They see more hope than hype in FTTX

March 1, 2005

Long-haul remains dormant, metro ticks along but still not at the rate analysts first predicted-the only optical communications space where investment appears steadily on the rise is the access space. Of course, it’s not hard to grow by double-digit percentages when you’re starting near zero (at least in the United States), but the following companies demonstrate that there’s money to be made in the last mile.

Tellabs bought its way to the top of our list through its acquisition of AFC. The latter won the first contract to emerge from the BellSouth/SBC/Verizon joint RFP when Verizon selected its FiberDirect for the most aggressive fiber to the premises (FTTP) rollout among the RBOCs. While the company stumbled over some well-publicized software glitches, Verizon was happy enough with AFC’s progress to move full-speed ahead on its mission to pass one million homes by the end of last year. Of course, the revenues don’t really start to roll in until Verizon hooks up a significant number of customers.

Of course, it doesn’t hurt that AFC itself had made a shrewd acquisition before joining the Tellabs family. The company bought Marconi’s fiber to the curb product line, which BellSouth happens to use in its access networks. So that’s two RBOCs in which Tellabs has a foothold.

To demonstrate its commitment to the optical access space (and perhaps strengthen its position with Verizon), Tellabs also acquired Vinci Systems, a developer of optical-network terminals (ONTs-the units that go on the side of the customer premises in passive optical networks).

Alcatel probably has more revenue coming in from FTTX equipment than Tellabs, in particular thanks to SBC. However, since the RBOC isn’t going to be as aggressive as Verizon in bringing fiber directly to the user, Alcatel will sit behind Tellabs for now.

SBC named Alcatel its primary supplier for Project Lightspeed, the RBOC’s upgrade of the infrastructure it installed during Project Pronto, in a deal worth $1.7 billion over three years. Lightspeed will use a fiber to the node approach to bring optical cable within an average of 3,000 ft to each home and business within the carrier’s existing footprint. New builds will see FTTP deployment using Alcatel’s Fiber-to-the-User (FTTU) product line.

But SBC isn’t Alcatel’s only optical access customer. Recent contract awards include Paducah Power in Kentucky, EATEL of Louisiana, and the city of Quincy, FL.

Hitachi earns the third spot on our list because of its success in supplying broadband PON (BPON) equipment to NTT in Japan. Because Japan has seen the most aggressive rollouts, Hitachi can claim to have more PON lines in service than any other vendor.

The question for Hitachi will be how long they can maintain this position, particularly as NTT and its competitors switch to Gigabit Ethernet (GbE) PON and Verizon continues its deployments. Hitachi Telecom, the company’s U.S. subsidiary, has deployed its AMN1200 products in Dover, OH, and Hitachi also has publicized a customer in Australia. While there may be other customers whose names have not been released, Hitachi has its work cut out if the company is to maintain its current status.

Optical Solutions already offers a GPON product through its FiberPath line. The company has found willing customers for the latest generation of PON, with Cap Rock Telephone Cooperative the most recent to sign on the dotted line.

The deal with Cap Rock is typical for Optical Solutions. Founded in 1994, the company was among the first in a wave of startups to address fiber to the home long before it became fashionable. With the RBOCs reluctant to commit to FTTP technology until recently, Optical Solutions turned to subdivision developers, utilities, CLECs, RLECs, and anyone else who might be interested in the advantage of optical access networks. It probably has more customers than any of the other PON startups that began at the same time.

Wave7 Optics demonstrates that you don’t have to offer PON equipment to make a splash in FTTX. The company developed its active approach to optical access networks based on its experience working with cable TV companies. Its Last Mile Link product line has found favor in triple-play and IPTV applications in the U.S. and overseas. The fact that the product line can support Ethernet-, IP-, or ATM-based architectures increases its potential customer base.

The company also played an important role in helping Hitachi develop a triple-play product offering by leveraging its video expertise.

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