Infrastructure Solutions: The Future of PON

More Thoughts on the RBOC FTTP RFP

PON seemed the obvious choice in defining the focus of this article, listed in xchange’s editorial calendar simply as “next steps in broadband last mile.” Since late May the industry has been buzzing about the fiber-to-the-premises RFP issued by an RBOC consortium including BellSouth, SBC Communications Inc. and Verizon.

The companies issued the formal 41- document RFP in late June, after sending select vendors a letter in late May that generally described what was to come. Mike Wearsch, vice president of sales at broadband access vendor Wave7 Optics Inc., tells xchange a vendor conference was scheduled for late June and the three RBOCs sought vendor responses by July 21. A short list of vendors is to be compiled by Aug. 8 when the telcos plan to visit vendors. Supplier evaluations are to be completed by mid-September, according to Wearsch. “That’s an aggressive schedule,” says Wearsch.

Of course, it remains to be seen how aggressive vendors will be in bidding for the contracts and how aggressive the RBOCs will be in deploying the fiber access solutions. However, as with the joint DSL RFP that got Alcatel a coveted seat at the RBOC table, the stakes for this FTTP deal are high and competition should be fierce given an industry populated with hungry vendors.

So, how low are vendors willing to go and what’s the size of this pie? Danny Briere of TeleChoice writes that his research and consulting firm has “seen numbers from $1,200-$3,000 and more depending on what applications are being installed (video adds a lot), and where it’s being done. The magic number that starts to drive the business plans for the RBOCs though is in the $700-$800 range (no fiber, no trenching).”

The total RBOC order for the equipment, he says, will be at least an $800 million to $1 billion order per year. “We’ve heard several talk about 100,000 units per year being easily absorbed in the greenfield developments in their territories — there are between 500,000 to 1 million planned homes built each year in the U.S. — and 3 x 100,000 = 300,000,” writes Briere. “We don’t think that is coincidence. So, we truly think that 300,000 is a no-brainer low-end unless the pricing is unexpectedly high and obscene. (However, we don’t think that is going to be the case.)” Briere notes “this RFP for fiber is the first major tacit acknowledgement by the RBOCs involved that their networks — including the DSL services — won’t cut it against cable. Cable can throw sheer bandwidth at the problem because they have it. DSL has to beg for bandwidth and is erratic at that, based on the loop length, line conditions, etc. Fiber will provide a more reliable services platform because of the upside on the bandwidth. And it’s a big vote for PON.”

Gary Lee, CEO of gigabit PON vendor FlexLight Networks and chairman of the PON Forum, agrees. “There’s no question the RBOCs are moving toward PON,” says Lee. “SBC and BellSouth have been trialing it for some time. SBC has been public about the capex and opex [benefits of PON].”

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