RBOCs Hungry for Fiber
Late this afternoon, BellSouth Corp. (NYSE: BLS), SBC Communications Inc. (NYSE: SBC), and Verizon Communications Inc. (NYSE: VZ) issued a press release saying they've decided on a "set of common technical requirements" for extending FTTP and have put appropriate manufacturers on notice that they'll be issuing an RFP for gear very soon (see RBOCs Agree on Access Specs).
Shawn Dainas of SBC confirms that the technologies the group is seeking are based on PON (passive optical networking) standards, such as the G.983 specs from the International Telecommunication Union (ITU) and the GR-909 standards from Telcordia Technologies Inc.
Interestingly, Qwest Communications International Inc. (NYSE: Q) wasn't part of today's announcement. "We did know about the fiber-to-the-home project and were approached to join, but after conducting our own internal analysis we decided it didn't meet our own success threshold," says a spokeswoman. Qwest won't rule out joining in the future, she says.
Notwithstanding, PON vendors are in high spirits from the news, which apparently has been anticipated for months. Most expect the RFP to be issued within a couple of weeks.
"This is very, very good news for the industry," says Darryl Ponder, CEO of Optical Solutions Inc., which by most accounts leads in PON market share. He says carriers realize it doesn't make economic sense to install copper cable if data, voice, and video are on the cards for future services.
Others agree. "We're excited about it," says Tom Tighe, CEO of Wave7 Optics Inc. He says the carriers had surveyed manufacturers industrywide in April, and vendors have been eagerly anticipating the announcement ever since.
At least one analyst thinks it's significant. "Sources suggest the RBOCs are collectively looking to deploy between 500,000 and 1 million lines per year beginning as early as 2004, if the price is right," writes Steven Levy of Lehman Brothers in a note this morning. He says current prices of $1,200 to $1,800 per line will probably go down to $700 or so once the RFP action begins.
But Levy's cautious about getting investors too hyped. He says PON rollouts will likely mimic the slow uptake of DSL. Further, he says it would be misguided to think the RFP signals any uptick in carrier capital spending.
Levy says one possible outcome could be M&A, however, as large companies that have pulled away from PON hasten to get with the small players that have persisted in the market despite the negatives.
Indeed, Alcatel SA (NYSE: ALA; Paris: CGEP:PA) stands relatively alone among large companies that have stood by PON. Others, including Marconi Corp. plc (Nasdaq/London: MONI) and NEC Corp. (Nasdaq: NIPNY), put their efforts on ice indefinitely.
Some expect next week's Supercomm 2003 to be a convenient venue for PON partnerships. "I'm certain partnering will happen," says Jeff Gwynne, VP of marketing and a founder at Quantum Bridge Communications Inc. He says a crucial juncture has been reached, as the cost has dropped and carriers finally see a chance for revenue-producing services via PON. "Everything's coming together," he says.
Wave7's Tighe agrees that partnerships are in the offing. Indeed, Wave7's been working on deals with larger companies for months particularly in Asia (see Pining for PON). Regarding next week's show in Atlanta, "It'll be fun," he says.
— Mary Jander, Senior Editor, Light Reading
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