Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) has decided to cease all of its GPON (Gigabit PON) activities focused on its biggest customer, Verizon Communications Inc. (NYSE: VZ).

The company cited "economic reasons" for its decision, saying the move "serves the best interests of both companies and their respective stakeholders." (See Tellabs Ceases GPON.)

Tellabs stressed, though, that it is not abandoning the GPON market altogether. In its official statement today, the vendor noted it will continue selling BPON (Broadband PON) and other products to Verizon and will continue its GPON efforts elsewhere.

The vendor tells Light Reading it will now focus its GPON efforts on independent operating companies (IOCs) and the international market.

The news pleased investors, many of whom have had concerns about the viability of the Verizon GPON engagement: Tellabs saw its share price rise by $0.17, more than 3 percent, to $5.65 in early trading Wednesday.

A Verizon spokesman said Tellabs had been looking to renegotiate the price and deployment details of the GPON deal, first announced in July 2006, but the two sides could not reach an agreement. (See Alcatel Joins Verizon PON Party.)

"We couldn't reach a middle ground. We'll keep using Alcatel-Lucent (NYSE: ALU) and Motorola Inc. (NYSE: MOT)," said the spokesman, referring to Verizon's other two GPON vendors.

The decision comes as Tellabs finds its access business on thin ice. It lost its fiber-to-the-curb (FTTC) business in the BellSouth territories when AT&T Inc. (NYSE: T) scrapped the project, and has seen its BPON orders with Verizon slip as the company shifts towards GPON. (See Tellabs's Access Biz Under Fire.)

With most of Verizon's GPON business going to Alcatel-Lucent, Tellabs has decided that trying to sell GPON to Verizon was doing more harm than good.

Not everyone thinks that chasing Verizon GPON is a lost cause, though. Tellabs' decision comes just as Adtran Inc. (Nasdaq: ADTN) announced it is entering the GPON market with a view to winning a significant portion of Verizon's GPON business. (See Adtran Adds GPON.)

— Raymond McConville, Reporter, Light Reading