Merrill Lynch Reports on Telecom Plans for Network Upgrades

December 22, 2004

Telecommunications analysts from Merrill Lynch today released a report highlighting plans from three companies to upgrade their access networks to deliver video to homes. BellSouth, BCE and Manitoba Tel (MTS) are all involved in Fiber-to-the-Node (FTTN) projects and are working intensively to get in-ground construction taken care of in anticipation of market demands for video service.

Below are some notes about each of these providers and their plans. The Merrill Lynch report is private and restricted, so all I can really link to is information made public by the companies themselves

BellSouth

For an interesting analyst presentation provided by BellSouth, see this PDF.

For new construction, BellSouth is rolling out Fiber to the Curb (FTTC); most households (16.3 million) get Fiber to the Node. The company has not specifically committed itself yet to delivering terrestrial video, but it obviously realizes the importance of this service if it is to remain competitive.

BellSouth is evaluating ADSL2+ technology for video delivery and is trialing Microsoft’s IPTV platform. Merrill Lynch quotes BellSouth Chief Staff Officer Mark Feidler about IPTV: “The fact that there is a switched architecture gives us an ability to differentiate the product … but first and foremost, it’s got to work.” Sounds right to me.

MTS (Manitoba Tel)

Unlike BellSouth, MTS is already providing DSL TV and had signed up 30,000 subscribers by November 2004, 17% of its homes.

Here’s where to find information about MTSTV.

Merrill Lynch analysts say about the MTS TV business: “We believe that the standalone economics of this business are challenging.” But not impossible, apparently. Even though the costs of network upgrades and individual installations are high, the operation should reach break-even in earnings in 2005, if I understand correctly.

BCE (Bell Canada)

Here’s a pretty thorough press release from BCE outlining its plans in the IP communications space.

According to Merrill Lynch, BCE is pursuing a multi-pronged strategy for its access network and video services, delivered via a mix of satellite, FTTP and FTTN (using IPTV). BCE expects to reach about half its homes with this upgraded network by 2008, about 4.3 million homes, most of which are single-family and small multi-unit residences; these will receive ADSL2+ technology delivering bandwidth of up to 26Mbps.

One thing I would have to say from the point of view of a small business user, knowledge worker and consumer: All I really want is a fat pipe coming right to my house and my place of business so I can send and receive massive volumes of data and communications seamlessly and effortlessly, whatever application or device I’m using. That’s all, really. I get impatient when I hear about the square-peg-into-round-hole contortions of the various telecoms to get the infrastructure and networks in place to make this happen.

Of course, they are businesses after all, and whatever they do has to be feasible and profitable. Maybe I just need to be more patient and have confidence that it will eventually happen ….

AB -- 12/22/04