Pronto, part deux

In the fall of 1999, when competitive service providers were experiencing much better health and managing to lure customers from incumbents, SBC Communications prepared to strike back. It outlined plans to transform and upgrade its network so it wouldn't be left with services and a network from the past.

But that $6 billion Project Pronto plan, targeted at readying the SBC footprint for DSL, ignored a huge portion of the market: small and medium-sized businesses. Now the provider wants to fill the gaping hole with broadband passive optical networking (BPON).

BPON technology, a combination of passive optical networking (PON) and wave division multiplexing (WDM), effectively extends the reach of a direct fiber connection with the attachment of a passive splitter. An optical line terminal in a central office or remote terminal is linked to optical fiber, which can be connected to a powerless splitter.

“One direct fiber connection will serve about 12 businesses,” said Ross Ireland, senior executive vice president of services for SBC, noting that making fiber available to small businesses has always been part of Project Pronto. “The [PON] technology matured much quicker than we thought.”

That fact, coupled with WDM advancements and decreasing costs, made it more feasible to use the technology in the access portion of the network.

Using equipment from Paceon, which is owned by Mitsubishi Electric, SBC initially will deploy BPON in Houston, where it will migrate small businesses from older infrastructure to T-1 service.

According to Ireland, the T-1 rolls will be the first step of the deployments targeted at businesses. He expects the company to hit 1000 by the end of the year and 9000 by 2002.

Calling it “a natural evolution of some of that [DSL] technology,” BPON fits perfectly with SBC's Project Pronto, Ireland said. Because Project Pronto entails the buildout of those remote terminals, SBC will have less ground to cover as it tries to reach customers via fiber.

“The idea is to push the fiber closer to the customer. Fiber has become the Holy Grail,” Ireland said. “DSL reach tends to be limited to around three miles so we supplement that reach with fiber or other technologies.”

SBC plans to use its existing fiber plant in metro areas and augment it with T-1 rolls. So far, the provider has deployed 3000 gateways and has 954,000 DSL subscribers, Ireland said. The company plans to have 17,000 gateways installed by 2003.

While the PON technology will serve 12 businesses off one fiber, it can serve 32 homes. To experiment with residential deployment, SBC plans to use the technology in 2002 for a new development in San Francisco called Mission Bay and for one in Richardson, Texas.

Although serving 32 homes with one fiber sounds good, wide deployment of PON technology for residential use isn't expected soon for several reasons, the most important of which is cost. The economics of building out fiber to residences already served by copper are not currently favorable.

While SBC may have cleared technical and economic hurdles, regulatory issues may prove more troublesome.

SBC is really trying to appeal to regulators by using the word “consumer,” said Mitchell Brecher, a shareholder at the Greenberg Traurig law firm. “They want the right to offer it without having to unbundle it,” he said. “While competitors say it is the law, they have to make the network available on an unbundled basis with no discretion.”

Even SBC's Ireland admitted regulatory judgments affect the scope of the incumbent's fiber and PON deployments.

“In new builds and large multidwelling units it might be practical, assuming we get good regulatory work,” Ireland said, referring to residential deployments.

Ireland noted recent dealings in Illinois, where the provider halted DSL deployments because of unfavorable conditions commanded by the PUC. “They required unbundling of the technology where it just wasn't economical,” Ireland said.

But that deployment shutdown may just be part of SBC's strategy.

“What happens is the citizens get pissed off, and then the PUC gives in,” said Hilary Mine, executive vice president at Probe Research.

But state PUCs will not necessarily be easy to win over. “SBC figured they would walk all over the California PUC, and that didn't happen,” Mine said.

Brecher echoes this sentiment. “With the state and federal regulators, money doesn't talk quite so much,” he said. “There will be a battle over these.”

But Mine believes the FCC likely will favor SBC. “SBC's most core strength as a company is [regulatory],” Mine said. “They are the masters of it, and now that they have their man in the White House, life is good. SBC will get whatever they want.”

The FCC opened a proceeding on advanced access but won't act on it soon, said Patrick Brogan, analyst at Precursor Group. “They really don't have any eagerness to expand unbundling,” he said.