SBC Plan: Upside for Adtran?

What's good for SBC Communications Inc.'s (NYSE: SBC) fiber-to-the-node (FTTN) strategy will be absolutely fantastic for Adtran Inc. (Nasdaq: ADTN), according to a report issued today by Jeffries and Co. analyst George Notter.

Notter's narrative estimates that Adtran is the "best-positioned" vendor to take advantage of the possible $740 million market for "outside plant" or remote DSLAMs, the devices that will eventually make FTTN possible.

At Supercomm, SBC said it will spend $4 billion to $6 billion in the next five years on FTTN deployments. CEO Ed Whitacre said SBC could deliver high-speed Internet access, voice-over-IP, and video via connections of between 15 Mbit/s and 20 Mbit/s across its FTTN network (see SBC's $6 Billion Banquet and DSL Revival ).

SBC's vision is possible because FTTN does not drive fiber as deeply into the network as fiber-to-the-premises would. Instead, it drives fiber roughly to the serving area interface (SAI), the demarcation point where the cables coming from the phone company's central offices meet the wires that extend to the customer premises, says SBC. Once the fiber gets to the SAI, SBC would use the existing copper for the rest of the way, in most cases.

Notter's previously pegged the remote DSLAM market as a $150 million to $225 million opportunity. His upgrade assumes that there are 100 million U.S. homes with consumer access lines; that about 66 percent of those homes are FTTN candidates (they're more than 5,000 feet from a central office or digital loop carrier); and that 10 percent will subscribe to video and DSL services.

Other big players in the remote DSLAM market include Allied Telesyn Inc., Conklin Corp., ECI Telecom Ltd. (Nasdaq/NM: ECIL), and Extel Communications Pty. Ltd..

Adtran sources have told Light Reading the company will have video transmission capability in the 48-port version of its Total Access 1100 Series remote DSLAMs by the first half of next year. Notter writes that Adtran's gear and that of startup Pedestal Networks Inc. were designed "to be upgradeable for fiber transport and video."

"In total, the outside plant DSLAM solves the tactical problem of expanding DSL coverage today while laying the groundwork for FTTN in the future," Notter writes.

Not everyone is as enthusiastic that SBC's FTTN announcement will result in a quick windfall for Adtran. "Adtran shares have risen sharply in response to the announcement by SBC… We believe this move is at least premature and perhaps totally unwarranted," writes analyst Eric Buck from Janco Partners.

"SBC's plans at this time appear quite tentative… at best, this is mid-2005 business."

Adtran holds its second-quarter earnings call tomorrow. Analysts expect the company to report earnings of 26 cents a share on revenues of $120.3 million, according to Reuters Research.

— Phil Harvey, News Editor, Light Reading

issey 12/5/2012 | 1:27:37 AM
re: SBC Plan: Upside for Adtran? You mean like this one can ?

paolo.franzoi 12/5/2012 | 1:27:37 AM
re: SBC Plan: Upside for Adtran?
If Adtran could actually run video over their DSLAMs.

paolo.franzoi 12/5/2012 | 1:27:31 AM
re: SBC Plan: Upside for Adtran?
Probably Next Level has the most subscribers.

Others that do this for real in the field today... AFC, Occam, Calix, Alcatel and even a bit of Tut equipment. Adtran equipment has never even been involved in a video deployment.

The other highly humorous bit of this sell side analyst (who clearly has an axe to grind) was that SBC is looking for node sizes of hundreds of ports not 48 ports. So, this whole thing is really rather silly. The amount of construction required to get to lots of 48 port nodes is daunting (gee lets see maybe 2000 construction permits for the City of Dallas alone).

In case anyone has never met George Notter, he is a nice young man with an MBA (about 27 years old and no actual telecom experience).

Scott Clavenna 12/5/2012 | 1:27:30 AM
re: SBC Plan: Upside for Adtran? seven,

I think you're on target here, with one reservation. Adtran has done a fantastic job penetrating the DSL market with very low cost solutions for coverage expansion, yet haven't rolled out products specifically to support a triple play.

That said, I recently viewed a presentation from Adtran's CTO Kevin Schneider on VDSL2, ADSL2+, and two-loop bonding for video delivery. The presentation described the need for a high-speed DSLAM located at the feeder-distribution interface (FDI). So if they have such a product in the works, it would satisfy the requirements of SBCs FTTN, at least on paper.

paolo.franzoi 12/5/2012 | 1:27:29 AM
re: SBC Plan: Upside for Adtran?
That would be true, if that was all that was required. Its not. I suggest you ping those companies that are actually doing this today.

And again. SBC wants bigger DSLAMs not 48 port DSLAMs. They need to target a different product.

optoslob 12/5/2012 | 1:26:58 AM
re: SBC Plan: Upside for Adtran? Steve and Brook,
I think all this talk about Video over DSL misses the point that this is not a business model which the RBOC's want. Technically ADSL2 has sufficient bandwidth to easily support compressed HDTV over loop lengths of a few kilo feet. The problem is how to implement this in a manner that ensures that the RBOC has a monoploy on Video content.

Take for example the FTTU standard called BPON. It requires a Triplexer in the ONU (CPE side) whereby Video is broadcast as a normal Analog (Cable equivalent) signal. There are two reasons for this, the most often quoted is to ensure compatibility with installed Cable Settop boxes. However from my experience the real reason is to be certain that the RBOC has a unique way to distribute Video which is incompatible with any IP standard.

That's my 2 cents worth.

[email protected] 12/5/2012 | 1:26:58 AM
re: SBC Plan: Upside for Adtran? Brook is right about the suppliers, plus add ECI and Zhone. (Brook, are you located in Western WA?)
paolo.franzoi 12/5/2012 | 1:26:56 AM
re: SBC Plan: Upside for Adtran?

I find you very confused. The RF overlay spec for a BPON system is exactly a 870 Mhz CATV system. Exactly what a cable guy does, so that Mot and SA set tops can be used.

From a Video over DSL perspective, the model is one that is easy to put the LEC in control of access to the content. These systems today use Access Control Lists to be able to access the IGMP streams of the video content. So, unless the MAC addresses are in the list no content will flow. At the same time, Video is generally fixed routed to the end office.

If you are trying to prevent somebody going to a website to download a movie, I think that is not what is comparable here. The Video over DSL here is full on live broadcast with VoD. That content will come from the LEC. Nobody will get access to sell to those set tops unless the LEC agrees that they can.

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