal degradation for many, many miles.
The way fiber-optic cables work, explains one of the manufacturers, ARC Electronics, on its Web site, is by converting data or voices into light pulses and then transmitting them down fiber lines, instead of using electronic pulses to transmit information down copper lines. At one end of the fiber-optic system is a transmitter. The transmitter accepts coded electronic pulse information-words or data-coming from copper wire out of your home telephone or office computer. The transmitter then processes and translates those digitized, electronically coded words or data into equivalently coded light pulses. A light-emitting diode (LED) or an injection-laser diode (ILD) can be used to generate the light pulses, which are then funneled down the fiber-optic cable. The cable functions as a kind of light guide, guiding the light pulses introduced at one end of the cable through to the other end, where a light-sensitive receiver converts the pulses back into the electronic digital Is and Os of the original signal, so they can then show up on your computer screen as e-mail or in your cell phone as a voice. Fiber-optic cable is also ideal for secure communications, because it is very difficult to tap.
It was actually the coincidence of the dot-com boom and the Telecommunications Act of 1996 that launched the fiber-optic bubble. The act allowed local and long-distance companies to get into each other's businesses, and enabled all sorts of new local exchange carriers to compete head-to-head with the Baby Bells and AT&T in providing both phone services and infrastructure. As these new phone companies came online, offering their own local, long-distance, international, data, and Internet services, each sought to have its own infrastructure. And why not? The Internet boom led everyone to assume that the demand for bandwidth to carry all that Internet traffic would double every three months-indefinitely. For about two years that was true. But then the law of large numbers started to kick in, and the pace of doubling slowed. Unfortunately, the telecom companies weren't paying close attention to the developing mismatch between demand and reality. The market was in the grip of an Internet fever, and companies just kept building more and more
That is what happened with the Internet stock boom. It sparked a huge overinvestment in fiber-optic cable companies, which then laid massive amounts of fiber-optic cable on land and under the oceans, which dramatically drove down the cost of making a phone call or transmitting data anywhere in the world.
The first commercial installation of a fiber-optic system was in 1977, after which fiber slowly began to replace copper telephone wires, because it could carry data and digitized voices much farther and faster in larger quantities. According to Howstuffworks.com, fiber optics are made up of strands of optically pure glass each “as thin as a human hair,” which are arranged in bundles, called “optical cables,” to carry digitized packets of information over long distances. Because these optical fibers are so much thinner than copper wires, more fibers can be bundled into a given diameter of cable than can copper wires, which means that much more data or many more voices can be sent over the same cable at a lower cost. The most important benefit of fiber, though, derives from the dramatically higher bandwidth of the signals it can transport over long distances. Copper wires can carry very high frequencies too, but only for a few feet before the signal starts to degrade in strength due to certain parasitic effects. Optical fibers, by contrast, can carry very high-frequency optical pulses on the same individual fiber without substantial signal degradation for many, many miles.
The way fiber-optic cables work, explains one of the manufacturers, ARC Electronics, on its Web site, is by converting data or voices into light pulses and then transmitting them down fiber lines, instead of using electronic pulses to transmit information down copper lines. At one end of the fiber-optic system is a transmitter. The transmitter accepts coded electronic pulse information-words or data-coming from copper wire out of your home telephone or office computer. The transmitter then processes and translates those digitized, electronically coded words or data into equivalently coded light pulses. A light-emitting diode (LED) or an injection-laser diode (ILD) can be used to generate the light pulses, which are then funneled down the fiber-optic cable. The cable functions as a kind of light guide, guiding the light pulses introduced at one end of the cable through to the other end, where a light-sensitive receiver converts the pulses back into the electronic digital Is and Os of the original signal, so they can then show up on your computer screen as e-mail or in your cell phone as a voice. Fiber-optic cable is also ideal for secure communications, because it is very difficult to tap.
It was actually the coincidence of the dot-com boom and the Telecommunications Act of 1996 that launched the fiber-optic bubble. The act allowed local and long-distance companies to get into each other's businesses, and enabled all sorts of new local exchange carriers to compete head-to-head with the Baby Bells and AT&T in providing both phone services and infrastructure. As these new phone companies came online, offering their own local, long-distance, international, data, and Internet services, each sought to have its own infrastructure. And why not? The Internet boom led everyone to assume that the demand for bandwidth to carry all that Internet traffic would double every three months-indefinitely. For about two years that was true. But then the law of large numbers started to kick in, and the pace of doubling slowed. Unfortunately, the telecom companies weren't paying close attention to the developing mismatch between demand and reality. The market was in the grip of an Internet fever, and companies just kept building more and more
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