FTTH Dispute Boils Up

What began as a cheerleading session for fiber-to-the-home (FTTH) this week looks to have wedged Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Corning Inc. (NYSE: GLW) into an awkward space.

At the annual Fiber-to-the-Home (FTTH) Council conference in New Orleans, the equipment manufacturers reportedly were asked to support opposing camps -- one led by keynote speaker Kevin J. Martin of the U.S. Federal Communications Commission (FCC), the other led by key customer BellSouth Corp. (NYSE: BLS).

The fight is over the definition of FTTH, which has important regulatory consequences. The FCC says FTTH services require a fiber loop that runs all the way into the customer's home. In its Triennial Review released in August (see FCC Rules Out!) the FCC says FTTH services can remain unbundled -- that is, exempt from forcible sharing at reduced rates with competitors, which is required of incumbent carriers in other parts of their networks.

BellSouth wants the definition of FTTH to be widened to include not only fiber links into houses, but also fiber to the curb (FTTC). The RBOC says so-called FTTH services, such as triple-play voice/data/video offerings, can be delivered effectively through fiber links from the central office to the curb or neighborhood box, where individual homes tap broadband services via copper. BellSouth has spent heavily in recent years to deliver broadband services this way. It resents having its broadband initiative hampered by what it views as a short-sighted definition by the FCC.

Now here's what happened this week: According to one FTTH Council conference attendee, analyst Timm P. Bechter of Legg Mason Inc., commissioner Martin used his keynote to ask the council to formally support the FCC in its efforts to keep the definition of "fiber to the home" the way it is now.

Bechter says Alcatel and Corning, both conference sponsors as well as key members of the FTTH Council, felt pinched because BellSouth has pressured them to back up the carrier on this issue. At the same time, a BellSouth spokesman today confirmed that the carrier wants the vendors to support its position.

What's an equipment vendor to do? Both Alcatel and Corning are driving forces behind the FTTH Council, which invited Martin to speak and has announced its support for FCC decisions in the past (see FTTH Council Applauds FCC). At the same time, BellSouth is clearly an enormously influential customer for both. How can both masters be served?

Some apparently hope the matter will go away if no one pays attention. Officials at Alcatel and Corning both declined to comment on the issue. Leonard Ray, market development manager at Corning's Global Broadband Group, who also is FTTH Council Government Relations co-chair, did not return a call at press time. A call to the FTTH Council main number went unanswered, as did an email to commissioner Martin.

Bechter of Legg Mason thinks the vendors and the FTTH Council shouldn't stay mum for long. In a note to clients today, he says the group has a chance to take a stand against what he sees as BellSouth acting in its "own self-interest" in this matter of redefining FTTH. He says opening the definition to include fiber to the curb goes against the "goals of the FCC, the FTTH Council, or the economic interest of the country." In his view, though, the FTTH Council will probably do nothing to formally oppose either the FCC or BellSouth.

This isn't the first time an RBOC has taken a strong stand against the FCC that's had a potential impact on suppliers. Last month, SBC Communications Inc. (NYSE: SBC) appeared to backpedal on support of an RBOC PON (passive optical networking) RFP in light of FCC actions (see SBC Ratchets Up PON Politics). BellSouth and Verizon Communications Inc. (NYSE: VZ) also are part of that RFP, but analysts recently have questioned the seriousness of any of the incumbents in rolling out PON deployments in the near term.

— Mary Jander, Senior Editor, Light Reading