• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Telephone Companies Look to Replace Networks With Fiber-Optic Lines

Posted on: Tuesday, 28 December 2004, 21:00 CST

Dec. 29--Sometime in 2005, look for at least one of America's largest telephone companies to begin piping television into homes. And if consumers like it, expect the birth of phone-line television to pump some long-awaited business toward equipment suppliers like Eden Prairie's ADC Telecommunications.

Verizon Communications, SBC Communications and BellSouth are embarking on ambitious plans to replace their century-old voice-and-data copper networks with fiber-optic lines that can carry voice, data and video in ways never before seen, the phone companies promise.

The undertaking is a multibillion-dollar, bet-the-farm move by the nation's three largest Bell phone companies to fend off the largest cable companies, Comcast and Time Warner.

The cable companies offer or are preparing Internet phone services that can undercut the Bells. In the Twin Cities, for instance, Comcast provides only conventional phone service to St. Paul and the east and north metro areas, but it is testing voice-over-Internet Protocol (VoIP) in other parts of the country for a nationwide rollout.

Meanwhile, Time Warner this year introduced an Internet phone service for Minneapolis and the western suburbs over its cable network.

ADC, long a provider of traditional copper-network equipment to the country's major phone companies, is well-positioned to help the phone companies get more fiber in their diet, its officials say.

ADC does not make the slender, light-carrying fibers themselves; that's the job of companies like Corning. Instead, it makes large terminals or frames that accept large transcontinental fiber lines in phone-company central offices and split them into scores of smaller fibers that go out to neighborhoods. ADC also builds rain gutter-like tracks that direct the fibers throughout the office from frame to frame.

It also makes smaller, weatherproof outdoor terminals that do the same thing, but these cabinets, which squat on street corners or the curb, split up fibers from the central office and shoot them out to homes and businesses.

ADC, whose engineers toured the country this past year touting their company and its products, was one of the preferred vendors for Verizon Communications' $800 million plan to lay fiber into 1 million homes and businesses this year.

ADC says it has ongoing relationships with SBC and BellSouth's plans to lay fiber too, though no formal vendor relationship.

"One of the very exciting things is that we've got a very, very high level of customer interaction," said Tom Kampf, ADC director of fiber solutions. "We're learning as new products are being developed and deployed, and the customer is learning too. We've got a good number of our engineers on site."

Neither ADC nor Verizon will reveal the size of ADC's contract, but Verizon, whose service area is in the Northeast, says it plans to double the size of its fiber rollout in 2005 and run fiber strands into 3 million homes by year's end.

New York-based Verizon, which many observers consider furthest along in its fiber plans, also will unveil video service by mid-2005 "at the latest" somewhere in its territory, said Mark Marchand, director of media relations for networking technology.

Verizon is hoping to steal away cable-TV customers with hundreds of channels, video-on-demand service and innovations like "switched video," in which viewers can tune in Web cams that allow them to see unusual cable fare, like the airport traffic at JFK International, Marchand said.

BellSouth, of Atlanta, has laid 5 million miles of fiber to curbs passing 1 million homes and plans to add 150,000 to 200,000 more homes in 2005, most of them in new developments in the fast-growing Southeast, spokesman Brent Fowler said.

Qwest Communications International, the fourth and smallest Baby Bell, has announced no fiber plans. Qwest is Minnesota's largest local phone provider.

The secret to phone TV is that it will use super-high-speed Internet access. A decade ago, telephone companies made similar rosy promises of blazing fiber optic lines that would bring Alexander Graham Bell's network into the 21st century. Those promises died when the telecommunications bubble burst in 2001, and telecom observers have listened skeptically ever since to talk of fiber rollouts.

But this time it's different, phone companies say.

"Two words: cable TV," Verizon's Marchand said. "Cable TV is a fierce competitor. They're selling millions of lines of local phone service. They've got data and TV already and they've added voice. We need our own triple play."

SBC, based in San Antonio, calls its fiber rollout "Project Lightspeed," and it plans to run fiber into the neighborhoods of half of its 36 million households in its 13-state territory by 2007, spokeswoman Denise Koenig said.

SBC estimates it will spend $4 billion by then. While it has announced only two equipment vendors -- Alcatel to provide the end-to-end equipment and Microsoft to provide the software for the television set-top boxes that the phone line plugs into -- at least one Wall Street analyst thinks Project Lightspeed offers even more opportunity for ADC than Verizon.

In a November report, Paul Silverstein of Credit Suisse First Boston estimated ADC could reap $40 million to $80 million per year from 2005 to 2007 from the SBC project. He thinks ADC has recognized only "limited revenue" from Verizon's project to date.

Any fiber project, he wrote, "requires fiber distribution frame and terminals of the sort manufactured by ADC." ADC historically has enjoyed a strong relationship with SBC as one of its leading suppliers for similar copper-based products, he said. Silverstein initiated coverage on ADC in November with an "outperform" rating.

To be sure, there are no guarantees this time either. The Bell companies could be trumped by technology companies that are experimenting with emerging wireless Internet that might accomplish the same things but cheaper. The Bells will have to offer comparable programming to snatch away cable viewers accustomed to everything from CNN to HBO.

"ADC would likely be adversely affected if Verizon, SBC and other local exchange carriers delay, scale back or terminate their (fiber) deployment plans," Silverstein wrote.

If a price war breaks out, consumers could win but the phone companies may not recoup their massive capital expenditures.

The phone companies appear firm on their direction though. "It's future-proofed. Fiber is the way to go," Marchand said.

-----

To see more of the Pioneer Press, or to subscribe to the newspaper, go to http://www.twincities.com.

(c) 2004, Pioneer Press, St. Paul, Minn. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

ADCT, VZ, SBC, BLS, CMCSK, TWX, Q, MSFT, CSR,

Source: Saint Paul Pioneer Press (St. Paul, Minn.)

More News in this Category