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DSL Fuels Second Thoughts on FTTP

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News Analysis
Light Reading
11/12/2003
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Despite information about how U.S. ILECs (incumbent local exchange carriers) plan to roll fiber out to homes and businesses, it looks as if DSL, not fiber to the premises (FTTP), is the real focus of RBOC access deployments.

Even as BellSouth Corp. (NYSE: BLS), SBC Communications Inc. (NYSE: SBC), and Verizon Communications Inc. (NYSE: VZ) pursue their high-profile FTTP request for proposal with forecasts of reaching hundreds of thousands of homes in 2004 (see RBOCs See Three Ways to FTTP and FTTP Booty Tough to Peg), their recent earnings reports showcase growth in copper-based DSL.

In their October reports, the three collectively posted 661,000 new DSL customers, an average increase of 11 percent from the previous quarter. They now boast 6.5 million DSL customers nationwide. In all their recent financial announcements, DSL, along with wireless, was cited as key to recent revenues. Further, the RBOCs indicated that DSL adoption is attracting customers interested in combination packages of voice and data, a key for fighting customer churn.

Table 1: RBOC DSL Deployments to Date

Carrier DSL subscribers added in 3Q03 Total DSL subscribers to date
BellSouth 111,000 1.3 million
SBC 365,000 3.1 million
Verizon 185,000 2.1 million
Source: Company announcements


Analysts say RBOCs are doing so well with DSL that they'd be hard-pressed to start displacing it in favor of fiber anytime soon, particularly given that they're only just emerging from the worst downturn in their history. The DSL fun is just beginning, it seems, after a long ramp-up (see DSL Growth Explodes in 2003).

"We remain skeptical that the RBOC FTTP deployments will be as aggressive as stated... The RBOCs remain committed to their DSL deployments, and the bandwidth of DSL is sufficient to deliver broadband data and voice to their customers," writes Sterling Perrin, senior research analyst at IDC, in a recent email.

If demand for video grows substantially, that could change things, Perrin says. But even then, there's evidence that DSL technology, with tweaks, can handle video delivery -- at least in areas where copper is upgraded and dense. In Italy, for example, provider FastWeb SpA offers customers TV-over-DSL via 4-Mbit/s-per-home connections (see FastWeb Piles On the Users).

The argument's been made that Italy is a country in which the copper is relatively new and of a high quality, and distances between carrier facilities and homes are short and dense. Even so, there's evidence that U.S. carriers are interested in ongoing improvements to their copper infrastructures in order to expand DSL subscriptions. And those improvements could put FTTP on the back burner.

Verizon, the only RBOC viewed by analysts as really serious about deployment of FTTP, claims publicly that reaching 60 percent of its customer base with fiber within the next five years is a goal (see FTTP Bidders Slashing Prices?). But in its third-quarter report, the carrier said it has upgraded 74 percent of its copper infrastructure to handle DSL and that it "remains on track" to make 80 percent available to DSL by the end of 2003.

Priorities, priorities...

Meanwhile, others say it's likely the RBOCs will consider FTTP for a modicum of new buildouts but take another tack with fiber in their existing networks. Namely, the carriers will insert fiber strategically in the middle of their networks, instead of running it all the way to customer premises. Such a strategy would shorten the distances DSL signals need to travel, increasing data rates to support higher-speed services like digital TV.

Fiber-to-the-curb, a version of this approach, is already embraced by BellSouth as a key method of bringing fiber to the home. That carrier has tangled with the FCC over the semantics (see FTTH Dispute Boils Up).

Bottom line? What the RBOCs plan to do with FTTP is up in the air, but it's pretty clear they're nowhere near shelving DSL. Indeed, at least one analyst, Tom Nolle, president of CIMI Corp., has long maintained that RBOCs are ready to sacrifice FTTP plans to further DSL interests. He views the FTTP RFP mainly as an information exercise (see A Closer Look at PON Econ). From his perspective, more fiber in the loop may be a key goal for the RBOCs, but they're not about to sacrifice precious DSL revenue to FTTP buildouts that could cost them ten times as much to get going as DSL -- without payback guarantees to match.

— Mary Jander, Senior Editor, Light Reading

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firstmiler
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firstmiler,
User Rank: Light Beer
12/4/2012 | 11:15:40 PM
re: DSL Fuels Second Thoughts on FTTP
that the RBOCs would be less than genuine in their much hyped RFP excercise. Certainly these organizations are aware of the cost, effort, and time that the vendors will put into their responses to the RFP. They would not prosecute this RFP "exercise in vain" for thier own selfish and self serving purposes, at the expense of their vendor "parnters"?

Your article implies that the legion of mid-level Jr. Execs that are in charge of this RFP are simply doing busy work, while the money men know all along that they have zero intention of risking capital to build out FTTH in any meaningful manner.

The RBOCs can't be blamed for not wanting to build out FTTH aggressively if the financial reward does not merit the risk at this time, but to put out this RFP in bad faith is less than chivalrous. There are other ways of researching the state of the FTTH market.

Prediction: NO MEANINGFUL RBOC FTTH BEFORE '07
lastmile
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lastmile,
User Rank: Light Beer
12/4/2012 | 11:15:39 PM
re: DSL Fuels Second Thoughts on FTTP
'Prediction: NO MEANINGFUL RBOC FTTH BEFORE '07

I agree : but 07 may be a bit too early.
'The RBOCs can't be blamed for not wanting to build out FTTH aggressively if the financial reward does not merit the risk at this time, but to put out this RFP in bad faith is less than chivalrous'

I disagree: The RBOC's are playing games. If revenue from 'fraudband DSL' gives them an extended life they will never invest in fiber. Just heard today that the cable co's are reducing broadband prices. Ask the average consumer what is better if both cable/DSL is available in their area. Cable is choice # 1.

The RBOCs are less than genuine in their much hyped RFP excercise.
FACT: They hate Cable/VOIP/FTTH. They love Copper and POTS.
joestudz
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joestudz,
User Rank: Light Beer
12/4/2012 | 11:15:37 PM
re: DSL Fuels Second Thoughts on FTTP
Not close enough to really understand the economics, but have always felt FTTC (as opposed to FTTP/FTTH) combined with high speed DSL would be a reasonable alternative for telcos.

Here is URL to a company that offers a packaged ethernet over VDSL solution (believe it has been used quite a bit in Europe, but not sure about here in US) that should allow use of existing copper while offerring high speed broadband in parrallel with conventional phone service.

http://www.mrv.com/technology/...
cyberpunk
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cyberpunk,
User Rank: Light Beer
12/4/2012 | 11:15:31 PM
re: DSL Fuels Second Thoughts on FTTP
Why woudl a user prefer Cable, when the speed of Cable transmission (upstream and downstream) is impeded by an increase in the number of customers coming on-line.
DSL does not have that problem. Besides with ADSL and ADSL 2++ and SHDSL, the bandwidths for DSL are much more than what cable can offer.
--V.
jayja
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jayja,
User Rank: Light Sabre
12/4/2012 | 11:15:28 PM
re: DSL Fuels Second Thoughts on FTTP
Bring it on.

DSL is a loser hand for the RBOC's. There are too many places it can't serve. Our area code did not have DSL at all until earlier this year, and now it is only available to customers within 3000 ft of a CO. Meanwhile, our MSO signed a work-at-home agreement with our area's largest employer to subscibe its employees to cable modem - those customers are already gone if our ILEC ever offers DSL widely in our area.

Several studies show actual delivered DSL line rates to residential subscribers (not lab experiments or web advertising) continuously lag line rates available by cable modem, even as MSO's offer to further double cable modem line rates.

And of course, cable modem maintains almost a 2X subscription edge vs DSL, and current DSL growth rates show no path to catch up.

Finally, video. My DVD player delivers 6 Mb/s to my television. DSL providers are constantly rationalizing delivery of video over slower speeds. I expect a reduction in quality too. Even then, what if I want two or three streams to my home? What if I want hi-def?

Granted they may or may not listen, but FTTP is the lifesaver the ILEC's need to avoid a long slow decline.
wap545
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wap545,
User Rank: Light Beer
12/4/2012 | 11:15:26 PM
re: DSL Fuels Second Thoughts on FTTP
The RBOC have a choice of 2 basic FTTx systems:
1. FTTCurb: This is VDSL and there is one company now that offers a viable (cost sompetitive to legacy Copper and HFC) Voice/Data and Video Play (True CATV 140+ Channles)over this Copper Last Mile (3-5000')network. That is Next Level Communications-Now Motorola.
2. FTTPremise/Home: This is real Fiber all the way to the NID or ONT, delivering the same triple play services.


Competitiveness of FTTH over 5-7 Years
If one looks at the Telco cost/overhead to install and maintain/support their existing Fiber to a DLC/Cabinet and Copper to the home network as a Cost/Subscriber/Month over 5-7 year period they will find FTTH a far better investment. Overhead for the Legacy network is dramtically higher then any Fiber to a Passive Optics Splitter that does not go bad and requires virtually not Maintenance/Support, power replacement etc.
Wait until these Financial Analyst evalaute the Broadband Wireless networks that only have Air between them and customer Premise.

Prediction: If the RBOC are going to remain a viable competitive force in deployment of communication services (Triple Play) against the MSO they will deploy FTTH in all major Greenfield locations and will deploy FTTCurb to address existing legacy plant.

wap545
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50%
wap545,
User Rank: Light Beer
12/4/2012 | 11:15:25 PM
re: DSL Fuels Second Thoughts on FTTP
The RBOC have a choice of 2 basic FTTx systems:
1. FTTCurb: This is VDSL and there is one company now that offers a viable (cost sompetitive to legacy Copper and HFC) Voice/Data and Video Play (True CATV 140+ Channles)over this Copper Last Mile (3-5000')network. That is Next Level Communications-Now Motorola.
2. FTTPremise/Home: This is real Fiber all the way to the NID or ONT, delivering the same triple play services.


Competitiveness of FTTH over 5-7 Years
If one looks at the Telco cost/overhead to install and maintain/support their existing Fiber to a DLC/Cabinet and Copper to the home network as a Cost/Subscriber/Month over 5-7 year period they will find FTTH a far better investment. Overhead for the Legacy network is dramtically higher then any Fiber to a Passive Optics Splitter that does not go bad and requires virtually not Maintenance/Support, power replacement etc.
Wait until these Financial Analyst evalaute the Broadband Wireless networks that only have Air between them and customer Premise.

Prediction: If the RBOC are going to remain a viable competitive force in deployment of communication services (Triple Play) against the MSO they will deploy FTTH in all major Greenfield locations and will deploy FTTCurb to address existing legacy plant.

DSL:
If they put all their eggs in DSL basket they will eventually have to give up their Voice Networks to the MSO as well. This ridiculous effort underway by select RBOC to partner with Satellite Services for a triple play offering will turn out to be a great Double play in the game but they will ultimately Lose the game and their market.
I do have confidence that Better Management minds will ultimately prevail here and they will aggressively seek out the correct formula-as listed above and retain control of their markets.


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