FTTP: The New Standard And How It's Changing Already!

SUMMARY

Overview:

On May 29, 2003, the three largest RBOCs (BellSouth, AT&T, and Verizon) announced that they had adopted a common set of technical specifications for the delivery of fiber-to-the-premises (FTTP). Since then, FTTP has become the "gold standard" in local access. Verizon is installing FTTP BPONs at a rate of 3,000,000 per year. It appears other major telcos are ready to jump on this bandwagon, and many smaller telcos are installing similar access architectures across the country. AT&T is installing FTTN (and some FTTP) at the rate of about 2,000,000 per year with a speed-up promised.

In the midst of all this success, we are about to see some major changes! The architecture is going to change; the players are going to change (more will be joining); and the rate of installation will increase! Why do we face change in this very successful program? What is the new architecture, and why is it being selected? What are the other major RBOCs going to do? This report will address these questions.

We have now been producing annual reports on FTTP since before the program was actually originated. This is the most comprehensive of those reports, and it has the most useful direct forecast information ever presented on FTTP.

This latest incarnation of our efforts to keep our clients completely up-to-date on FTTP will focus on the following:

• The substantial progress to date for FTTP
• The changes we see coming for FTTP from new organizational structures
• Changes we see coming for the architecture
• Our forecasts for the future, including for RBOCs not now involved

The RBOCs, all three (now that the AT&T/BellSouth merger has been consummated) to greater or lesser extents, are now in the process of rolling out FTTP. Verizon has a monumental effort underway, and the other two are in various stages (lab tests, minor deployments, or preparing massive rollouts) of deployment. The RBOCs have actually moved into the video business in a massive way. As forecast in our 2005 and 2006 reports, two of the RBOCs are in the residential TV delivery business. Several relatively new technologies have been deployed in their entries into that business, and the RBOCs will use just about every imaginable combination of those technologies to achieve their objectives. This report covers all details of these activities.

In other times, the announcement of the FTTP RFP (and the subsequent RFP for GPONs) would likely be viewed by most with a big yawn - just another technical standardization. However, in today's times, this was the biggest news in the telecommunications world - perhaps the biggest in years. The initial announcement was followed by a joint RFP issued in June 2003 to selected vendors for the FTTP equipment. Responses and vendor selections were made in the third quarter of 2003, with initial deployments to beginning in 2004. As we will detail, this schedule was not completely met, but the RBOCs (at least Verizon) were close. Then in late 2005, the RBOCs issued a RPF for GPON approaches to FTTP. In mid-2006, Verizon announced awards under that RFP.

These three RBOCs serve 123,000,000 of the 180,000,000 access lines (68%) in the U.S., which is the main reason for the excitement. They also control the largest interexchange carriers and the largest cellular phone companies. These three companies are the powerhouses of the telecom world. In a recent year, their capital expenditures were 76% of the total by major telephone companies, and over 46% of all capital spent that year by all telecommunications carriers! Clearly, these three companies have the financial power to rule the equipment markets.

The equipment vendors have looked at the potential size of a project to bring fiber near the customers of these three companies, and they visualize a return to the go-go days of the late 1990s telecom market. At around $1,000 capital cost per installed fiber line, it is easy to see how a program that involves over 100,000,000 lines could easily drive a return to profitability for many equipment vendors.

This report will consider the issues of the background competitive landscape - especially now that the RBOCs have swallowed up the two largest IXCs (and CLECs):

• The details of the RBOC PON and the GPONs
• The current deployment plans of the RBOCs and our forecast for changes;
• An analysis of the economic impact (capital and on the overall network) of the current plans, as well as of our forecasted deployments
• Extensive forecasts of FTTP and associated equipment are provided, particularly GPONs vs. BPONs
• Forecasts for the relative use of FTTP, FTTN, and FTTC.
• Details of the various RBOC access architectures, and how video fits into these architectures; details of the various options for deploying video - FTTX, broadcast video, and IPTV;
• Vendors of the equipment and software covered in detail

TABLE OF CONTENTS

Table of Contents

Table of Figures

The Lightwave Network Series of Reports

Introduction

• This Report
• Background

Market Competitive Analysis

• Pre-Merger Competition
• RBOCs vs. the CLECs (IXCs)
  • The RBOC Counterattack - Long Distance
• Post Merger Competition
• RBOC Purchase of IXCs
• RBOCs vs. Cable Companies
• Cable Companies vs. Satellite Companies

RBOCs' FTTP Plan - The Lightwave Is Back!

• FTTP as the Light Sword of the RBOCs
• Comments on Triennial Review Results
• Original Schedule
• Differences of the RBOCs

The Need for Capacity

• How Much Bandwidth Is Enough?
• Basis for Estimating Needs

Access Architecture

• Various Approaches for Fiber-based Access Architecture
• Fiber to the ‘X’
• xDSL Versions
• Design Details for Current Plans
  • Fiber to the Neighborhood (FTTN)
  • AT & T's Fiber to the Node (FTTN)
  • BellSouth's Fiber to the Curb (FTTC)
• The RFP - PONs Will Set Us Free
• What Are PONs?
  • The PON Design
• Status of PON
• Advantage and Disadvantages of PON
• Types of PONs
  • BPON
  • EPON
  • GPON
• The PON in the First RFP
• GPONs
• Architectures to Meet the Needs

Approaches to Video Delivery

• Broadcast
• IPTV
  • IPTV Architecture
    • IPTV Global Architecture
    • Super Hub Office
    • Video Hub Office
    • Serving Offices
  • IPTV Distribution and Access Architecture
  • IPTV Channel Selection

RBOC Plans

• Verizon Plan
  • Verizon - Physical Description
    • Verizon Vendors
  • Verizon - Size of Rollout
  • Verizon - Services
• AT&T Plan
  • AT&T - Physical Description
  • AT&T Vendors
  • AT&T - Size of Rollout
  • AT&T - Lightspeed Services
    • Video
    • Internet
    • Voice
  • AT&T U-verse Video Services
  • High-Speed Access U-verse Services
• BellSouth Plan
  • BellSouth - Physical Description
    • Pre-Merger
    • Post-Merger
• Qwest Plan
  • FTTP
  • Other Architectures
  • Future Plans
• Comparing the Plans of the RBOCs
  • Operations Savings Estimates

Summary of Announced Plans

• Verizon
  • AT&T
  • Bell South
  • Qwest

Summary information on the Announced Plans

• Announced Plans - Quantitative Analysis
  • Announced Plans - Size
  • Announced Plans - Costs

Forecast for FTTP

• Forecasts for Deployment
  • AT&T
  • Verizon
  • BellSouth
  • Qwest
• Deployment Forecast Summary
  • AT&T
  • Verizon
  • BellSouth
  • Qwest
• Forecast size of Deployments
• Technology Forecast
• Forecast Technologies by Type
  • Forecast PONs - GPON vs. BPONs
  • Forecast Costs

Vendors of the Light Sword

• Requirements for a Successful Vendor
• Possible Consortiums
• Selected Vendors
• Vendors of GPONS
• Vendors Listing
• Summary of Vendors

Detailed Listing of Vendors

• ACTERNA
• Adtran
• Advanced Fibre Communications Inc. (AFCI) (Now Tellabs)
• Alcatel
• Alloptic Inc
• Amino Technologies plc
• AOC Technologies
• Avanex Corporation
• Broadlight
• Calix
• Cisco
• Corrigent
• Entrisphere, Inc.
• Ericsson
• Fiberxon
• Finisar Corporation
• FlexLight Networks
• Fujitsu
• Genone3 Technologies, Inc.
• Hitachi Cable
• HUMAX USA Inc.
• iamba Networks
• JDS Uniphase
• Kreatel Communications AB
• LightComm Technology
• Lucent/Alcatel
• Marconi
• Microsoft
• Motorola
• NeoPhotonics
• Nortel
• OFS
• O-Net Communications Ltd
• Oplink Communications, Inc.
• Optiviva Inc.
• Optical Solutions
• Osaki Electric Co., Ltd.
• Paceon (Mitsubishi)
• Passav
• Quantum Bridge Communications
• Salira Optical Network Systems
• Scientific-Atlanta
• Siemens
• Tandberg, Ltd.
• Tellabs
• Terawave
• Tut Systems
• Vinci Systems, Inc.
• Wave7 Optics
• Worldwide Packets, Inc
• Zhone Technologies

Table of Figures

• Figure 1, Market Matrix - Pre-Mergers
• Figure 2, RBOCs vs. CLECs (IXCs)
• Figure 3, RBOCs in Long Distance
• Figure 4, Revised Competitive Structure Due to IXC Purchases
• Figure 5, RBOCs Subsume IXCs and CLECs
• Figure 6, RBOCs vs. Cable Companies
• Figure 7, High Speed Forecast
• Figure 8, Verizon H-S Access Lines - By Quarter
• Figure 9, Adoption Rates of PCs and High-Speed Access
• Figure 10, Cable Companies vs. Satellite Companies
• Figure 11, Summary of Competitive Position
• Figure 12, Five Reasons for 'Why FTTP Now?'
• Figure 13, FTTP Schedule
• Figure 14, Bandwidth Needs - Current Compression Technology
• Figure 15, Usage Forecast Calculation Details
• Figure 16, Fiber to the 'X' Varieties
• Figure 17, Chart of Various xDSL Technologies
• Figure 18, Fiber to the Neighborhood
• Figure 19, Fiber to the Node
• Figure 20, Fiber to the Curb
• Figure 21, PON Basic Arrangement
• Figure 22, RFP PON - Central Office Portion
• Figure 23, RFP PON - Outside Plant Portion
• Figure 24, RFP PON Service Assignments
• Figure 25, BPON/GPON Comparison
• Figure 26, Typical GPON
• Figure 27, Bandwidth Needs vs. Capabilities
• Figure 28, Broadcast TV on BPONs
• Figure 29, Broadcast TV
• Figure 30, IPTV General Architecture
• Figure 31, IPTV Global Architecture
• Figure 32, IPTV Access Architecture
• Figure 33, FTTP Architecture for IPTV
• Figure 34, IPTV Hub Office Architecture
• Figure 35, IPTV Channel Selection
• Figure 36, Map of Verizon FTTP Exchanges
• Figure 37, Verizon FIOS Offices
• Figure 38, Verizon Services
• Figure 39, AT & T U-verse Video Services
• Figure 40, North Texas U-verse Service Offering
• Figure 41, AT&T U-verse High-speed Access Services
• Figure 42, Announced Plans Summary Chart
• Figure 43, Announced Plans - Annual HPs
• Figure 44, Announced Plans - HPs Cumulative Passed vs. Served
• Figure 45, Announced Plan - Comparison to H-S Accesses
• Figure 46, Severed Customer Cost Assumptions
• Figure 47, Cost per Unserved (but passed) House
• Figure 48, Assumed Cost for FTTN and FTTC
• Figure 49, Announced Plan - Costs by Segments
• Figure 50, Cumulative Costs - Announced Plans
• Figure 51, Segment Costs Including Video
• Figure 52, Announced Plan - Capital Costs and Budget Impact
• Figure 53, Forecast Homes Passed Cumulative - All Technologies
• Figure 54, Forecast Homes Passed Annually - By Company - All Technologies
• Figure 55, FTTX vs. H-S Accesses vs. US Households
• Figure 56, Technology Type Cumulative - Forecast
• Figure 57, Forecast Technologies - Homes Passed - Annual
• Figure 58, Forecast Homes Passed - PONs vs. Other Technologies
• Figure 59, Total PONS Forecast - RBOCs - Cumulative
• Figure 60, Moving from BPONs to GPONs
• Figure 61, Forecast BPONs vs. GPONs by Year
• Figure 62, Verizon PON Forecast
• Figure 63, AT&T PON Forecast
• Figure 64, Severed Customer Cost Assumptions
• Figure 65, Cost per Unserved (but passed) House
• Figure 66, Assumed Cost for FTTN and FTTC
• Figure 67, Forecast FTTP Costs by Plant Segment
• Figure 68, Forecast Plan Costs by Architecture
• Figure 69, Video Costs as Related to Total Plan
• Figure 70, Forecast Cumulative Cost and Annual Budget Impact
• Figure 71, Requirements for Successful RFP Vendor
• Figure 72, Possible Consortiums
• Figure 73, Originally Selected Vendors
• Figure 74, Newly Selected Vendors
• Figure 75, GPON Selected Vendors
• Figure 76, Summary of Vendors