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CenturyTel Eats Up Ethernet

Light Reading
News Analysis
Light Reading
4/27/2005

CenturyTel Inc. (NYSE: CTL) is wading through bids from vendors for what could be a huge metro Ethernet network that utilizes a lot of the fiber assets it bought in the past two years, Light Reading has learned from sources close to the carrier.

The carrier first issued its metro Ethernet request for proposal (RFP) in February, proposals from vendors were due March 18, and sources say it is due to make its final decisions on June 1.

The carrier is looking to provide point-to-point Virtual Leased Line (E-Line) services, so businesses can connect to business partners or customers, in addition to multipoint-to-multipoint Transparent LAN (E-LAN) services so businesses can interconnect their LANs at different locations (see Reports: Carriers Acclerating Ethernet).

Internet access service and circuit emulation services are also on the menu, according to sources familiar with CenturyTel's plans. The call for circuit emulation services is interesting because it would allow CenturyTel to sell triple-play services to enterprises, without forcing them to use VOIP just yet (see More Ethernet, More Places).

The overall point, though, observers say, is that CenturyTel realizes it's not enough to be a POTS-based phone company and it has a chance to make hay in the Tier 2 Ethernet services market, making use of its fiber networks (see Tier 2 Carriers Eat Up Ethernet).

It's worth noting CenturyTel will face plenty of competition. No fewer than 77 providers already offer point-to-point Ethernet services in the U.S. and no fewer than 50 offer multipoint services, according to Light Reading's Ethernet Services Directory.

For vendors, this opportunity will require lots of pairing up, as CenturyTel appears to be asking for every part of a network from the customer premises to the core.

The parts include 10-Gbit/s optical Ethernet switches that support WDM interfaces and MPLS in the network's core. Also called for are aggregation devices that sit on the end of a metro Ethernet ring, and several varieties of access devices.

Sources say some of the customer requirements described include providing Ethernet services via a copper wire infrastructure, so companies such as Hatteras Networks Inc. or Actelis Networks Inc. would be likely bidders.

Another example of customer requirements asks next-generation DLC vendors to connect two customer sites to a central office -- one that's 15 kilometers away and one that's 45 km away -- via fiber at 350 Mbit/s. The pack bidding for that section may include Occam Networks Inc. (OTC: OCCM), Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), Entrisphere Inc., and, of course, Calix Networks Inc., which already has some CenturyTel deployments (see Calix Comes Out).

The connections supported in the access layer of the proposed network include "everything from gigabit Ethernet down to copper," according to one source with knowledge of the RFP.

"This is a standalone, high performance, multifaceted network," says one source, who spoke on the condition of anonymity. "It's pretty clear that they're not just going to sell dumb pipes here."

A CenturyTel spokesperson acknowledged that the carrier had put out a metro Ethernet RFP, but declined to comment on the requirements or vendor considerations.

It's still a mystery where the proposed network will be built. The CenturyTel spokesperson acknowledged that there was no specific location associated with the RFP, but would not comment further.

What is clear is that CenturyTel's serious about selling more to carriers and business customers as sort of a hedge to its consumer landline, wireless, and broadband Internet businesses. The carrier has been selling high-speed, high quality connections to enterprises and other carriers lately, as well as attempting to link together some of its own local exchanges, which are spread out over 22 states.

In 2004, CenturyTel increased its fiber transport and CLEC revenues by $31.4 million (72.9 percent), nearly all of which was attributable to the company's acquisitions of fiber transport assets (see CenturyTel Acquires Digital Teleport).

The carrier bought metro fiber networks in 16 markets from KMC for $65 million back in February, giving it almost 1,000 lit route miles of fiber optic cable located in small to medium cities in 11 states (see CenturyTel to Buy Fiber Networks and Level 3 Completes Sale of MFON).

CenturyTel operates its fiber transport assets under its LightCore subsidiary and that network encompassed more than 8,700 route miles of lit fiber in the central U.S. as of December 31, 2004 (see LightCore Expands Network Reach).

"We can connect twelve of those rings for around $10 million, which is a very small investment when you look at the potential revenue," said Glen F. Post, CenturyTel's CEO, during an investment conference in March. "We ... bought those assets for $65 million. They have $50 million of enterprise revenue today, wholesale and retail combined, so we think it's a very good acquisition for us."

— Phil Harvey, News Editor, Light Reading




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