HALF MOON BAY -- Drew Lanza yesterday unveiled an interesting business plan for a fiber-to-the-home (FTTH) startup. The company has a commitment from an East-coast RBOC and a projection showing revenues growing to $5 billion in about ten years.

Lanza, a general partner at Morgenthaler, shared the documents on Monday during a morning panel session at Light Reading's Links 2004 Executive Summit, decribing a bullish scenario in which the startup would ride the wave of explosive FTTP growth.

The only problem? In Lanza's own words: "It's a fraud, and I have misled you." Just like Dan Rather, Lanza had cooked the books.

The punchline? The startup was Raynet, which Lanza had helped found -- in the 1980s. "Every slide I've shown you is more than 15 years old."

Lanza's point underscores a theme noted by his fellow panelists: FTTH is hung up on the hurdle of demand. The eventual takeoff of FTTH buildouts "has nothing to do with technology," he says. "The technology has been around for 15 years."

Lanza articulates the issues in a recent column on Light Reading (see Fiber's Sticky Wicket). His conclusion is that if the applications in use don't require much bandwidth, there's no real reason for FTTH to storm the nation.

The outlook from the lone carrier representative on the panel -- Mark Kaish, vice president of next-generation solutions for BellSouth Corp. (NYSE: BLS) -- wasn't much more promising. "There's not a tremendous amount of demand growth," he says.

In a sense, the move to the converged IP/MPLS network is in the same situation. What's lacking, Kaish says, is the "compelling event" that drives carriers to change to a new network. Frame relay, for example, benefitted from the shift to LAN/WAN architectures from mainframes. Nothing like that is pushing customers to IP and fiber. "There's no driver that's forcing people to change their networks," Kaish says. "It's a customer-by-customer or almost industry-by-industry move towards this type of network."

Another barrier is the politics within carriers, says Bert Whyte, CEO of Network Equipment Technologies Inc. (net.com) (NYSE: NWK). Whyte characterizes the telecom world as being run by old guys reluctant to radically change the network they grew up with. "They want that telephone network model moved to the broadband generation," Whyte says.

Whyte notes that it's up to equipment vendors to do the hand-holding to help carriers get over their fears. Moreover, as IP hasn't been a moneymaker for carriers to date, he declares it imperative for the equipment community to help carriers work out the equation. "We've got to work hard trying to develop services and applications so they can make money on the network," he says. "We haven't done that. We want to sell them equipment and tell them about the 'converged network.' "

Carriers also have to find ways to retain customers as more broadband options become available, including wireless. Bundling is a key differentiator for service providers, but it's an intermediate step, says Kevin Walsh, vice president of marketing for Calix Networks Inc.

The endgame is to have services integrated, to the point where a single-end device handles voice, data, video, and whatever else is coming down the pipe. Some of this is beginning already, in the form of cell phones surfing the Web or TV sets showing caller ID information. "Obviously the service provider that's able to do that will reduce churn," Walsh says.

BellSouth's Kaish agrees on that point. "Ultimately, seamless integration is where the excitement is," he says.

— Craig Matsumoto, Senior Editor, Light Reading

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