As expected, Verizon tapped Motorola as a second source for current generation FTTP gear.

We first reported that this was likely back in January and that it's a double-edged sword for primary supplier Tellabs.

Motorola won't likely ramp up shipments to Verizon until 2006 after it completes integration with the Verizon OSS, analysts say. That means Tellabs will be the sole supplier to Verizon this year.

But in beating out Alcatel as the second source, Motorola introduced a new pricing structure for FTTP active optics that could undermine Tellabs' current margins from the Verizon project.

Under the five-year contract, Motorola will provide Verizon with ATM-based broadband PON (BPON) gear such as its AXS2200 Optical Line Terminals, residential and business Optical Network Terminals, and video-optimized Optical Amplifiers. In a separate multiyear contract, Verizon selected Motorola to help build the video network infrastructure portion of its FTTP project, providing head-end technology, digital set-tops and integration services.

But BPON will eventually give way to the higher-speed, Ethernet-based GPON for IPTV on FTTP. Verizon has stated plans to adopt GPON beginning next year.

Currently, Verizon’s FTTP network passes more than 1 million homes and businesses across 14 of the 29 states the company serves.  Verizon plans to double its FTTP network deployment this year, as well as launch its first television services in the second half of the year.