SBC Plan: Upside for Adtran?
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