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Summary:

Yesterday the big news was Verizon’s big plan to expand its fiber-to-the-home experiment to newer markets. The Eastern Bell promised mega-bandwidth for a few dollars. If that is the case, then things should be looking good for their primary FTTP gear supplier, Advanced Fibre Communications, right? […]

Yesterday the big news was Verizon’s big plan to expand its fiber-to-the-home experiment to newer markets. The Eastern Bell promised mega-bandwidth for a few dollars. If that is the case, then things should be looking good for their primary FTTP gear supplier, Advanced Fibre Communications, right? Wrong, for after the market close, AFC announced a disastrous quarter.

“Our revenues came in somewhat lighter than we had anticipated,” said John Schofield, chairman, president and chief executive officer at AFC. “This was primarily due to a supply constraint of a key component that impacted FTTP shipments which we expect to be resolved in the current quarter.” This is a case of classic double speak. I will translate it for you: [a] Verizon is not deploying FTTP as quickly as they would like us to believe or [b] that AFC’s gear does not work. Which one is it I don’t know.

Phil Harvey over at Light Reading (why doesn’t he write more often) does some number crunching and comes up with this:

For, even if a full one third of the residents in Keller subscribe to Verizon’s FTTP network, the carrier’s network will have cost it about $1,360 per customer served. Supposing one third of Keller’s population does subscribe to FTTP services at the $45 monthly rate, Verizon would take about two-and-a-half years to make its money back.

  1. Lutas, just because AFC is worried about upsetting Verizon and letting the world know the truth – they did not offer any details – you are telling me that i failed the test. i am in serious need of laughs and your attempt at humor has failed.

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  2. Supply constraints do happen in the real world of transistors and capacitors. When the Kobe earthquake hit Japan several years ago it took out 33% of the world’s production capacity of laptop screens. Laptop prices soared and supply was constrained for months afterwards.

    For a corporate fiduciary to make false statements of the nature you allege is a crime. I don’t have any problem with alleging criminal acts by corporate bad guys but the barest sense of decency requires just a little bit of evidence that things are not as they say.

    You failed that test.

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  3. Well, it doesn’t make much sense as plan for Verizon if they only anticipate getting $45/month for the service. As he points out in the article, comparible service with TV is around $85/month or double what they get for the naked line. Now, the margin on the TV service won’t be that good, but it will contribute something – so I think that might reduce the 2.5 years to recoup the investment to something, maybe, like 1.75 years. It’s still a waste of time for Verizon and a continuation of their shell game.

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  4. You forgot to mention that Verizon now believes AFC is in breach of their supply aggreement. If things are well with supplying the product then how does one get into a breach of agreement? Supply constraint could be true or not, however you cut it AFC is in deep trouble in its traditional cash-cow DLC business from Calix and POTS lines aren’t growing. Its new FTTP business is in technical trouble and even if it works it will have negative gross margins for a while. So go figure how does TLAB make it accretive? Krish has a fiduciary duty also.

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  5. verizon is looking further down the road than just what we make in the next two years…this is the threshold to the future…we are the future….fiber will be in every home, and it will have the verizon name on it.
    we are in this for the long haul.

    Bob Morris, Verizon FIOS tech, Tampa, fl.

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