The telecom industry is touting the benefits of fiber again, but don't expect to see a high-speed push move forward immediately.
this week showcased their latest plans to add to their fiber-optic networks. Wall Street is keen on the idea, believing fiber could help the Bells compete with cable rivals by offering consumers one-stop television, Internet and telephone service.
Verizon said Thursday that it will add six East Coast states to its so-called fiber-to-the-home project and hire as many as 5,000 workers by the end of next year to help with the effort. Those comments came just after SBC said it would outline its fiber-optic network expansion plans to analysts and investors on Nov. 11.
The Bells are suddenly unveiling ambitious optical fiber plans in the wake of new federal rules. A clarification provided by the Federal Communications Commission last week relieves the telcos of the obligation to share or lease newly upgraded high-speed networks.
SBC's latest announcement even represents a slight acceleration of its earlier blueprints. Though Verizon has now extended the fiber effort to nine states, the company did not change its goal of "passing" a million homes this year.
The Bells hope fiber enhancements can help them deliver on their promise to offer advanced digital services like TV programming, video-on-demand and Net access.
Wall Street has been particularly interested in the Bells' fiber plans, though investors tend to fall in a few different camps.
For example, critics say that if Verizon were to go ahead with the plan at a cost of $1,500 per home, it would be disastrous to the financial structure of the business. From the skeptics' standpoint, the Bells' heavily promoted fiber announcements are merely an attempt to distract the investment community from their rotting core local phone business.
Meanwhile, tech fans cheer the move. Not only do the local phone giants face few alternatives available to compete with cable companies, but the big spending promises to rejuvenate a slumping networking equipment sector.
If the upgrades go according to plan, there will be a big spigot of cash available to suppliers. SBC says it will spend about $5 billion on the effort over the next few years. On a conference call Thursday, though, SBC executives said the expenditures won't start appearing until late next year, with the bulk of the spending coming in 2006 and 2007.
For its part, Verizon says it will spend about $800 million this year and as much as $3 billion in the future. But it is not clear how much of the fiber money is simply redirected from other areas in the equipment budget.
Though the spending is still a ways out, the allocation process has already begun.
shares jumped 5% after the company announced that it had been named as one of SBC's suppliers. The big French telecom gearmaker expects to sell $1.7 billion in fiber and Internet infrastructure to SBC. Other vendor selections are expected imminently from SBC.
Earlier this year, as Verizon emphasized just how huge its fiber plans would be, investors got excited and flocked to stocks like
But as the hype faded, so did the stocks.
Corning is down 22% from its 2004 highs in January. AFCI has dropped 39% and ADC is down 41% over the same period.
To be sure, after nearly a year of Bell fiber talk, it appears expectations ran well ahead of fundamentals. And skeptics would say there's still plenty of chance for that to happen again.