FTTP faces test in 2005

Fiber Optics Weekly Update, Nov 5, 2004

The immediate prospects for fiber-to-the-premises (FTTP) network build-outs in the U.S. are likely to hinge on the ability of Verizon Communications Inc. To convince customers to sign on in significant numbers for telco-delivered "triple play" voice, data, and video services delivered over newly installed fiber networks, according to a new report released by Light Reading Insider.

The report, entitled FTTP Success: It's the Video, assesses U.S. FTTP deployment plans for 2005, focusing on announced deployment strategies of major local incumbents, independent service providers, and municipalities. Economic rationalizations for FTTP deployment are analyzed based on shifting market and product price conditions, with the main emphasis on costs and opportunities in the video services sector.

As the most aggressive pursuer of FTTP deployment among the Bell companies, Verizon will serve as a de facto guinea pig to test the economic viability of a large-scale commitment to fiber access networks, according to analyst-at-large Peter Lambert, the author of the report. Investment in fiber will work economically only if Verizon can convince a significant proportion of its customers--at least 25 percent--to subscribe to its entire package of triple-play services.

If Verizon succeeds, other RBOCs such as BellSouth Corp. and SBC Communications Inc. might be convinced to pump more CapEx resources into deploying FTTP to renovate copper-based networks already in place. But any significant glitch in Verizon's roll-out could stymie RBOC spending on FTTP for years to come.

Other key findings of the report include:

* Verizon's elevated commitment to FTTP overbuilds of copper networks will triple overall U.S. homes passed by fiber (to more than 1.5 million) by the start of 2005 and amounts to an inflection point for further supplier investment.

* BellSouth and SBC have committed only to greenfield FTTP, but could join Verizon's aggressive overbuild bandwagon in time, given proofs of substantial revenue growth and longterm cost savings.

* Vendors have been able to reduce PON deployment prices by more than 20 percent, to about $1,650 per home passed, in the past year--but further cost reductions aren't likely in the foreseeable future.

* The PON distribution suppliers will almost certainly winnow out in the coming 12 months--as already demonstrated by vendor mergers.

The report includes product and positioning strategies of 15 key vendors in the FTTP-based IP video market.

To learn more about this report, go to www.lightreading.com/insider.>

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