BellSouth Corp. (NYSE: BLS) has chosen Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Lucent Technologies Inc. (NYSE: LU), and Ericsson AB (Nasdaq: ERICY) as finalists for its IPTV request for proposal (RFP), according to Jeffries & Co. analysts George Notter and Rajat Das, as well as other industry sources.

”We fully expect that Alcatel will be the ultimate winner,” the analysts write in a note distributed today, noting that they expect the deal to look similar to Alcatel’s FTTN win at SBC Communications Inc. (NYSE: SBC), where it won the right to serve in a network integrator role while supplying many of the key network elements.

Notter and pals note that Alcatel’s professional services organization, its IP-based DSLAM product, and additional product capabilities should be the differentiator in the deal. In addition, Alcatel’s standing relationship with BellSouth and the company’s incumbent DSLAM status will probably factor in to push them to the top.

The BellSouth RFP is targeted at providing integrated voice, data, and video over a next-generation broadband access infrastructure to its residential customers (see Analyst: Copper Is BellSouth's Gold). The company hopes to build a network capable of delivering broadcast TV, video-on-demand, digital video recording, VOIP, high-speed data/Internet access, online gaming, and audio services.

This IPTV buildout is a very big deal for BellSouth and the winning vendor, as the carrier has set a year-end 2009 goal to have 80 percent of its residential households covered by this new broadband access network.

Notter and Das note that the deal will be a big blow to BellSouth’s incumbent fiber to the curb (FTTC) supplier Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), which they expect will get supplanted by the FTTN deal.

[Ed. note: Reltec Corp. had the original FTTC product at BellSouth. Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) bought Reltec in 1999. Advanced Fibre Communications Inc. (AFC) bought Marconi's North American access business, which included Reltec's gear, last year. And Tellabs bought AFC this year. Clear?]

“Looking forward, we don’t believe that BellSouth and/or AFC will be able to migrate these older, TDM-based FTTC/DLC electronics into the future for delivery of video services within BellSouth’s new network architecture,” Notter writes. But while the game seems Alcatel's to lose, Lucent could run away with several pieces of the deal, including coarse WDM equipment, professional services/installation, and possibly some DSLAM business. BellSouth has put a fourth-quarter target of choosing the winning vendor for the RFP, and its upcoming Analyst day in New York on Dec. 6 might offer an opportunity for the carrier to formally announce its FTTN initiative. Initial deployment of the network is expected to start in late 2005.

— Chris Somerville, Senior Editor, NGS