Three of the top U.S. carriers say they're serious about fiber to the premises (FTTP) and plan to issue big new RFPs for equipment deployments in "2004 and beyond."
Interestingly, Qwest Communications International Inc. (NYSE: Q) wasn't part of today's announcement. "We did know about the fiber-to-the-home project and were approached to join, but after conducting our own internal analysis we decided it didn't meet our own success threshold," says a spokeswoman. Qwest won't rule out joining in the future, she says.
Notwithstanding, PON vendors are in high spirits from the news, which apparently has been anticipated for months. Most expect the RFP to be issued within a couple of weeks.
"This is very, very good news for the industry," says Darryl Ponder, CEO of Optical Solutions Inc., which by most accounts leads in PON market share. He says carriers realize it doesn't make economic sense to install copper cable if data, voice, and video are on the cards for future services.
Others agree. "We're excited about it," says Tom Tighe, CEO of Wave7 Optics Inc. He says the carriers had surveyed manufacturers industrywide in April, and vendors have been eagerly anticipating the announcement ever since.
At least one analyst thinks it's significant. "Sources suggest the RBOCs are collectively looking to deploy between 500,000
and 1 million lines per year beginning as early as 2004, if the price is right," writes Steven Levy of Lehman Brothers in a note this morning. He says current prices of $1,200 to $1,800 per line will probably go down to $700 or so once the RFP action begins.
But Levy's cautious about getting investors too hyped. He says PON rollouts will likely mimic the slow uptake of DSL. Further, he says it would be misguided to think the RFP signals any uptick in carrier capital spending.
Levy says one possible outcome could be M&A, however, as large companies that have pulled away from PON hasten to get with the small players that have persisted in the market despite the negatives.
Indeed, Alcatel SA (NYSE: ALA; Paris: CGEP:PA) stands relatively alone among large companies that have stood by PON. Others, including Marconi Corp. plc (Nasdaq/London: MONI) and NEC Corp. (Nasdaq: NIPNY), put their efforts on ice indefinitely.
Some expect next week's Supercomm 2003 to be a convenient venue for PON partnerships. "I'm certain partnering will happen," says Jeff Gwynne, VP of marketing and a founder at Quantum Bridge Communications Inc. He says a crucial juncture has been reached, as the cost has dropped and carriers finally see a chance for revenue-producing services via PON. "Everything's coming together," he says.
Wave7's Tighe agrees that partnerships are in the offing. Indeed, Wave7's been working on deals with larger companies for months particularly in Asia (see Pining for PON). Regarding next week's show in Atlanta, "It'll be fun," he says.
Editor's Perspective Thank you, cable guy II By Ed Gubbins June 18, 2003
After my last column, in which I thanked the cable industry for the recent interest Bell companies have in fiber access networks, I expected a lot of hate mail. (The usual stuff, about my mother and various techniques for blowing fiber.) But I didn't get much in the way of discouraging words.
One employee of a well-known equipment vendor wrote, "Although I agree to a certain extent that the cable telephony business implemented by a couple of the big MSOs has pushed the ILECs to invest more heavily into an FTTX (who knows exactly what 'X' will be?) network architecture, I don't believe that this was the primary catalyst. Personally, I believe it was the recent FCC ruling that allowed the ILECs to 'hide' their broadband networks from those fearsome CLEC guys who could 'rent' their low-tech copper links at below wholesale cost."
Good point, but if we're looking for the "primary" catalyst, consider this: A report published last week from UBS Warburg analyst John Hodulik called the economics of the Bell fiber initiative "dismal on a stand-alone basis," even if the Bells offer cable or video services. The real value of the initiative, Hodulik said, was in preventing erosion of the Bell customer base. And who is the "primary" catalyst of this erosion? CLECs have captured 13.2% of the local phone market so far, according to the FCC, but their subscriber growth last year was only about 3%. According to Hodulik, the Bells could lose as much as 30% of their residential phone customers to cable MSOs.
Editor's Perspective Thank you, cable guy By Ed Gubbins of Telephony's Optical Insight June 11, 2003
When I finally get fiber to my home, the first thing I'm going to do (even before logging on to ShowerRoomWebCams.com) is thank my local cable company--whether I get the fiber from them, the local telco or a jolly fat man with a red suit and reindeer. Why?
At the OFC conference in March, BellSouth CTO William Smith spoke with great alacrity about how exciting fiber-to-the-home technology was, but he admitted the company's trials hadn't shown it to be economically viable. Less than three months later, the Bells are all joining forces to drive FTTU, not because it has since become cost-effective, but precisely because it is still not cost-effective, and the Bells need to attain economies of scale to roll it out. They could have done this long ago, of course (and whether it would have been wise to do so is not for me to say), but only the encroaching cable companies, with their advance into voice markets, forced the Bells' hands.
As Jeff Blumfeld, partner with law firm Gray Cary and a panel speaker at Supercomm, said, "In less competitive markets, you make investments when you want to. In competitive markets, you make investments because you have to."
Thank heaven for the cable companies and their aggressive pursuit of the telephony market. At the moment, they're one of the few catalysts for motion and innovation in this flash-frozen industry.
>> My posts bring my opinions. Opinions are personal. So, agreed there. Though, don't know that a single voice of strong opinions determines our agenda.
What do you think my agenda really is? And, more importantly, what do you think our agenda should be? <<
I have no problem with you or anyone else having opinions. What I have a problem with is the fact that everytime someone has a different opinion that you, you make some personal attack, like they have some agenda. The hypocrisy of course is that you push your agenda every chance you get, regardless of whether it has any relevance to what is being discussed or not.
Perhaps if you watched something else other than ESPAN you might be able to relate to people who are not political activists, but just happen to have an opinion they want to discuss - instead of being meat for your political agenda.
As to what your agenda is? Other they expanding and/or creating public sector monopolies the only other thing you seem to be pursuing is the spreading of hatred for people or instituitions that you see as being opposed to your agenda, no matter how benign their intent.
But consider Wi-Fi for a sec. Well, consider a dense metropolitan area (such as NYC, where I live), where in the future there are so many hotspots, the whole damn city is covered with them like a blanket (and remember that each of these hotspots is likely a small router). The Wi-Fi router in my house may determine that the "shortest route" to, say, my friend across town, is NOT through my cable modem, but through my neghbors' Wi-Fi link, and so on. That packet may NEVER go wireline.
I see WiFi-metro's fate as the tragedy of the commons. Assigning some responsiblity, even for public goods, seems required.
My opinion is that ad-hoc wi-fi metro efforts won't succeed in providing a long lasting last mile infrastructure. Wi-fi capitalists connecting to a publicly owned fiber infrastructures serving RV parks does seem viable ;-) Where does one find an RV park in Manhattan? For the publicly owned fiber, ConEd may be the guys to approach.
Well RJ, although you seem to have plenty of "vision" (some of which I can agree with), I don't see how this vision plays out very well in the optical fiber world.
Saying a "10Gb matrix of some kind" really indicates that you are largely unaware of the reality of the costs associated with wire-line approaches to your lofty ideals (and I don't mean lofty ideals sarcastically). When you start mapping the costs of getting LOTS of 1Gbs 'lines' through to the Internet, you are still talking HUGE amounts of money. And the traditional "high value" services like voice and cable video are a way to pay for that.
RJM also said...
"This seems confused to me. Maybe it's motivated by some other agenda, like selling some Wi-fi stocks? I don't know and don't really care. But why not check the personal agenda at the door and see if we can come up with a deeper understanding of what is the public good?"
Ironically, you seem so intent on a specific wire-line fom for the vision you are offering you seem to be looking right past a major possibility here, and one that may actually end up being what you seem to be talking about.
(As for an agenda, I spent many years in the optical networking industry, so my prejudice would certainly be toward fiber-based approaches).
But consider Wi-Fi for a sec. Well, consider a dense metropolitan area (such as NYC, where I live), where in the future there are so many hotspots, the whole damn city is covered with them like a blanket (and remember that each of these hotspots is likely a small router). The Wi-Fi router in my house may determine that the "shortest route" to, say, my friend across town, is NOT through my cable modem, but through my neghbors' Wi-Fi link, and so on. That packet may NEVER go wireline.
In this environment, the more people deploy routers, the better. The giant WiFi city-wide storm might supplant the wireline network for large amounts of traffic, and the more people join such a network, the more routers the more bandwidth. (Some guy at MIT wrote a PhD thesis that's been very popular for a while on this subject.)
This seems to be a much more realistic scenario in which the kinds of ideas you frequently discuss might play out. At least there's a number of people who believe so. FTTH, however, is going to move VERY slowly.
Source: EETimes Editorial Title: Disquiet on the front URL: http://www.eetimes.com/story/OEG20030602S0076 Author: Brian Fuller, bfuller@cmp.com
EE Times, June 2, 2003 (12:23 p.m. ET)
MIT/Stanford Venture Lab's forum on communications posed a rhetorical question when it asked whether Asia would be "the next broadband access battleground." Clearly the troops are already engaged, and China clearly is the theater. It's where the money is, as the bank robber said.
As he navigates his third startup through China's gold fields, Ikanos CEO Rajesh Vashist is certain of that. But as he and his fellow panelists revealed, you've got to watch out for the mines.
The market projections sound mouth-watering, but you've got to have feet on the ground in Asia to take advantage of the broadband boom there, said Eric Hsia of the Softbank Asia Infrastructure Fund. "The opportunities are pretty local," he said.
Indeed, the Chinese government has split the country in half and designated a service provider for each, although it hasn't barred the providers from poaching in one another's territory. That situation has created magnificent pricing for consumers.
Then again, Centillium CEO and co-founder Faraj Aalaei argued, it's easy to develop a viable business model in broadband service when your line access costs only pennies, while the U.S. RBOCs are charging DSL customers more than $16 to $17 per line to use copper "that was written off three years after Graham Bell died."
SBC, Aalaei said, "is bitching and moaning that they can't make money at $40 a month, and these guys are doing it at $10."
But the Holy Grail still appears to be North America. Wall Street doesn't value companies that aren't making boatloads of money from the North American market. That would be fine-if a credible North American market existed. But it doesn't, Aalaei said, because the federal government "allowed the RBOCs to win the battle." People are thrilled with DSL speeds because they don't know any better, but DSL shouldn't be defined as broadband. Is "just good enough" good enough for the broadband food chain in North America?
No, because the next wave of content innovation-and consumer spending-will emerge from high-speed video services. And if Asia's got 40 Mbits/second piped into the home and we've got 200 kbits, if we're lucky . . . well, it could be a tectonic shift.
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