Baby Bells' FTTP: Is it really a plan?

Recent reports and editorials in Lightwave and other publications continue the clamor about the series of announcements regarding the RBOC fiber to the premises (FTTP) plan. The three carriers—BellSouth, SBC, and Verizon—intend to use FTTP to compete with the cable companies and presumably with the large competitive local-exchange carriers (CLECs) such as AT&T and MCI. A recent report suggested that the RBOCs could be taking fiber to between two and five million homes a year by 2005. The higher number would suggest that the three RBOCs would be converting slightly over 3.5% of their lines a year at a capital cost of about $9 billion per year. That is close to half of the planned 2003 capital budgets for the three RBOCs!

While we all look forward to a return of prosperity for the telecommunications sector, we certainly don't need any false hopes. To suggest that the RBOCs are going to be spending 40% (approximately) of their capital budgets on this program by 2005 seems like pie in the sky. It certainly isn't consistent with the conservative capital estimates that the RBOCs are making. One must also question the ability of the industry to turn on a dime and move to a massive program like that in so short a time, with the implied capital commitment.

There are a number of things that stand out as red flags regarding this program. Space won't allow a full discussion of all the problems, but I will mention a few. The first is the question of the business plan. Although details aren't really available, it seems the RBOCs think they can pay for that on the basis of expense savings and on the assumption that it won't cost any more than next-generation digital-loop-carrier (DLC) implementation. I think both of these assumptions are going to prove to be wrong—on several counts. Costs of $1,200 per subscriber upgraded are being quoted, but that must assume all subscribers take the new service—in other words, the price quotes are really per home passed, not per subscriber.

There are other problems in that the rest of the network has been ignored, yet the FTTP plan would surely have dramatic impact on the entire network. If you don't believe that, ask some of the RBOC plant extension engineers what dialup data (orders of magnitude slower than the services on this fiber network) did to their interoffice trunking.

The mention of plant extension engineers brings up another point about these announcements. All information on FTTP seems to be coming from the advanced planning groups, rather than the network planning groups. Unless the RBOCs are drastically reorganized, purchases aren't going to happen until the network planning groups are involved.

Other questions involve obtaining video content to be able to compete with the cable-company networks, the coordination of this activity with other initiatives of the RBOCs, the wiring of homes for new services, etc.

All these questions may have answers, but thus far they have not been forthcoming. I feel it is responsible to identify the lack of clarity as to the intention of this activity and to temper optimism with reality. Our industry has been through the most trying time in its history in the last two years. We all are aching to see the return to prosperity and increased employment. We must be careful, however, not to build false expectations with poorly thought out initiatives or dream-based plans.

Clifford R. Holliday is president of B & C Consulting Services ([email protected]) and analyst for Information Gatekeepers (www.igigroup.com). His recent reports include "ROADMs—The Lightwave under Control" and "The Telecom Market: A Delayed Return!" as well as the upcoming "The RBOCs' FTTP Plan—Reigniting the Lightwave?"

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Stephen Hardy
Editorial Director
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