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AT&T Lightspeed Gets More Expensive

All is not well at the Death Star today. AT&T (T ) announced that capex for the U-Verse IPTV & Fiber to the Node initiative (known as Project Lightspeed) would increase from $4.6B to $6.5B. They also announced the scope of the project was being reduced from 19M to 18M homes.

This is a sizable increase (41%) in capex for a project that was designed to minimize cost. It is indicative that the decision AT&T made to substitute advanced technology to deliver an incremental solution in favor of laying fiber isn’t going as planned. The price of mediocrity just went up.

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AT&T Project Lightspeed – Too Little Too Late

I’ve written in the past about the drawbacks of Project Lightspeed, AT&T’s ( T) program to provide video and broadband services to the home. In short, I think it’s a half measure at best and provides no competitive advantage over cable.

It looks like this opinion is starting to be echoed within the financial community. AT&T also neglected to offer any details on Lightspeed in their recent quarterly earnings call.

Investment pundits love to point out that Verizon (VZ) is being ‘punished’ for overextending themselves with FiOS capital expenditures, and praise the measured investment being made by AT&T with FTTN.

The reality of the situation is Verizon is purchasing infrastructre usable for the next 100 years with 6% long term credit. AT&T has chosen to delay an inevitable infrastructure upgrade. It’s hard to see how AT&T’s financial position will be significantly better 5 years down the road without making the upgrades now. Just like most homeowners refinanced their houses in the last few years, AT&T (to be fair, SBC) should have taken the cheap money and done the same with their residential network.

This is short-term Wall St. driven thinking at it’s finest.

I posted a link to my article AT&T Project Lightspeed and the Jedi Mind Trick at Broadband Reports, and the comments there are interesting and informative, and reflect the excellent technical aptitude of the readers there.

People who want to dive into the issues more deeply should check out the thread here.

AT&T Project Lightspeed and the Jedi Mind Trick

The Death Star is looking vulnerable these days.

Obi Wan MindTrickAT&T (T ) COO Randall Stephenson, speaking yesterday at Bank of America’s 2006 Media, Entertainment and Telecommunications conference attempted to exercise his marketing skills with a poor attempt at a Jedi Mind Trick.
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Excellent overview of power supply issues with FTTN and FTTH equipment. A single AT&T Lightspeed remote terminal uses as much power as a small home. Carriers looking to use 190V line power over legacy copper. Fuel cells… 5 pages of crazy stuff.

Fairpoint & Occam Networks

Fairpoint Communications (FRP) plans to spend $781M over the next 5 years maintaining and upgrading the network they purchased from Verizon. Drilling into the details of the network spending suggests Occam Networks (OCNW) is well positioned to materially benefit from this proposed deployment. Details provided by Fairpoint and fundamental metrics of the Broadband Loop Carrier business lead us to believe Occam will recognize up to $125M in revenue, of which $80M will come in the next 18-24 months, provided Fairpoint executes it’s current capex plan.

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Lightreading Gives Ma Bell Both Barrels

R. Scott Raynovich, Editor in Chief of Lightreading, unloads both barrels into retiring AT&T (T ) CEO Ed Whitacre in a Lightreading editorial outlining the massive gap between his pay and performance.

Shareholder activism along the lines of Carl Icahn’s Motorola crusade is sadly absent in the Networking component, equipment, and carrier business that I follow. Companies such as Centillium (CTLM) and Sycamore (SCMR) are allowed to drift along in a zombie-like state at the expense of investors. Even Robert Chapman has abandoned his cause at Vitesse.
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FTTH Stakeholders /= FTTH Shareholders

Monopoly Money

People tout the big benefits of fiber but refuse to allow those who put capital at risk to make big profits. They seem to be afraid that someone, somewhere, might actually make some money.

A report from the Broadband Stakeholder Group summarizes ongoing worldwide fiber to the home (FTTH) projects . The report highlights the need for FTTH in the UK, something BT (BT) has steadfastly refused to do.

I cannot blame BT- asking them to deploy an expensive network and then be forced to lease it out to competitors (with no downside investment protection of course) is a ridiculous thing to expect of a profit driven entity.
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The Cablecos are Waking Up to Reality

The WSJ today has an exclusive look (free version of article here) at a report to be released by CableLabs that outlines the potential need for cablecos to undertake a massive infrastructure upgrade in order to stay competitive. Unfortunately, the report is not yet available to non CableLabs members, though we would sure like to get our hands on one (HINT HINT HINT) and CableLabs has informed me it never will be.

The report, which has been reviewed by The Wall Street Journal, warns that at present growth rates cable operators’ existing technology may not be able to compete efficiently with Verizon on Internet services. “At some point, optimization of the (cable) network becomes more expensive than simply deploying” fiber directly to homes, the report warns.

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Future of Optical Networking – Lightreading Conference

I attended the Lightreading “Future of Optical Networking” conference in New York last week.

I had high expectations for the conference based on one I attended two years ago on Ethernet in the WAN. At that conference there were a number of participants from start ups and established companies who led a vigorous debate about what the future of SONET/SDH looked like. Even though I lived and breathed Ethernet over SONET/SDH at the time, and met regularly with the companies on the panel, the debate that ensued was highly educational and enlightening.
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