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Cable Tech

FTTP Bidders Slashing Prices?

Pricing has become the hot topic du jour following last week's public update on the fiber-to-the-premises (FTTP) request for proposal (RFP) from SBC Communications Inc. (NYSE: SBC), BellSouth Corp. (NYSE: BLS), and Verizon Communications Inc. (NYSE: VZ) (see Carriers Give FTTP Update). Though none of the vendors we contacted would speak about pricing on the record, rumors are afoot that some vendors priced systems below cost in order to remain in contention for a contract.

Privately, vendors say a well-worn practice called "forward pricing" has reared its head. Forward pricing involves pricing equipment cheaply today, based on anticipated volumes in the future.

"The ticket to the dance is that you have to be willing to drop your pants and savage your margins in the near term," says Kermit Ross, founder of Millennium Marketing and a veteran of vendor-carrier contract negotiations. [Ed. note: And past master of the mixed metaphor.]

What vendors are counting on at this point is that the carriers will eventually order their gear at volumes that will make the price cuts worthwhile. Secondly, the winning vendors might have first dibs on other network elements that need replacing, such as next-generation digital loop carriers.

But will carriers ever follow through and order as much gear as they promise at the bargaining table? Industry sources remain split on the issue.

Some say that the carriers' public statements have wed them to a huge FTTP rollout over time. Verizon vice chairman and president Larry Babbio has said that his company will reach 60 percent of its consumer revenue base with a fiber solution within five years.

But the other RBOCs involved in the big FTTP RFP haven't been so forthright about their deployment plans. "We can't make any deployment decisions until we've completed the RFP," says SBC spokesman Wes Warnock. "We're still heavily involved in the process."

That said, BellSouth and SBC will start first office application (FOA) trials during the second half of 2004, and only after that will they finally award an equipment contract. In greenfield applications, where the first FTTP rollouts will most likely occur, BellSouth expects to reach 135,000 new homes a year out of the 315,000 new homes in its territory, said Peter Hill, VP of technology planning and development at BellSouth, during a presentation at the United States Telecom Association (USTA) meeting last week.

Verizon is already said to have picked Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) for its first run of trials and deployments, according to analysts' reports (see Speculations Boost AFC). Not surprisingly, AFC's competitors quickly point out the likelihood that "aggressive pricing" factored heavily in the carrier's decision.

For AFC, having an installed base of digital loop carriers that can be upgraded to handle PON applications also helped keep its costs down. "Since carriers already deploy the [AFC] AccessMax, we know it works with current circuit switches (i.e., it supports standard interfaces TR08, GR57 and GR303, all of which are included in the FTTP RFP)," writes Merrill Lynch & Co. Inc. analyst Simon Leopold in an August 27 note to clients.

There is a historical precedent for forward pricing. In late 1996, Ameritech, BellSouth, Pacific Bell, and Southwestern Bell all signed multi-year contracts with Alcatel SA (NYSE: ALA; Paris: CGEP:PA) to deploy its ADSL DSLAMs and related equipment. Industry lore has it that Alcatel won the deal largely because of its ability to price its gear based on anticipated volumes. "The RFP was designed to help the individual companies meet growing customer need for high-speed data network access by creating volume orders for equipment, thereby driving down ADSL costs and speeding deployment," the companies said in a joint press release.

The effect of the huge RFP win was obvious. Alcatel quickly became the market leader in ADSL DSLAMs, delivering more than 400 DSLAMs in North America during 1998, according to RHK Inc. By the end of 1999, RHK notes that Alcatel held 51 percent of the ADSL DSLAM market, with no other vendor commanding more than 16 percent share.

While today's FTTP race isn't exactly analogous to Alcatel's early conquest of the DSL equipment market, the similarities are strong enough to make a case for forward pricing. Vendors say they were each asked to provide a five-year forecast at three different volume levels, but none will divulge the levels.

There are only two constants in carrier contract negotiations, vendors say. The first is that the initial price a vendor gives in response to an RFP is never the final price. The second is that, whatever the circumstances, carriers won't let a vendor bid at a higher price than its initial RFP response.

"If you win this, it could mean a lot of business," says one vendor bidding for the RFP. "If you don't, it means you could be shut out for a very long time."

— Phil Harvey, Senior Editor, Light Reading

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dodo 12/4/2012 | 11:19:30 PM
re: FTTP Bidders Slashing Prices? Opto dunce

This is my understanding:
There are 2 types of PONs: APON and EPON
The OLT send frames of data ( ATM or Ethernet) down to the 1:32 splitter.
The splitter sends same set of frames to each ONU.The ONU filters out only the frames that are specific to a user and then discard the rest ( which has not been encoded that said user address)
The bandwidth is shared but not the data.

This is my limited functional view- been away from BB access for a while.

Hopefully someone can give us more info
optodunce 12/4/2012 | 11:19:30 PM
re: FTTP Bidders Slashing Prices? If understand the PON design there is 1 fiber split down to serve 32 subscribers. Up-stream will be using one channel and down stream another and broadcast a third.

How does the information get isolated to one 1 of the 32 users...in other words doesn't all 32 users have access to the information that is assigned for user 1?

How can this be carrier class type service? can't any of the 32 users tap in on the information?

I am a bit confused on how effective PON design will be in the log run...
network 12/4/2012 | 11:19:18 PM
re: FTTP Bidders Slashing Prices? The PON solutions I have seen have a very nice triple play soluton. I am cusrious as to how carriers are going to power these devices that sit outside of the house in the access NID. If that is where the ONT will reside.

The demarcation point is of great interest especially as regulatory bodies weigh in on the bundling of services.


Ben Crosby 12/4/2012 | 11:19:17 PM
re: FTTP Bidders Slashing Prices? >>>
I am cusrious as to how carriers are going to power these devices that sit outside of the house in the access NID. If that is where the ONT will reside.
<<<

Since you have to run copper through the wall to the inside anyway, the powering is typically from inside the premise. To meet lifeline requirements many SP's are advised to deploy a device such as APC's powershield.

http://www.apc.com/products/fa...

Cheers,
Ben.
Curious George 12/4/2012 | 11:19:15 PM
re: FTTP Bidders Slashing Prices? Power is a key issue. A couple of ways to handle. One is a "collar" placed on the power meter which taps appropriate voltage/current and also sends data through the PON to the power company with your usage stats. In some places, this is valuable enough to the utility that they will pay for the collar. Another potential method is drilling a hole (roughly $100) through the exterior wall and tapping into home power. A third and more elegant approach is to take advantage of standard 802.3ae - power over ethernet. In this case, a wireless 802.11x router supplies power from a wall socket through the cat 5 cable that connects to the ONU on the side of the house. Drilling holes for data cables is cheaper, smaller hole less danger of hitting a pipe, easier to seal, and also low voltage. In all cases batteries are used to provide some form of UPS. This is another issue. What is being proposed is that the RBOCS would supply the first set of common batteries (D's for example) which are trickle charged. When end of battery life is approached, a signal is sent from ONU to the OLT or headend. This then triggers an email message to you indicating you should change your batteries. If you don't you take similar risk as a smoke alarm - your problem. People want to stay away from wet cell batteries since they can leak and make a mess/cause corrosion or can poison a pet in the garage - usually placement.
Eventually, UPS may go away from a practical perspective since most people cannot use the phone if main power fails due to a predominance of wireless phones. It is hard to find a RJ11 powered phone these days. However, it will only take one publicized case of a baby born on the front lawn due to an emergency during a power failure that will trigger an extension for this powering requirement.
Curious George 12/4/2012 | 11:19:15 PM
re: FTTP Bidders Slashing Prices? A bit more detail as I understand it: PON first then AON.

PON. FSAN standards with current implementation being BPON - what the RBOCS asked for. BPON uses three wavelengths. 1550 overlay for standard video broadcast that everyone sees. 1490 downstream from the headend for voice and data - also everyone sees. 1310 upstream for voice and data from the home. Downstream data at 622 Mb/s is read by the intended ONT on the side of the house as per the PON MAC stack which takes care of addressing, but again, everyone sees. The downstream path is relatively simple - upstream is another story. Upstream is handled in a burst mode at 155 Mb/s. Essentially when the PON is setup, the OLT or head end does something called ranging. Address pings are sent to individual ONT's (homes) and time of flight return pings clocked. This time of flight is used to determine when the OLT pays attention to a bit stream coming from a particular home and is used to control flow of traffic. The transit time along with other addressing information is used to ensure the appropriate bits have originated from the intended ONT or home and responses do not contend with each other in the shared upsteam pipe (remember, all 32 go into one in the headend). The OLT or headend is in complete control. BPON frames are ATM-based, hence the familiarity for the RBOCS. The next incarnation of PON is GPON, which allows for higher transmission rates and introduces a new protocol called GFP - Generic Framing Protocol which allows for mixed ATM and IP payloads.
The value of PON as stated by the RBOCS is that there are absolutely NO ACTIVE ELEMENTS in the outside plant. External to a building, everything is passive. This explains the intended OpEx savings they anticipate and also is consistent with statements from Verizon like "we spend 3-4% of our total budget on Cu rehab, so roughly every 30 years we rebuild the network. Why would we build another Cu network, users will be migrated to fiber in any case and next gen access network will be fiber based, even if FTTH is slow to be broadly deployed"

AON: Active network is essentially IP based with all of the swithing, collision control, etc. that is imbedded in that protocol. However, unless point to point networks are used - basically a 1 or 2.5 Gb/s link from the head end to the basement of a large building, switching elements are found in the outside plant. For example one might have a GigE link to a neighborhood switch which then distributes and aggregates upstream traffic from separate drops, this is point to multipoint. There is an ethernet pon variant called EPON which attempts to get rid of the outside plant active elements, but typically with a hit in efficiency and overhead since switches are quite good at controlling and aggregating traffic. Also, IP payloads can be of varying length, unlike ATM so timing and control is a bit messier.

For ethernet stuff, lots of good reading on the EFM (ethernet for the first mile website). For PON stuff, you can read standards or get bootleg copy of RFP - in either case good bedtime stuff.

From an optical perspective, the data/enterprise space is driving GigE modules to relatively low price points so volume is consolidated between enterprise and access.
On the PON side, a triplexer is a very difficult part to build with a target of $50 and less in high volume. The trickiest bit is the linear PD and amplifier for the video overlay. The data streams are relatively straightforward with digital PD and standard TIA and a directly modulated FP. On the OLT side, the challenge is the 1490 launch power since it is split 32 ways. The 1550 signal is amplified by and EDFA so plenty of juice. Because of the high launch power, some other effects can creep in which makes it advantageous to split as close to the headend as possible.

Hopefully enough detail here to draw the conclusion that PON can and does work but is a North American phenomenon at present. Some real technical challenges here. Much of the rest of the world is entirely digital and IP based with the bulk of the broadband brought to the basement of an MDU (multi dwelling unit) and distributed via Cu within the building.
Ben Crosby 12/4/2012 | 11:19:13 PM
re: FTTP Bidders Slashing Prices? There's quite an old study of powering issues published by EURESCOM circa 1998. I'm not aware of anything more up to date, but would happily be pointed at something.

Correcting some factual errors.

>>>
A third and more elegant approach is to take advantage of standard 802.3ae - power over ethernet. In this case, a wireless 802.11x router supplies power from a wall socket through the cat 5 cable that connects to the ONU on the side of the house.
<<<

First, the standard for power over ethernet is actually 802.3af (not ae).

Second, The IEEE's 802.3af specification calls for power source equipment (PSE), which operates at 48 volts DC, to guarantee 12.95 watts of power over unshielded twisted-pair cable to data terminal equipment (DTE) 100 metres away.

It seems that most ONT's operate at under 7W at 48V DC, so what you suggest is a neat idea. I don't think anyone has implemented it.

I'm also intrigued by the "collar" you mention. Whilst it is conceivable to tap power by induction in this manner, it would have to be performed after the electical meter. This means that in theory one still has to deliver the power cable through the wall.

If you look at Cisco's typically carrier class approach, they have obviated the need for holes through walls with their 1xxx ONT products, suggesting instead that:

"The power cord coming from the power supply may run through a small hole drilled in the wall or out a slightly opened window."

http://www.cisco.com/en/US/pro...

I can't find any references to other vendor's power suggestions.

>>>
People want to stay away from wet cell batteries since they can leak and make a mess/cause corrosion or can poison a pet in the garage - usually placement.
<<<

Actually most SP's that have researched this are happier to use sealed lead acid batteries than Ni-Cd or Ni-MH. They respond better to a long shelf life of trickle charging, typically lasting 10 years, and are widely deployed today inside emergency lights, and as backup power for Alarm Systems.

>>>
Eventually, UPS may go away from a practical perspective since most people cannot use the phone if main power fails due to a predominance of wireless phones.
<<<

I really doubt this. After the North Eastern power outage, all my local technology stores (Futureshop, RadioShack, Best Buy - even Staples in this case) had sold out of UPS'. APC, Belkin, Energizer and others have all brought out sub $100 products that they target at end users. A surprising number of my neighbours have UPS' for their computers and also use them for the cordless basestation for the phone.

As you rightly said, it takes something without power to prompt people to understand the value of certain technologies.

In most cases, there's going to be holes drilled in walls. ;)

Ben.
Rupert_1 12/4/2012 | 11:19:09 PM
re: FTTP Bidders Slashing Prices? On the subject of powering, is anyone up-to-date on the state of photovoltaics? At some point that may be the ideal solution. A quick search comes up with this from a company called PhotonicPower:

"InP Photovoltaic Power Converter (PPC-LW)

Photonic Power is pleased to announce its new InP photovoltaic power converters. The InP-based device can operate in the wavelength range from 1310nm to 1550nm. This allows the transfer of power over fiber at distances up to 20km or more. Consequently, remote antennas can be accessed without any need for electrical wiring.

With its launch of the InP power converters, Photonic Power is entering new exciting Communications areas where applications such as conversion from analog to digital TV and powering wireless antennas are increasingly using optically powered technology.



The question is, how much power is delivered? I seem to recall devices at lower wavelengths delivering several watts, several years ago, but they weren't yet cost-effective. This doesn't seem to be a real active R and D area for some reason. Can anyone add any updated info on photovoltaics?
wap545 12/4/2012 | 11:19:09 PM
re: FTTP Bidders Slashing Prices? AFC had no choice but to win here if they were to remain a viable vendor in the Telecom Space. If the Motorola/Quantum Bridge or Alcatel team had won this RFP AFC DLC business would go away over the next 2-3 years.
Verizon gave them the business due to Low Ball pricing (plus I feel Verizon is in no hurry to deploy FTTH and the other two vendors teams can deliver a viable FTTH solution today) and also they will allow them (AFC) 14 Months to develop and demo a viable FTTH solution.
What will be really interesting to see is what Vendor these RBOC will actually put in field trials in 2004.
My bet is that Alcatel and Motorola/Quantum Bridge will get some field time in both the RBOC and the IOC space.

wap545 12/4/2012 | 11:19:09 PM
re: FTTP Bidders Slashing Prices? AFC had no choice but to win here if they were to remain a viable vendor in the Telecom Space. If the Motorola/Quantum Bridge or Alcatel team had won this RFP AFC DLC business would go away over the next 2-3 years.
Verizon gave them the business due to Low Ball pricing (plus I feel Verizon is in no hurry to deploy FTTH and the other two vendors teams can dliver a viable FTTH solution today) and also allowed them (AFC) 14 Months to develop and demo a viable FTTH solution.
What will be really interesting to see is what Vendor these RBOC will actually put in field trials in 2004.
My bet is that Alcatel and Motorola/Quantum Bridge will get some feild time in both the RBOC and the IOC space.

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