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Verizon Doubles FTTP Supply List

Light Reading
News Analysis
Light Reading
12/22/2003

Verizon Communications Inc. (NYSE: VZ) has announced four more suppliers for its fiber-to-the-premises (FTTP) build-out starting next year, but analysts say the winners should be cautious, as these contacts are not exclusive and there are no quantity guarantees (see Verizon Names FTTP Suppliers).

These FTTP contracts are important, as they underpin the beginning of the move to fiber last-mile connections for the mass market served by the Bell operators. For consumers, FTTP will offer more bandwidth per user than do most flavors of DSL and cable access -- singlemode fiber has 31 times the capacity of coaxial cable on 100-meter links, and over 250 times the capacity of high-end twisted-pair copper over those lengths, according to Corning.

The four suppliers announced today -- Corning Cable Systems (CCS), a subsidiary of Corning Inc. (NYSE: GLW); Preformed Line Products Co; ADC Telecommunications Inc. (Nasdaq: ADCT); and Tyco Electronics -- will provide fiber optic cabling and other outside plant equipment (a.k.a. "passive" elements, a.a.k.a. "widgets") for the FTTP system.

They join four other companies that Verizon selected and announced last month: Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) for the central-office and CPE electronics; and outside plant suppliers Sumitomo Electric Lightwave Corp., Pirelli Cables and Systems North America, and Fiber Optic Network Solutions Corp. (FONS) (see AFC Signs Verizon FTTP Letter and RBOCs See Three Ways to FTTP ).

Verizon network services group president Paul Lacouture said the latest vendor selection completes the second phase of the project, begun earlier this year when Verizon, BellSouth Corp. (NYSE: BLS), and SBC Communications Inc. (NYSE: SBC) adopted technical standards and issued a joint RFP to equipment suppliers (see RBOCs Agree on Access Specs).

While it’s great to see an RBOC announcing something other than declining revenues for a change, Legg Mason Inc. analysts highlight in a note to investors today that these contracts are “non-exclusive pacts that guarantee no certain volumes.”

The note continues: “These vendors have been invited to participate in the start-up phase of a long-term last-mile-of-the-network conversion that is, in our view, likely to take several twists and turns as standards evolve, bandwidth requirements increase, and the competitive landscape shifts. How it will all play out and which vendors will be the big winners in the FTTH build out five to ten years down the road, we believe, is impossible to know at this stage of the game.”

Verizon spokesman Mark Marchand says that, with its vendor selection complete, the next major step is working out how legacy operations support systems (OSS) will have to be upgraded or replaced to support the new network.

“Internally, we have to reinvent the wheel in terms of OSS, as we need an entirely new system that supports the new network and still interacts with our existing OSS infrastructure,” says Marchand. It’s likely Verizon will build most of this new software in-house, he adds, although there could be smaller contacts farmed out to external OSS vendors.

Verizon is keeping its lips sealed on the services it anticipates running over its new network. “It’s a voice, data, and video network, but we aren’t revealing the specific product sets for competitive reasons,” says Marchand.

Verizon sketched out its deployment plans as follows:

  • Two FTTP trials in the first half of 2004
  • Additional deployments in 100 central offices across nine states
  • Deployments to consist of both "greenfield" (new residential construction) and overbuild (deploying fiber to existing subscribers now served by copper) projects
  • Total homes passed in 2004: 1 million
  • Deployment pace may "potentially" double in 2005
  • Verizon will not increase total capital expenditures but will rather shift funds from copper to fiber.


— Jo Maitland, Senior Editor, Boardwatch

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cypress737
cypress737
12/5/2012 | 2:47:08 AM
re: Verizon Doubles FTTP Supply List
"Cypress, I think your on the wrong forum for the level of discussion that your seeking, try Yahoo, or if you also have a really big "member" than there are a couple of chat groups I could recommend.:-)"

Unfortunately I just came with a standard-issue member, opto -- nothing that would get me into one of those gifted groups. I'm stuck with fiber optics.

Hey, I'm the first to admit I'm not one of your peers in terms of knowledge, but I don't think that means I ought to seek out a lower level of discussion. There isn't a smooth continuum of forums between Yahoo! and Lightreading, and even if there was, I'd probably still choose to come here. I'd like to be in a place where most of the discussion occurs near the limits of my ability to understand -- you know, something like total immersion when you're trying to learn a new language. I wish I could contribute something but I really can't; obviously I'm limited by my lack of knowledge. But I don't think I've done any harm by asking questions.

Anyway, don't stop ranting. This is good stuff.
BigBubble
BigBubble
12/5/2012 | 2:47:06 AM
re: Verizon Doubles FTTP Supply List
Optoslob

You posted this: "Certain states have even passed legislation forbidding the municipal deployment of FTTP systems."

I'm curious, do you know how many states have these laws and what is the possibility that these laws will deter municipalities from deploying FTTP? This is really where the action is. Along with electric utilities, interest in fiber is definitely growing here.

Interesting post. Thanks
bonnyman
bonnyman
12/5/2012 | 2:47:06 AM
re: Verizon Doubles FTTP Supply List
Big Bubble, repsonding to Optoslob, wrote:

You posted this: "Certain states have even passed legislation forbidding the municipal deployment of FTTP systems."

I'm curious, do you know how many states have these laws and what is the possibility that these laws will deter municipalities from deploying FTTP? This is really where the action is. Along with electric utilities, interest in fiber is definitely growing here.

Interesting post. Thanks


There is a key case before the Supreme Court this session that will determine if states have the constitutional right to limit municipal broadband initiatives if state laws conflict with the federal Telecom Act of 1996.

I track municipal broadband efforts in a blog; here are some posts relating to the case before the Supreme Court:

http://communityfiber.blogspot...

http://communityfiber.blogspot...

http://communityfiber.blogspot...

http://communityfiber.blogspot...

http://communityfiber.blogspot...

You might also check out the American Public Power Association's web site at:

http://www.appanet.org

and attorney Jim Baller's web site:

http://www.baller.com

The APPA is the trade group for municipal electric utilities and has been very involved in this case. Jim Baller is the lead attorney for municipal attorneys and an expert on municipal broadband issues.

A.B.
cypress737
cypress737
12/5/2012 | 2:47:04 AM
re: Verizon Doubles FTTP Supply List
What do you guys think about this MaLigne TV product that's being offered in France? Isn't this something technonerd said had been tried unsuccessfully in the United States?
optoslob
optoslob
12/5/2012 | 2:47:03 AM
re: Verizon Doubles FTTP Supply List
BigBubble,
I know that Texas and Missouri both have such laws but I'll defer to Al Bonnyman, for more complete list. Legal deployment issues are really not my speciality.

Optoslob
deckchairs
deckchairs
12/5/2012 | 2:47:03 AM
re: Verizon Doubles FTTP Supply List
Optoslob -


First, I now understand the economics of wireless NID: discontinue the land-line and replace it with a device to improve wireless reception in your house. At a one-time price of $50-$100, even higher, I would do this. I'm not too concerned about which cell phone is in what cradle, or who's ringer has what sound. Enough said by me about that technology.

As for Verizon, I recognize it is a huge conglomerate of many businesses related to telecom/datacom but several personal experiences seem to indicate a common theme:
* Trying to move my existing cell number using LNP to Verizon Wireless. It's been three weeks and I haven't heard a thing from them - bupkis. I'm sure it's in some legal entanglement or something.
* Verizon won't even consider you for DSL if you have a noisy copper line. One loadcoil, even if you are 5000ft from the CO, and you're out of luck. To be fair though, a number of homes in my neighborhood have the old single-pair 22gauge copper from the '40s - Verizon is upgrading these as time/expense permit.
* Several years ago, I had DSL from a CLEC. After service installation, Verizon didn't provide SOMETHING to the CLEC for over three months. Verizon had little motivation, other than the law, to do this, but still it took a long time.
* Sometimes my landline becomes very noisy. I call Verizon and put in a trouble ticket (after first confirming the noise is on the network side of my NID.) The operator performs a line test and says the line is clean and it's not a Verizon problem; a couple days later the noise is gone.

So my experience with Verizon, and really any telecom carrier ILEC, IXC and CLEC, makes me believe it perceives any additional work as a bad thing. Personally, I find it hard to believe they are going to complete the replacement all the old 22-gauge copper in my neighborhood by the end of 2004 - there's no economic incentive to do this.

So now let's shift the focus to FTTX: a magnificent technology that has been around for 15 years without any large scale deployments.
In order to do FTTP, there would have to be HUGE economic incentive for Verizon to string/splice/maintain (okay, contract this work to your company) a NEW fiber plant, get into all the legislative hoopla to carry "triple-play" services while placating the local PUCs that E911 and local phone service will be maintained reliabily, upgrade all their OSS's to support these technologies AND still try to convince their labor unions that cutbacks and layoffs are necessary.

My original question remains as to FTTP economics - who is going to pay for this? I find it a little hard to believe the articles that Verizon is going to roll out fiber flybys to ~1M homes in Massachusetts next year without some small trials to prove the economics.

I want to point out I have NO vested interest in any product other than getting cheap/reliable services.

deckchairs.
bonnyman
bonnyman
12/5/2012 | 2:47:02 AM
re: Verizon Doubles FTTP Supply List
BigBubble,
I know that Texas and Missouri both have such laws but I'll defer to Al Bonnyman, for more complete list. Legal deployment issues are really not my speciality.

Optoslob


I don't have a comprehensive list but I do know that Bristol, Virginia had to get a waiver to offer cable TV. Nebraska used to have a prohibition. Wisconsin is considering a ban and Pennsylvania was considering a ban.

In some other states, cable TV and telco lobbyists have succeeded in making it hard to launch a municipal system without outright banning it. One way to do this is to require the municipal provide wholesale services to retail service providers. While structural separation is a good thing, in my opinion, in the long run, for now it greatly complicates (and can kill) municipal FTTH builds.

That's because of a chicken and egg effect. There are well-established retail business models for municipal broadband systems that date back almost 10 years to HFC builds then later FTTH builds. There have been dozens of retail municipal broadband systems built. There are no well-established business models for wholesale only FTTH (or HFC) systems. Likewise, there's not an established group of retail providers out there that will povide service over municipal wholesale FTTH systems.

There have only been one or two municipal wholesale FTTH builds. The challenges of dealing with the wholesale-only model led to the managers of one FTTH pioneer, Grant County PUD getting fired a few weeks ago.

In a few years, (maybe just 1 or 2), I think the wholesale model will be established and there will be plenty of service providers out there to compete to provide services in towns around the U.S.

Cable TV and telco lobbyists are very well aware of the chicken and egg issues associated with requiring munis to stick to wholesale services. It's politically easier and almost as effective for them and their anti-muni legislative allies to mandate wholesale-only business models than it is for them to seek outright bans on muni broadband.

They wrap the mandate up in things such as:
1. free enterprise system
2. freedom of speech
3. unimpeded access to all programming
4. monopolies are bad
5. all government is bad
6. government operations are corrupt

Of course, if you look at their own behavior, epsecially on items #3, #4, and #6 (think Enron, Adelphia, etc.), it's pretty hypocritical.

What they really need to do is improve their service levels and reliability and keep their promises. Municipal systems don't get built in areas with well-manaed incumbents.

A.B.
BigBubble
BigBubble
12/5/2012 | 2:47:02 AM
re: Verizon Doubles FTTP Supply List
bonnyman

Great info about municipalities. Thanks. I will bookmark the websites. I especially like the 2nd article about BellSouth getting hammered by the judge in NC for sueing the muni there. Just goes to show that the Bells are sweating the muni's also. Its not over with though.

The Supreme Court's ruling on this will have major ramifications on FTTP deployments. Light Reading needs to monitor this story closely!
optoslob
optoslob
12/5/2012 | 2:47:00 AM
re: Verizon Doubles FTTP Supply List
deckchairs,
What can I say, sounds like you'll get FTTP about 2 years before I do (I have SBC), which at current deployment rates will be 10 years after I retire!

I expect the majority of FTTP to be Greenfield for the next 5 years, So the industry in the US, will need to exist on build-out for 1.5 to 2M houses per year. Fortunately the US market is not the only game around. In many other countries HFC systems do not exist, and POTS has only limited deployment. These are the areas where my attention is focused and where FTTX,(including FTTC + RF) solutions have the best economic case.

Optoslob



technonerd
technonerd
12/5/2012 | 2:47:00 AM
re: Verizon Doubles FTTP Supply List
Verizon won't even consider you for DSL if you have a noisy copper line. One loadcoil, even if you are 5000ft from the CO, and you're out of luck.
Loading coils are essentially high-pass filters; the block the upper frequencies. If there's a loading coil on the copper, they couldn't give you DSL no matter how much they wanted to. They have to remove the loading coil.

They're not going to do that on a one-by-one basis because it's too expensive. I suspect that there are often bridge taps (splices, basically) and loading coils on the same copper. Bridge taps essentially lengthen the loop to include all of the wiring that's been spliced together over the years, so I'd bet that Verizon has to identify a geographical area and take care of BOTH issues.

Not to mention a bunch of other stuff like worn out copper, etc.


Several years ago, I had DSL from a CLEC. After service installation, Verizon didn't provide SOMETHING to the CLEC for over three months. Verizon had little motivation, other than the law, to do this, but still it took a long time.
I'd be willing to bet that your CLEC used a form of DSL that employed 2B1Q line coding -- almost all of them did it that way. This line coding is really a bad choice for ordinary residential copper because it needs very clean copper. If the CLECs had been established not as quick-hit stock frauds but as telecom companies, they'd have used the line codes that work over dirty copper.


So my experience with Verizon, and really any telecom carrier ILEC, IXC and CLEC, makes me believe it perceives any additional work as a bad thing.
It not that work is a bad thing, but it costs money to do the work and for Verizon it's that cost is a bad thing.

In order to do FTTP, there would have to be HUGE economic incentive for Verizon to string/splice/maintain (okay, contract this work to your company) a NEW fiber plant, get into all the legislative hoopla to carry "triple-play" services while placating the local PUCs that E911 and local phone service will be maintained reliabily, upgrade all their OSS's to support these technologies AND still try to convince their labor unions that cutbacks and layoffs are necessary.


My original question remains as to FTTP economics - who is going to pay for this?
It has to be funded by Verizon's cap-x budget, and they're not going to spend the money unless they think it will generate enough of a positive return to justify the cost.


I find it a little hard to believe the articles that Verizon is going to roll out fiber flybys to ~1M homes in Massachusetts next year without some small trials to prove the economics.
In the mid-1990s, Bell Atlantic (now part of Verizon) told people that they'd be rolling out movies over ADSL to 25,000 homes in Washington, D.C. and Northern Virginia within a year. At the time they were saying this, they knew internally that the version of ADSL they were working with could only operate on 4% of their copper loops.

All of which is to say that no one should ever take an RBOC's public announcement at face value. You have to interpret it in much the same fashion that "Sovietologists" used to study photographs of the Russian leadership at their annual May Day military parades. In Verizon's case, ask yourself what other goals are served by making a particular announcement.

In Massachusetts, is there any particular regulatory case that Verizon is working on? Are they setting themselves up to be able to claim at some point that they would have done this but for the government's dastardly refusal to restore their monopoly over the phone wiring? Who knows, but in any case you should never, ever believe an announcement right away. You must remember that this is a phone company, and that all phone companies are evil.
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