Living in glass houses

It seemed like a good idea at the time. In the summer of 2003, while the telecom industry was desperately clawing its way out of a three-year trough, Bell companies — beset by line losses and encroaching cable competitors — huddled together and presented a unified front of fiber to the premises, for which they sought equipment vendor support.

But as the months wore on, the triumvirate crumbled, and it became clear that neither BellSouth nor SBC Communications was committed to going the last mile with fiber. BellSouth expressed a preference for fiber-to-the-curb. SBC announced a roughly $5 billion fiber-to-the-neighborhood deployment, promising $1.7 billion of that to Alcatel, its primary supplier. SBC CEO Ed Whitacre even tossed his glove in Verizon's face by boasting that his initiative would take a fourth of the time and expense of FTTP. All of this forced Verizon, which stuck to its guns on FTTP to the tune of 3 million homes passed by the end of next year, to further defend its bold strategy.

“If you can reduce the copper loop to a mile or less, with ADSL 2 and ADSL 2+, you can pump a lot of bandwidth down that,” said John Celentano, president of Skyline Marketing. “You don't have to have fiber go all the way.”

Particularly nettlesome for Verizon, he added, is the challenge of powering the customer premises equipment, which, unlike in advanced DSL architectures, doesn't get any power from the network.

Verizon's chief argument for the necessity of fiber to homes is that no amount of stretching and stuffing of copper loops will give them the bandwidth necessary to ultimately trump the cable industry. Long-term, Verizon says, FTTP will allow big-bandwidth applications that perhaps haven't even been invented yet. Though Celentano conceded that point, he sees the last-laugh strategy as contradictory to Verizon's more immediate time-to-market imperatives.

And perhaps staining the bandwidth argument is this irony: While Verizon is deploying the passive optical networking (PON) equipment it chose last year, many of the smaller telcos that are deploying FTTP this year are leapfrogging Verizon with Gigabit PON (GPON), which offers twice the bandwidth. The increasing maturity of GPON and big-bandwidth Ethernet access systems further calls into question the righteousness of Verizon's PON architecture.

Even on the heels of a recent Verizon press event naming a slew of new towns targeted for FTTP (these, at long last, in Verizon's own Northeast motherland), Comcast CEO Brian Roberts posed the question during his company's last earnings call: Is Verizon merely conducting a test?

“I haven't seen a business model that says [FTTP] is a great return on investment,” he said.

To those who don't believe in the economics of FTTP, Verizon's initiative might seem like a prank played on it by its brothers, SBC and BellSouth, who betrayed the pact they made in the foxhole of 2003. But it's too soon to make that judgment. And as the Bells have proven, a lot can change in a year.