FTTP Booty Tough to Peg

The three Baby Bells said to be interested in the fiber-to-the-premises (FTTP) market have put in a tall order, and one with a wide range of possible outcomes.

One possible outcome: billions of dollars in new spending. Another outcome: close to zilch.

The request for proposal (RFP) Verizon Communications Inc. (NYSE: VZ), BellSouth Corp. (NYSE: BLS), and SBC Communications Inc. (NYSE: SBC) sent to telecom equipment vendors in June states asks for bids on three different scenarios ranging from 50,000 homes to 640,000 homes during 2004, according to sources close to the proceedings. Each of the phone companies is in talks with vendors at the moment to finalize details for lab testing that will begin next month, so the companies are still months away from actual deployments (see FTTP Bidders Slashing Prices? and Carriers Give FTTP Update). But a glimpse of the information those vendors were asked to supply during the selection process gives some idea of how aggressively the Bells are heading into FTTP -- at least on paper. Vendors in contention for the Bells' business had to provide, among other things, price forecasts for five years of deployments (homes passed) at three different volume levels. Though the Bells have never released these figures publicly, Light Reading has learned the forecasted FTTP volume levels, which are represented in the chart below.

Table 1: BellSouth, SBC, Verizon FTTP RFP Forecast for 2004
Low Forecast Mid-Range Forecast High Forecast
Single Family Homes 50,000 345,000 640,000
Multi-tenant Units 11,250 77,625 144,000
Businesses 1,250 8,625 16,000

For those interested in back-of-the-envelope math, at a cost of roughly $2,000 per subscriber, which some experts say is reasonable, it could represent up to $1.2 billion in spending.

But that's the high end of expectations. Here's the less appealing scenario: The RBOCs are said to be looking for aggressive pricing in the RFP. What if they could lower things to $1,000 per subscriber? If they were targeting the lower range of 50,000 residential customers over the next few years, that would peg the total money involved at a much less exciting $50 million.

But the big question is, would they move that fast? If the Bells hit their mid-range forecast for the first year of deployments to single family residences, they would easily surpass the number of fiber-to-the-home installations to date.
Table 2: FTTH Today
Homes Passed Homes Connected
180,300 64,700
Source: Render Vanderslice & Associates

There are 64,700 homes connected via fiber services today and that's only about 36 percent of the 180,300 homes passed, according to Render Vanderslice & Associates president Michael Render. Render says about 80 percent of the homes passed today (roughly 144,240) are triple-play capable, meaning they'd be able to get voice, video, and data services, if ordered. Even if all the Bells are aiming for is the low end of the forecasts they supplied in the RFP, the companies would have to move quickly. BellSouth and SBC say they'll start first office application (FOA) trials during the second half of 2004. Verizon, however, says its FOA trials will start during either the second or third quarter of 2004.

— Phil Harvey, Senior Editor, Light Reading

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BobbyMax 12/4/2012 | 11:18:04 PM
re: FTTP Booty Tough to Peg Unless the RBOCS provide convergent services over fiber, it may take as long as ten years to recover the cost. It is also not clear what services will be bundled and how various ervices will be provided. The population density except in some big cities cannot be justified. No cast sudy has been done by RBOCs to present a clear picture of the cost factors. With amost no profitability and no recovery in sight,to think of fiber installation and providing services does not seem to be a good idea at least the recovery takes place, which may be another ten years or so.
busted 12/4/2012 | 11:18:03 PM
re: FTTP Booty Tough to Peg i agree, population density can only be justified in cities :}
digezy 12/4/2012 | 11:18:01 PM
re: FTTP Booty Tough to Peg I think you are right about the foot dragging. They want more relief from the FCC. The latest ruling didn't help by making them share on brownfield applications. There aren't enough greenfield applications to make this a huge rollout. On the other hand they are losing customers daily to the MSOs (cable companies), so they can't wait forever.
dcarson 12/4/2012 | 11:18:01 PM
re: FTTP Booty Tough to Peg If install costs were at $1k that's less than half the rule of thumb costs to wire existing POTS users via copper (estimated at $2k/sub).

Bobbymax, how do come up with 10 years ROI? Sounds like an ever more profitable ROI than copper...

Combine that FTTP with an MPLS core and you've got the best of convergence and technology advancement with lower opex and the capacity for a triple-play by the RBOCs. I believe that their foot dragging in FTTP has to do more with linesharing than anything else.
kampar 12/4/2012 | 11:18:00 PM
re: FTTP Booty Tough to Peg
>Bobbymax, how do come up with 10 years ROI?
>Sounds like an ever more profitable ROI than

How do you think he came up with it? Like he comes up with pretty much every other statement he makes. For example ... today's Friday so the answer must be 10. If you'd caught him on a Tuesday, it would have been 13 years.
gzkom 12/4/2012 | 11:17:58 PM
re: FTTP Booty Tough to Peg wheather FTTP will be profitable, RBOCs have to do it right now.

ROBCs will be dying in 5 years if they don't start FTTP now, period.
Curious George 12/4/2012 | 11:17:56 PM
re: FTTP Booty Tough to Peg The RBOC's are under tremendous competitive pressure from the MSO's and must respond. Voice related revenues are declining, margins squeezed, and the cost of operating a crumbling copper infrastructure skyrocketing. At the FTTH Council conf in New Orleans a few weeks back, Verizon made it clear that they will rebuilding their Cu plant with fiber at least at the rate of their rehab budget - 3-4% of total cap budget per year. Greenfield applications have already proved-in economically as take rates are above 90% for voice and data with churn well below 10%. While the PON networks installed are fully video capable, these service have not been broadly turned up. With regard to the overbuild segment, multi dwelling unit deployments are quite economical as has been proven in Italy, Sweden, Korea, and Japan. I agree, dense urban already makes sense for voice and data over fiber- adding video clinches it.
With a HDTV MPEG-4 stream requiring roughly 7 Mb/s, DSL is not going to cut it -

I agree, the RBOC's must respond and figure out the video business in a hurry.
sigesux 12/4/2012 | 11:17:55 PM
re: FTTP Booty Tough to Peg CG,
I agree, the RBOC's will be killed by the MSO's if they do not respond with a "triple play" unfortunately this is the reason that FTTH will be delayed. The RBOC's need a 2004/2005 solution and no meaningful deployment of FTTH is scheduled until 2005.

The RBOC's near term solution will be to partner with satellite to provide complementary services. so the solution becomes ADSL2+ with broadcast Video over satellite and VOD/PPV over DSL. This kills FTTH for at least another 2-3 years. Its the final irony that deploying a DSL/satelllite system to compete with the MSO will chew up the entire upgrade budget that could be used for FTTH.

Its a bad long term strategy, but as we all know in telecom these days, long term strategy takes a back seat to survival.

My prediction
Verizion deploys AFC slowly
SBC delays all FFTH to focus on ADSL/satellite

Where exactly is the unemployment office!
rs50terra 12/4/2012 | 11:17:44 PM
re: FTTP Booty Tough to Peg With high rise dwellings and other dense envrionments the proper architecture is FTTB/FTTC with VDSL for the last 1,000 ft.

Another way to do that is to have an active star in the basement or at the curb and use MMF and VCSELs for the last 1,000 ft.

In any case, the economic and engineering justification for FTTP is still obscure.

Perhaps this knowledgeable forum will be able to provide a cogent explanation for this old idea that started in the late 80's and was only useful to a handful of Raynet people.
rs50terra 12/4/2012 | 11:17:44 PM
re: FTTP Booty Tough to Peg Can you please post your messages in English?
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