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FCC Could Crash FTTH Party

Carol Wilson
9/15/2010
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LAS VEGAS -- Dan O'Connell is taking over as president of the North American Fiber-to-the-Home (FTTH) Council in the best of times -- and, potentially, the worst of times.

The telecom veteran, who will leave his position as National Sales Director of Verizon Communications Inc. (NYSE: VZ) Enhanced Communities on Oct. 1 to become the only fulltime employee of the FTTH Council, is inheriting an organization that his predecessor, Joe Savage, reshaped and, to a large extent, resuscitated during his five-year tenure. David Russell of Calix Inc. (NYSE: CALX), the outgoing volunteer chairman of the FTTH Council, acknowledged Savage's work Tuesday in introducing O'Connell at the FTTH Council Conference here.

FTTH is booming once more, as was reflected on the conference show floor, where vendors reported a higher level of activity both from US independent operators and from international players attending. (See FTTH on a Roll(out).)

But as O'Connell steps in, thunder clouds loom in Washington that could have a critical impact on whether private investment in FTTH buildout continues after the federal stimulus money now being distributed has been spent.

Tom Cohen, an attorney with Kelley Drye & Warren, and Washington counsel to the FTTH Council, contended in his panel session Wednesday that any move by the Federal Communications Commission (FCC) to reclassify broadband transport as a Title II service, subject to regulation, will inevitably lead to something akin to open access. (See FCC Looks to Reclaim Its Broadband Mojo .)

"If the FCC decides that broadband Internet access is a Title II service, then it will come under regulations that will force fiber-to-the-home providers to offer wholesale services," Cohen said. "Unbundling voice for resale had no margins, but when you unbundle broadband, a company can offer voice, data, and video over-the-top. If that occurs, those providers can take enough revenue from [the FTTH network builder] to inhibit deployments significantly."

Cohen acknowledged the FCC's insistence that it will not impose requirements for wholesale tariffs, but he said past experience shows that once the Title II door is open, competitors work the legal process and walk through. Just the competitive uncertainty is enough to dampen private investor interest in funding FTTH buildouts, he said.

Part of O'Donnell's immediate challenge is to convince legislators and regulators of this. A number of vendors at the FTTH Council show said their business in Europe, where the European Union imposed open access rules, has come to a virtual standstill, and that's something they want to avoid in the US.

In an interview this week, O'Donnell said he's seen the impact: "My personal experience has been that any prolonged period of uncertainty means I'm not going to spend." (He also said he won't comment on the regulatory issues until he actually takes his new job Oct. 1.)

O'Donnell hopes to expand FTTH Council membership to include companies affected by network builds, including media and entertainment providers, Internet companies, and such industries as healthcare that would be developing and using Internet-based applications.

"The future is applications and content, and revenue derived from the network platform will impact healthcare, education, commerce, and more," he said.

O'Donnell believes Verizon's success with FiOS has fueled some of the current market boom, along with the stimulus funding and the realization that bandwidth needs are not abating any time soon.

"We don't know what the exact application drivers will be, or what the real necessary bandwidth requirements are, but we do know that whatever bandwidth we make available, it is being filled."

Naturally, O'Donnell and the Council think FTTH remains the best way to prepare for new demand. Policies that promote private investment in fiber networks, he said, make the most sense.

— Carol Wilson, Chief Editor, Events, Light Reading

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