DT Flings Billions at Fiber Access

German incumbent Deutsche Telekom AG (NYSE: DT) plans to spend up to €3 billion (US$3.75 billion) on an ambitious fiber-to-the-curb (FTTC) project that is set to deliver up to 50 Mbit/s of broadband access to homes in 50 German cities by the end of 2007.

While the carrier's press release says it plans to invest "around €3 billion in the rollout of a high-tech optical fiber network," this refers only to deployments between the operator's local exchanges and customers' homes, and not to any upgrade of metro or long-haul networks, says a DT spokesman (see Deutsche Telekom Spews News).

The spokesman says the money will be spent on new fiber access equipment for the central offices, fiber deployment, and remote VDSL equipment that will be located within a few hundred meters of the target households.

The carrier isn't saying yet how this will affect its capex plans and is keeping stumm on which vendors might benefit from the capex. "We are only announcing our plans today, nothing else," says the spokesman.

The equipment providers with the best chance of picking up substantial deals include existing access equipment providers Siemens AG (NYSE: SI; Frankfurt: SIE) and ECI Telecom Ltd. (Nasdaq: ECIL), while Lucent Technologies Inc. (NYSE: LU) can also be considered a contender.

Lucent announced in June that it is supplying DT's French broadband access business, Club Internet, part of the T-Online International AG operations, with ADSL2+ and VDSL-enabled Stinger DSLAMs. In addition, DT is a long-time customer of Lucent, which has been successful in selling its integration and support services to the German carrier (see Lucent Lands T-Com Support Deal).

ECI also looks well positioned, not only as an incumbent vendor but as a company that already has fiber access experience in the region, including a live network trial with a Tier 1 carrier (see ECI's FTTP Goes Live in BT Trial and ECI Gets Euro FTTH Deal).

DT has been gearing up for this with some field trials already, it seems. In the company's recent interim report for the first half of the year it noted: "Another technology known as outdoor DSLAM has been in use since May 2005 to establish the necessary DSL technology in the immediate vicinity of the customer line. Besides increasing the level of coverage for customers in copper wire network areas, this technology also makes it possible to connect customers in fiber-optic development areas to the broadband network."

Heavy Reading senior analyst Graham Finnie, who penned an extensive report on European broadband earlier this year, says this "is the biggest commitment to fiber access in Europe to date by far. And the move makes sense." (See HR Tracks Europe's Need for Speed.)

Finnie describes the timetable as "very fast" and potentially reasonable from a per-household cost perspective, as he believes Germany's 50 major cities would cover a vast majority of the country's 82 million population. But he adds: "It's hard to see why they're doing this -- maybe DT is expecting greater competition from the cable operators."

— Ray Le Maistre, International News Editor, Light Reading

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