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Fiber Surprise in FCC Rules?

New FCC rules have a big impact on the Fiber-to-the-whatever market, but results aren't as positive as was hoped

August 22, 2003

4 Min Read
Fiber Surprise in FCC Rules?

Yesterday's big missive from the U.S. Federal Communications Commission (FCC) is good news and bad for proponents of Fiber-to-the-Home (FTTH) and passive optical networking (PON). They had been hoping the ruling would add fuel to the idea that RBOCs are ready to spend big on an RFP to put more fiber into the ground, connecting more homes and businesses (see RBOCs Hungry for Fiber, Fiber Access Plans Proliferate, and A Closer Look at PON Econ).

In reality, it looks like the ruling could take PONs in another direction.

First, the good news: The FCC seems to have left its February ruling on last-mile broadband connectivity largely untouched (see Fiber Players Giddy Over FCC Ruling). If incumbent LECs run fiber to new homes that never had fiber before (so-called "greenfield" deployments), they don't have to offer access to their facilities on the cheap to competitors. That's good for PONs, which divvy up bandwidth on fiber links.

The bad news is the ruling doesn't eliminate a potential snag for RBOCs looking to upgrade their existing copper facilities to run broadband services. Here's why: The ruling states that if an RBOC replaces a copper line directly to a home with a fiber one, in what's known as a "brownfield" or overbuild approach, it must continue to provide competitors with a 64-kbit/s voice-grade channel to lease on the cheap. CLECs can run any kind of service they like over it -- voice, data, DSL, etc., in direct competition to RBOC services to the same homes.

At least one analyst says this abolishes the RBOCs' advantage in using PON to extend fiber to homes that already have copper services -- in other words, to most homes in their regions. "In my view, this order doesn't change anything," says Tom Nolle, president of CIMI Corp., a telecom consultancy.

There's another blow to PON suppliers: It's unlikely the RBOCs will work to supply new housing developments with fiber en masse. "From a pure cost standpoint, there's more of an argument for overbuilds versus greenfields," says Michael Render, principal analyst at (the wonderfully-named) Render Vanderslice & Associates. An RBOC can get more rapid returns on serving a bunch of homes that already have service, versus waiting for customers to sign up piecemeal as new homes are built and sold in new developments.

Does this mean PONs are washed up as far as the RBOCs go? Not exactly. The FCC ruling states that PONs, along with other gear, can be used to upgrade the middle of incumbents' networks -- to link central office facilities to remote points of presence, for instance -- without subjecting the carriers to any unbundling orders.

Vendors seem aware that the PON and fiber-to-the-whatever (often referred to as FTTX) opportunity is changing, and some are upgrading their products for the higher speeds needed for mid-network deployments. Optical Solutions Inc., for instance, this week released a gigabit PON (GPON), a high-speed system based on specs from the International Telecommunication Union (ITU) (see Optical Solutions Debuts FTTP System). While there are other kinds of PONs on the go, ITU compliance reportedly was a preference in the RBOC RFP. (For more on GPONs, see Who's Growing a GPON?)

So far, the only other vendor to announce GPON is FlexLight Networks Inc.. A few others, including Alcatel SA (NYSE: ALA; Paris: CGEP:PA), are said to be working on GPON, though final specs won't be completed by the until later this year (see Who's Growing a GPON?).

Did Optical Solutions time its release to coincide with the FCC ruling? "I only wish I had enough foresight!" says Peter Jew, VP of marketing for the vendor. He said the choice to go GPON was made on economics alone. It was cheap and easy, so why not?

It remains to be seen whether RBOCs will consider the advantages of GPONs for mid-network deployment. One analyst says they're more likely to call their lawyers. "Fiber to the home is still not a proven business model, it has no proven financial reward at the end of the rainbow," says Phil Jacobson, general partner at Network Conceptions LLC. Instead of pursuing it with PON or anything else, he thinks RBOCs will focus on suing the FCC to help make FTTH more practical, "as Powell has invited them to do."

— Mary Jander, Senior Editor, Light Reading

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