SBC Takes a Dip Into PON

Alcatel, a relative newcomer to the PON world, has won a key contract with SBC. What's it mean for other players?

July 16, 2002

5 Min Read
SBC Takes a Dip Into PON

Yesterday's announcement that Alcatel SA (NYSE: ALA; Paris: CGEP:PA) won a contract with SBC Communications Inc. to deliver an optical network to a residential community has raised hopes in the bandwidth access sector.

Early indications are that the deal, which involves passive optical networking (PON) gear, may just be a flash in the pan. But it also sends some key signals for the access market.

Alcatel will install the PON-driven optical network in a new housing development in California (see Alcatel Wins SBC Broadband Deal). PON is an access technology whereby a single strand of fiber is shared among multiple users through deployment of passive optical splitters.

In what Alcatel calls a "multi-year, multi-million dollar agreement" (specifics not provided), the vendor will supply SBC with PON gear for trials in the residential portion of the Mission Bay development currently underway in San Francisco. SBC says it plans to follow the trials with commercial service during the first quarter of 2003.

But the deployment will be small, at least at first: According to the Catellus Development Corp., which is overseeing the Mission Bay project, only about 595 apartments are set to be done and occupied within 2003. The rest of the 6,000-unit residential portion of Mission Bay will roll out "over a 15- to 20-year period."

Sources say Alcatel won this award in part thanks to a longtime relationship with SBC. Alcatel supplies DSL gear and digital loop carriers to SBC, and it was an early supplier to SBC's now-defunct Project Pronto DSL trial, which reportedly was ditched last year by SBC when unbundling loomed (see Competitive Carriers Lash Out at FCC).

Other competitors, such as Quantum Bridge Communications Inc., weren't ready with residential gear when the initial SBC request went out late in 2000 or early in 2001. Marconi PLC (Nasdaq/London: MONI), which also bid, subsequently pulled out of the PON market (see Marconi to 'Streamline' Access ), although it says it will support a deal for trials at Verizon Communications Inc. (NYSE: VZ) and hold its products in abeyance until a market comes along. Paceon, which won a trial award from SBC for business PON in Texas last year, apparently didn’t have the goods SBC wanted in a residential device.

Other PON vendors say they found themselves locked out of the RFP when they requested inclusion later on.

Is the SBC/Alcatel deal yet another example of a slow-moving RBOC/PON trial set to go nowhere? No, say PON pushers. A tough bunch, used to disappointment but ever optimistic (see PON Believers Hang Tough), proponents say Alcatel's news is good, for several reasons:

  • The deal is with an ILEC. This is the first move by an ILEC (incumbent local exchange carrier) toward anything resembling a commercial service involving PON, proponents say. No matter that it's small, it's a start. "SBC could have used point-to-point or active electronics," says Tom Neel, product line manager at Alloptic Inc., which makes Ethernet-based PONs (EPONs). "It's a validation of PON architecture."

    • It's a new construction project. Many PON vendors have long held that the real opportunity for PON lies in new residential or business buildouts, where fiber isn't set to replace copper at great expense. The choice of PON for Mission Bay validates that tack.

    • It's a residential undertaking. It's significant, PON watchers say, that this high-profile ILEC trial is taking place in a residential, not a business, setting. While many companies, such as Paceon, Quantum Bridge, and NEC Eluminant Technologies Inc., insist that business PONs will build volume and competitive pricing for the larger, more slowly growing residential opportunity, others say they're just plain wrong. "That approach has been proven not to work," says Darryl Ponder, CEO of Optical Solutions Inc., another ATM PON maker and the market leader. "Right now, major independent phone companies, municipalities, and developers are putting in PONs." Waiting on the business market is a mistake, he says.

    • It's video. Alcatel makes a broadband PON according to newly defined additions to the International Telecommunication Union (ITU) standards for ATM-based PONs. These specs, known as recommendations G.983.4 and G.983.5, call for the allocation of PON bandwidth for video, either through the overlay of radio frequency signals on a separate wavelength in the PON stream, or via encapsulation of MPEG video signals in an IP stream on the PON. Alcatel claims to support both methods. Other vendors, including Quantum Bridge, say they're working on it. And EPON vendors like Alloptic say they provide both video methods easily, thanks to the larger bandwidth capabilities of Ethernet.

    • The deal helps the access market. Alcatel makes DSLAMs and other access equipment, a point that won't be lost on its competitors. This deal may tempt large vendors that have avoided developing PON technology to take another look. They may now look at it as an option in a larger access strategy. Vendors like ADC Telecommunications Inc. (Nasdaq: ADCT) may reconsider, as well as IP/DSL players like Cisco Systems Inc. (Nasdaq: CSCO) and Riverstone Networks Inc. (Nasdaq: RSTN).

      — Mary Jander, Senior Editor, Light Reading Want to know more? The big cheeses of the optical networking industry will be discussing this very topic at Opticon 2002, Light Reading’s annual conference, being held in San Jose, California, August 19-22. Check it out at Opticon 2002.

      Register now and save $500 off the registration fee. Just use the VIP Code C2PT1LHT on your registration form, and deduct $500 from the published conference fee. It's that simple!

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