An Ignoble Experiment

Google Fiber (Nasdaq: GOOG) may have officially got the green light from Provo's city council to purchase the iProvo network, but it's now facing a protest from area incumbent telco CenturyLink (NYSE: CTL).

In a letter sent to the city councilors, CenturyLink said that it objects to the sale and wants the vote on giving Google Fiber approval to purchase iProvo and operate their FTTH network to be delayed by 30 days.

As reported by The Daily Herald, the delay would give the city time to fulfill a Government Records Access and Management Act (GRAMA) request from the telco, and to let them object to the negotiation process.

"CenturyLink feels they have been treated unfairly," said city council attorney Brian Jones during the council meeting Tuesday night. "They feel they were excluded from the process."

However, Jones was quick to point out that the city contacted the telco a number of times starting in 2010 but they never responded to the RFP the city issued for the telco network. Even after the city made another attempt to contact CenturyLink about wanting to be part of the process, they did no respond

"CenturyLink responded to the RFQ but never responded to the RFP," Jones said.

What's interesting about CenturyLink is that the telco's current DSL-based service speeds don't come anywhere near what Google Fiber or the existing iProvo network could offer. The telco currently offers speeds from 1.5 Mbps to 40 Mbps depending on how far away a customer resides from the nearest remote terminal or central office. Customers also have to abide by usage caps.

CenturyLink is not the only service provider that's against Google Fiber's entry into Provo. Independent ISP, XMission said that the city is giving Google the ability to become a monopoly.

Although Google purchased the iProvo network for $1, the city will still have to pay $500,000 to hire a civil engineering firm to locate where the existing fiber was placed and $722,000 for equipment used to access the fiber service for various applications such as traffic light operations.

Unlike its deployment in Kansas City and its planned work in Austin,Texas, Google's entry into Provo is different as it is purchasing another network as part of its expansion strategy.

Under its proposed plan, Google said that it would upgrade the existing network to 1 Gbps technology and complete network construction so all homes in the city can get access to the service. In addition to the 1 Gbps service, it would offer a free 5 Mbps service to the 115,000 residents on the existing Provo network who pay a $30 activation fee.

For more:
- The Daily Herald has this article

Read more about: Broadband, Iprovo
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2. Level 3's Q1 revenue dips to $1.58 billion on expected government contract disconnects

By Sean Buckley

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Level 3 Communications' (NYSE: LVLT) first-quarter revenues declined sequentially and year-over-year to $1.58 billion due to the expected termination of various North America and UK government contracts.

During the first quarter, the company's net loss was $0.36 per share, including $0.11 in foreign exchange losses in EMEA and Latin America.

"In the first quarter, we saw the effects of the near-term revenue pressures we cited last quarter, due to the typical reversal in seasonally strong fourth quarter revenue and some known contract disconnects in North America and UK Government," said Sunit Patel, CFO of Level 3.

Despite these initial revenue challenges, Level 3's total Enterprise Core Network Services (CNS) revenue grew 2.2 percent year-over-year to $1.37 billion. Taking out the impact of UK government revenue, Enterprise CNS revenue grew 6.8 percent year-over year. Wholesale revenue, meanwhile, declined to $501 million, while wholesale voice and other revenue declined to $205 million.

In addition, Patel said that "our gross margin is now back above 60 percent for the first time since acquiring Global Crossing."

On a regional basis, North America was the clear leader with $967 million in revenue, while EMEA and Latin America posted revenues of $223 and $182 million, respectively.

Reiterating the guidance it provided in its Q4 2012 earnings call, Level 3 said that for the remainder of 2013 they expect sequential CNS revenue growth to be stronger compared to 2012.

Shares of Level 3 were listed at $20.59, up 0.32, or 1.58 percent in late morning trading Thursday on the New York Stock Exchange.

For more:
- see the earnings release

Earnings roundup: Wireline telecom earnings in the first quarter of 2013

Read more about: Level 3 Communications
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3. Florida provider Rapid Systems Inc. sues FRBA for $25 million, alleging fraud, misconduct

By Samantha Bookman

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A Tampa-based telecommunications equipment provider, Rapid Systems Inc., filed suit against the Florida Rural Broadband Association after being terminated from an agreement to install and maintain equipment on a rural wireless broadband network, claiming that the FRBA conspired to cut them out of the project. RSI is asking for $25 million in damages.

FRBA received a $23.7 million federal BTOP (Broadband Technology Opportunities Program) grant in 2010 to install and operate a wireless broadband network in northwest Florida, including Hardee County.

According to the complaint, RSI installed roughly $2 million of equipment on and operated the Hardee County Broadband Network, in what it characterized as an "in-kind contribution" listed as part of BTOP's requirement for matching funds on the public-private partnership project. But in January 2013, the FRBA terminated a contract with RSI and put a lien on the equipment and towers, in a move to "hijack" the network without paying RSI for its services.

Things get murky in the complaint filing, as they typically do. RSI named a number of parties in its suit, including nonprofits, consulting firms, and several individuals, and grouping various parties together as "conspirators." The company alleges that fraud, conspiracy, "self-dealing and double dipping" and a number of other issues took place.

Whether the company knew that it was being represented as both an in-kind contributor and a contractor is also not entirely clear in the suit. RSI told the Columbia County Observer that it donated about $2 million in cash, equipment and services to the project.

The FRBA is cousin to the North Florida Broadband Authority (NFBA), which last year faced allegations of fraud and misuse of NOAA funds in its $30 million middle-mile rural broadband project. That organization had its funding suspended and later reinstated in March 2012, but not until after several counties dropped out of the project. Interestingly, a consulting firm named in the RSI lawsuit, GSG, played a role in the NFBA funds suspension due to a conflict of interest. GSG is no longer directly involved with either broadband project.

RSI also installed equipment on the NFBA's system, but its involvement was based on a competitive procurement process.

Neither RSI nor the FRBA had responded to requests for comment by press time.

For more:
- the Columbia County Observer has this article

Read more about: broadband stimulus
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4. ADVA Q1 revenues decline to $101 million on slower carrier sales

By Sean Buckley

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ADVA Optical Networking (XETRA: ADV.DE) felt the headwinds of service providers tightening their purses, and the results of a temporary shift in priority to focus on ramping up LTE in their wireless networks, as revenues dropped 5.7 percent year-over-year and 4 percent sequentially to €77 million ($101 million).

Despite the drop in revenue, the vendor said its results were in line with the upper end of the guidance it issued for the quarter between €72 million ($94 million) and €77 million ($100.6 million).

"While the temporary decline of our business related to short-term market weakness driven by adverse macro-economic conditions and temporary shifts in carrier investment priorities clearly is a disappointment, we are still pleased to report our Q1 2013 revenues of €77 million at the upper end of guidance," said Jaswir Singh, chief financial officer & chief operating officer of ADVA Optical Networking, in the earnings release. "Our pro forma gross margin decreased from 41.8% in Q4 2012 to 38.6% in Q1 2013, due to quarterly variations in product and customer mix."

From a regional perspective, EMEA continued to be the dominant area of revenue growth, contributing 62 percent of total revenue in the quarter. Trailing EMEA were the Americas and Asia-Pacific regions, which contributed 33 and 5 percent of revenue, respectively.

While it's true that many service providers have temporarily shifted their investment priorities to LTE investments, ADVA Optical Networking cites new potential in two areas of the optical market: 100G core network optical and shifting metro packet-optical transport.

One of the proof points ADVA Optical Networking gained in its 100G story during the quarter came from Kabel Deutschland. The cable MSO is using the vendor's FSP 3000 platform for a new nationwide mesh backbone network.

Even with large wins like Kabel Deutschland, the vendor continued to see ongoing spending delays from other carrier customers, a number of which have been focusing more of their recent network upgrade attention on the radio access of their networks to support new wireless LTE deployments.

"Due to uncertain macro-economic conditions, carriers have been restricting investment in their networks for some time," Brian Protiva, chief executive officer of ADVA Optical Networking, in the earnings release. "Also, there have been temporary shifts in carrier investment priorities towards the ramp of LTE technology, delaying access and core infrastructure spending. However, in order to eliminate network outages, and under pressure to transform their business models, carriers will need to drive network efficiency to support increased volume and diversity of LTE traffic types while keeping tight control of costs."

Protiva added that they can play a bigger role in role in the wireless operator's backhaul network by providing software-defined networking (SDN) capabilities

"Operators need a roadmap for incorporating the cost-saving and revenue generating potential of software-defined networking (SDN) into the backhaul network," he said. "Over time SDN will become a critical enabler of leveraging greater intelligence into the backhaul network, as increasingly intense usage of real-time multimedia voice and video services creates new challenges with respect to congestion control."

Similar to Q1 2013, ADVA has forecast Q2 revenues to be between €73 million ($95 million) and €78 million ($102 million).

Shares in ADVA Optical Networking were listed at $3.76, down 0.03, or 87 percent, on Thursday morning on the XETRA stock exchange.

For more:
- see the earnings release

Earnings roundup: Wireline telecom earnings in the first quarter of 2013

Read more about: ADVA Optical Networking
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5. Infinera Q1 revenues rise to $124.6 million on DTN-X sales

By Sean Buckley

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