Everybody off the bandwagon?

It took only a few weeks after the release of the Federal Communications Commission's Triennial Review final order for Ed Whitacre, CEO of SBC, to declare his company was jumping off the fiber to the premises (FTTP) bandwagon. The fact the new order requires the ex-RBOCs to unbundle a single narrowband channel was too much to bear—as was the price tag for installing optical access infrastructure, he said.

The contents of the order should not have come as a surprise to Whitacre or any other observer. The thrust of the document is essentially the same as the preliminary announcement the FCC made last February. The order retains the UNE-P unbundling restrictions the former RBOCs were hoping would disappear; however, the 576-page document does grant them a virtual monopoly on fiber-based broadband networks as well as the broadband aspects of hybrid fiber/copper infrastructures. The ex-Bells also will not be forced to share lit OC-n fiber-based pathways in the local loop, particularly where dark fiber or other access alternatives are available. But that dark fiber must be unbundled for use by competitive carriers.

In making its determination that the incumbents can retain exclusive use of optical infrastructure deployed for packet-based services and other broadband offerings (they must provide access to 64-kbit/sec pathways for competitive narrowband services when they replace copper loops with fiber), the FCC said it was working to stimulate construction of next-generation broadband infrastructure. On the one hand, the incumbents will be more willing to invest in fiber networks if they are assured that they won't have to share them, the commission believes. On the other, competitive carriers will be more likely to build their own optical infrastructures if their access to the incumbents' plant is limited.

The perception that both incumbents and competitors are basically starting from scratch when it comes to fiber to the home (FTTH) underlies the FCC's position. Relying on information from Corning, the FCC contends that only 47 communities in the United States "enjoy widespread FTTH deployment." Within these communities, says Corning, competitive carriers have deployed fiber loops to 44,890 homes, compared to the incumbents' 4,000 (and only 400 of these are the work of the ex-Bells); municipalities account for loops to 18,100 homes. Thus, since the commissioners assume that installation costs and regulatory barriers are relatively equal for incumbents and competitors alike, neither camp is seen to have an advantage when it comes to FTTH. Therefore, the FCC appears to believe there is no reason to make the incumbents share infrastructure when competitors have an equal opportunity to build it themselves or buy dark fiber wholesale.

The order states that the FCC recognizes this ruling could give the incumbents the ability to shut out competitors by replacing existing copper loops with fiber in the name of broadband networking. (This, apparently, is what SBC was hoping to do.) Therefore, when incumbents do overbuild copper infrastructure, they have the option of either granting competitors enough bandwidth over the new plant to provide narrowband services or keeping the old copper infrastructure open for use.

SBC's announced retreat from optical access, while disappointing on its face, shouldn't materially change the outlook for FTTP. While it does partly vindicate the words of caution voiced by some that the RBOC FTTP effort should be viewed with a great deal of suspicion (see our Viewpoint column on page 14), sources who have followed the program consistently have suggested that SBC was the least enthusiastic of the three carriers about optical access infrastructure. (Verizon has been touted as the most aggressive, with BellSouth perhaps looking for prices that might spur extensions or expansions of its current fiber to the curb applications.) Few people who have been excited by the FTTP effort, including the occupant of this space, expected significant deployments from SBC anytime in the foreseeable future.

Thus, it was not surprising to discover that optical access vendors represented the most upbeat exhibitor segment at NFOEC last month. While the RBOC program represented the largest contract anyone is likely to see in the United States anytime soon, the companies with whom I spoke all had several irons in the fire—in locations around the world. For example, companies in the Ethernet passive-optical-network (EPON) space were particularly pleased that NTT has released an RFP for EPON equipment. Meanwhile, I also heard of activity in South Africa, Mexico, and Europe. South Korea, which has aggressively installed DSL lines for broadband, also holds promise for its next generation of infrastructure (see front page story).

Meanwhile, physical infrastructure players are getting into the FTTP act as well. ADC, Sumitomo Electric Lightwave, and PLP announced at NFOEC that they would combine their product lines to offer an end-to-end physical plant offering that would compete with Corning Cable Systems.

FTTP may indeed be too rich for SBC's blood. But the momentum behind the technology appears to be too great to be derailed by a single carrier's reticence—even if that carrier is an RBOC.