Snag in the Line

Advanced Fibre Communications is apparently running into some snags with its FTTP deployment at Verizon.

Advanced Fibre Communications is apparently running into some snags with its FTTP deployment at Verizon.

According to two analyst reports, AFC failed to deliver FTTP equipment suitable for lab evaluation several weeks ago. One report says AFC has already shipped revised equipment to Verizon, while the other states that Verizon has yet to receive it, but will shortly.

AFC is not in any danger of losing the five-year contract, the reports from Wachovia Capital Markets and UBS Warburg state; but if the inadequacies are not remedied quickly, Verizon may be forced to re-bid the contract.

“We do not expect Verizon to replace or augment the AFC relationship with other vendors at this point,” states Richard Church, the Wachovia analyst, in his report. “However, we believe there are nonperformance clauses that Verizon could exercise, as necessary, but do not expect that to be the case at this point.”

An AFC spokesman says the company does not comment on “rumors or possible scenarios.” A Verizon spokesman says that nothing has changed with respect to the carrier selecting and working with a number of FTTP vendors, including AFC. 

“It is our general policy to not comment on speculation such as this, again, since nothing has changed,” he says.

Meanwhile, other FTTP red flags are being raised at Verizon. While appearing committed to FTTP, Verizon continues to invest in DSL deployments and could “pull the plug” on FTTP if demand does not materialize, according to Church in his report.

Also, UBS Warburg states that Verizon will have a hard time meeting its 1 million homes passed goal for FTTP this year due to a number of factors, including: (1) the length of contract negotiating; (2) Verizon’s management buyout offer late last year; and (3) the AFC delay in delivering product to the lab.

UBS Warburg now believes the internal target at Verizon is closer to 700,000 to 800,000 homes passed in 2004. The firm also believes the carrier’s original plan to begin the two first office applications in the May/June time frame has been pushed out until the September time frame.

The Verizon spokesman again says nothing has changed with respect to the carrier’s plans for initial FTTP deployment this year.