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Optical/IP

SBC on Lightspeed: Full Fiber Ahead

(NYSE: SBC) has been working hard lately to prove that Project Lightspeed, its ambitious fiber, broadband, and IPTV initiative, is on schedule and technologically realistic.

On an earnings conference call last week, SBC officials said Lightspeed is on track to connect 2 million homes in the project this year. The company also reported a fairly strong third quarter in which the company absorbed costs from its Cingular Wireless LLC acquisition and inched closer to finalizing a merger with (NYSE: T).

CFO Richard G. Lindner said that SBC hopes to have fiber deployment “out and passed to facilitate 2 million homes on Lightspeed” before the end of this year. A “prepared launch” should take place sometime in 2006, he said. And Richard Dietz, vice president of investor relations, asserted that “the service is working and the project is on track.”

But doubts about the status of Lightspeed remain. The question is whether just "passing" a home really counts in the day and age of ultra-competitive broadband.

“ ‘Homes passed’ is a testosterone kind of issue,” says Kermit Ross, an independent telecom analyst. “What’s really important is how many customers they win and how many homes they hook up.”

Even as the company continues its move to data and IP-based services, wide Lightspeed deployment with live IPTV services may be still years away, due to reported delays with Microsoft Corp.’s (Nasdaq: MSFT) TV solution. (See SBC, Microsoft Defend Lightspeed.)

On the earnings call, SBC officials reiterated that Microsoft had “delivered the code for the platform,” but they did not address the reported glitches.

Nevertheless, Lindner said SBC will start putting more money toward Lightspeed during the next few quarters, which will put pressure on the 2006 capital budget. “We’ve been pretty frugal with our capex dollars, running in the low double-digits,” Lindner said. “But we will begin to see some pressure on that number.”

Although profits declined almost 40 percent from the year-ago quarter -- net income was $1.25 billion, or 38 cents a share, down from last year’s $2.1 billion, or 63 cents -- SBC said these numbers included $149 million in merger-related charges and $96 million in Hurricane Katrina damages suffered by Cingular.

Excluding these costs, SBC earned 47 cents per share, beating the average analyst estimate of 41 cents.

SBC stock prices have remained fairly steady since the statement, closing at $23 per share on Friday -- still down from the year’s high-water mark of $26.70 but slowly crawling back from a rough few weeks in which heavy industry competition kept investors away.

SBC officials said they expect to see shares, which they say are now “significantly undervalued,” continue to increase in price, and they have announced a buyback plan that may reach $1 billion.

And SBC reported a record quarter for DSL access lines, with 528,000 new lines added.

Further brightening the picture was AT&T's potentially final earnings statement, also made last week, which beat analysts’ estimates, reporting $520 million in third-quarter income and a profit increase of 64 cents per share. AT&T closed at $19.01 on Friday, up 2.3 percent.

Both companies have assured investors that SBC’s $16 billion deal to buy its former parent will clear regulatory hurdles and close before year’s end.

— Joe Tuzzo, special to Light Reading

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OldPOTS 12/5/2012 | 2:56:14 AM
re: SBC on Lightspeed: Full Fiber Ahead If they use ADSL2+/VDSL to provide Lightspeed (limited - Internet & Phone) service to homes, then does installing a DSLAM that supports the ADSL2+/VDSL cards and quality twisted pairs (less DSL modem) count as "homes passed"????

Just wondering how many DSLAMs needed this year?

OldPOTS
optiplayer 12/5/2012 | 2:56:03 AM
re: SBC on Lightspeed: Full Fiber Ahead "Verizon customers are already enjoying 15mbps downloads and HDTV over fiber."

Perhaps if you live in Keller Texas... but for the other 100M people in Verizon's territory video is way in the future.
tfruth 12/5/2012 | 2:56:03 AM
re: SBC on Lightspeed: Full Fiber Ahead I take 'homes passed' to mean that fiber has been trenched in the neighborhood, going by each property. In other words, 'homes passed' to me means that SBC has laid fiber through my back, fron, or side yard and my address is now eligible for fiber services. Of course, Verizon customers are already enjoying 15mbps downloads and HDTV over fiber. I guess they found a way to leave Micro$haft out of the mix.
optical_man 12/5/2012 | 2:56:03 AM
re: SBC on Lightspeed: Full Fiber Ahead Wrong Optiplayer.
Drive around Dallas Fort Worth area and you see dozens of "Fiber Project under Construction" signs, and the work trucks, and 4 weeks later Verizon trucks after the fiber installers leave.

I have seen this in some other towns in America that I visit. Same signs, different local Contractors name on the sign.

It's happening. Now.
optiplayer 12/5/2012 | 2:56:03 AM
re: SBC on Lightspeed: Full Fiber Ahead The "home passed" term originated in the cable industry back when cable was being built out they MSOs would talk about how many subscribers they had and how many homes they had "passed" which referred to current subscribers plus those homes that were passed by a distibution cable and needed only a drop to add service. Given cable's ubiquity these days one never hears the term in that industry anymore.

The Verizon FiOS model is similar in that they plan to run distribution cables down the street but won't install drops until a customer signs up for high speed data (and/or eventually video). Therefore, I think the "homes passed" metric is valid for VZ. For Lightspeed, however, I think its a bit deceiveing since they are only running fiber to a neighborhood. I suppose all the homes in that neighborhood become addressable once the DSLAM/BBDLC is in place but it seems exaggerated.

It reminds me of the bubble days when the data LECs (Covad, Rythym, etc.) used to place a DSLAM in a CO and count every line in the CO as a home passed or addressable and the Wall Street guys lapped it up quarter after quarter... until... pop!
Duh! 12/5/2012 | 2:56:02 AM
re: SBC on Lightspeed: Full Fiber Ahead You're both right.

The FiOS rollout is happening as quickly as can be expected for a major infrastructure overbuild. Incidentally, here in New England, the work is being done by union crafts in Verizon trucks. I drove past a couple of them on my way to lunch this very afternoon.

But FiOS TV is lagging Internet and telephony. Keller is FOA. It took them a while to deal with content, set up the super headends, get the overlay working on the PON. And franchising is an ongoing issue. But it's coming.
optiplayer 12/5/2012 | 2:56:02 AM
re: SBC on Lightspeed: Full Fiber Ahead I never denied that FiOS construction isn't happening in many areas of Verizon's footprint. That said, video is available from Verizon in one city only - Keller, TX. Period.

LaMichael 12/5/2012 | 2:56:01 AM
re: SBC on Lightspeed: Full Fiber Ahead Remeber that the vast majority of Lightspeed is Fiber to the node. There is no trenching in the neighborhoods, they are using the existing copper plant. The only fiber to the home they are using is in new neighborhoods.
paolo.franzoi 12/5/2012 | 2:55:56 AM
re: SBC on Lightspeed: Full Fiber Ahead
LaMichael,

That is until they find problems in the existing copper plant. And then they find out that they have other DSL issues. And then they decide that this is a horrible idea and go another way.

seven
Diogene 12/5/2012 | 2:55:52 AM
re: SBC on Lightspeed: Full Fiber Ahead Copper is a subtle enemy of fiber optics,
and it has the strongest ally: electronics.

I think PON is the best mid-2-long term solutions. FTTN is the winner for near term, both for low capex and timing.

Diogene
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