AT&T gets fiber envy

But even with costs driven down, Verizon is still spending roughly four times as much as AT&T to pass the same number of homes. What's more, although its new passive access network saves the company on operations expenses, Verizon still has to maintain a copper-to-the-home network for all its customers who don't sign up for FiOS. Until the company's penetration rates reach 100%, it is operating two parallel networks simultaneously. That's a cost FTTN avoids.

“I think it would be a major strategic mistake [for AT&T] to change course at this point,” said John Celentano, president of consultancy Skyline Marketing. “It would just delay them further. They have too much invested in their [current] plan. FTTP is absolutely the right way to go long term, but when you're trying to push high-speed connections to lot of customers in a short period of time, FTTN is a more economic way to go.”

If AT&T were to make a strong strategic shift toward more FTTP and less FTTN, it could be tough to explain such a reversal to investors, said one analyst who requested anonymity. “I don't know how [AT&T] could save face and admit a mistake. I can't develop a scenario for AT&T to say, ‘Verizon was right, we were wrong, and we have to spend more money.’ How do you do that?” A management change might make it easier to do, he added, pointing out that AT&T CEO Ed Whitacre is expected to retire next year.

Twist dismissed that idea, however, saying, “Companies change direction all the time.”

Religious arguments about the absolute superiority of passive optical networks or advanced DSL are less interesting given the fact that most carriers, from AT&T to BellSouth to Embarq and so on, are employing both. Each carrier is simply choosing the appropriate mix for its unique circumstance. For example, Verizon is an imperfect benchmark for AT&T to use to mull FTTP, as Verizon's has much more aerial plant than AT&T and thus finds FTTP deployment less expensive.

“It's misleading to think one approach is going to solve everything,” Celentano said.

And the predictions of Wall Street analysts should generally be taken with a grain of salt. Nine months ago, Lehman Brothers analyst Blake Bath predicted the high cost of FTTP would convince Verizon to make a substantial shift this year to FTTN. With about two more months left on the calendar, that doesn't seem likely.

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