FTTP Bulls Talk Billions
There's no immediate answer to that question, but at least two developments this week hint at tremendous opportunity and optimism for the FTTP business.
The first development: Verizon president Lawrence Babbio told a crowd at the Progress & Freedom Foundation’s Aspen Summit this week that Verizon could possibly increase its FTTP deployment plans if the government would be unambiguous in its regulatory treatment of fiber.
Verizon did not say it was increasing its plans to pass one million homes this year and two million homes next year with fiber (see Verizon's FTTP Texas Feeler). Still, Babbio's speech sent off a spurt of second-guessing, with folks wondering just how much the industry would benefit if Verizon did up its FTTP plans.
"Verizon management said that it could increase the number of homes added to the FTTP network in 2005 to 4 million," writes UBS Investment Research analyst Nikos Theodosopoulos, in a note to clients on Friday. "In our view, such an increase in homes passed would be significant from a capex perspective."
How significant? Theodosopoulos puts pen to paper and explains: "Verizon has stated it will spend roughly $800 million in 2004 to pass the 1 million homes, or about $800/home passed. The $800 million in FTTP capex in 2004 compares to a total wireline budget of $6.5 to 7.0 billion… If Verizon were to pass an additional 4 million homes next year, it would seemingly require about $3.2 billion at the current $800.home passed rate. This implies Verizon would need to spend an incremental $2.4 billion over the $800 million level spent in 2004."
This spending boost, if it does happen, could benefit ADC Telecommunications Inc. (Nasdaq: ADCT), Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI), Corning Inc. (NYSE: GLW), Motorola Inc. (NYSE: MOT), Scientific-Atlanta Inc. (NYSE: SFA), and Harmonic Inc. (Nasdaq: HLIT), Theodosopoulos writes.
Verizon's reaction? "We haven't said we'd increase [the number of homes passed] yet," writes a spokesman in an email to Light Reading.
The company has, however, said it would spend at least $3 billion on FTTP, wireless broadband services, and VOIP through 2005 (see Telco Video & VOIP Stakes Rising).
The second optimistic FTTP development this week is a new report from KMI Research that predicts that the total market for FTTP equipment, cable, etc., will reach $3.2 billion by 2009 (see Fiber Makers Perk Up).
In fact, by the time 2009 rolls around, telecom carriers will represent 70 percent of the market, with municipalities, utility companies, real estate developers, and other “non-telcos” making up the rest, KMI says.
Patrick Fay, senior analyst at KMI, says there will be about 1.6 million homes passed with fiber in 2004, with a 6 percent customer take rate among telecom carriers (mostly Verizon). In 2009, Fay predicts, the number of homes passed will be more than 6 million, with an average of fewer than 4 million homes passed per year in the previous years.
KMI's assumptions do factor in price declines in equipment, but they don't necessarily bank on any of the other RBOCs matching Verizon's FTTP enthusiasm (nor its numbers).
"We certainly don't think our numbers are outlandish or overly aggressive," says the report's author.
One factor that could slow down the anticipated steady march of FTTP is the training required for splicing and other field deployment techniques, Fay says. Another is how quickly Verizon can deliver a TV and video service to complete its triple-play offering and increase customer acceptance.
— Phil Harvey, News Editor, Light Reading