Corning Looks Very Good on Fiber Front for Rest of 2008

Implications: 1.      AT&T is buying a large amounts of fiber from Corning right now.   2.     Verizon continues to deploy large amounts of fiber optics. 3.      Qwest seems to be extending fiber somewhat beyond the node in a limited fashion.  

Analysis:  Even on FTTN, AT&T continues to deploy enough fiber up to the nodes to eventually accommodate any future penetration including enough to support both FTTH and FTTC.  The attitude at the RBOC is presently that in many cases there will not be a significant enough improvement in quality with further quantity of product in delivering to the home versus to the curb.   So as long as there is no significant disadvantage between the two, AT&T is questioning the idea of putting in all of the money to run from the curb to the house.  While it is hardly excited about paying the cost of installing all of those new nodes, it knows that Verizon got caught early on with a lot of damages in attempting to go under sidewalks, driveways, etc to get FTTH. It appears that AT&T has not made a firm commitment on FTTC suppliers at this time.  

Sales of fiber to AT&T from Corning are expected to be relatively stronger in the second half of the year as compared to the first half.  Of course, with the high probability in the future that the service provider will go to FTTC as well as to FTTH (including for rehab applications), there will be a substantial increase in the amount of fiber that it buys.  

Corning also anticipates that in the long term, Qwest will be a very significant player in   the fiber optic space.  It believes that the situation at the carrier is getting better quickly.  Qwest apparently is constructing a somewhat different kind of high-speed access network – just enough to make due for high-speed Internet as well as for getting to the business community.  The RBOC gets a little bit closer than the node, but not quite to the curb.  Fiber to the home deployment is limited except in Provo and Salt Lake City in which it has active FTTH operations.   

Corning is doing a lot of development work on new products that it will likely introduce in the next year or two.  While they may not necessarily have the impact of its OptiTap, they will further reduce the cost of FTTX.   

Corning does not really consider CommScope and ADC to be major competitors because they tend to be in Corning’s secondary business.  Corning is much more concerned with optical fiber and with TV panels.