Verizon’s Big Bet

I worked for NYNEX 14 years ago – it remains my only job. It was a wonderful experience, and I have very fond memories of the people and the place. So, it was good to read this story about Verizon (formed by the merger of NYNEX and Bell Atlantic). Fibre-to-the-home, WiFi and 3G – Verizon is rolling all of them out simultaneously. Business Week writes:

Verizon plans to roll out fiber-optic connections to every home and business in its 29-state territory over the next 10 to 15 years, a project that might reasonably be compared with the construction of the Roman aqueducts. It will cost $20 billion to $40 billion, depending on how fast equipment prices fall, and allow the lightning-fast transmission of everything from regular old phone service to high-definition TV.

In an unprecedented move, Verizon is blanketing Manhattan with more than 1,000 Wi-Fi hotspots that will let any broadband subscriber near a Verizon telephone booth use a laptop to wirelessly tap the Net for the latest news, sports scores, or weather report. If the rollout goes well, Verizon will duplicate this wireless grid in other major cities. Next up: third-generation wireless service, known as 3G, which lets customers make speedy Net connections from their mobile phones. Verizon will begin to deploy 3G in September, at least three months before any of its major competitors.

What’s behind Verizon CEO Ivan Seidenberg’s sudden series of audacious moves? Two major reasons: competition from cable companies and the CEO’s vision of his industry’s future. The cable assault is most pressing because Comcast and its brethren are cutting into Verizon’s cash-cow local-phone business and swiping most of the customers in broadband, the fastest-growing segment of telecom. To compete, Verizon plans to use its fiber-optic lines to offer Net access that’s 20 times as fast as today’s broadband — and bundle that with local phone service.

Just as important is Seidenberg’s conviction that telecom as we know it is history. In its place will emerge what he calls a “broadband industry” that will use the new, superfast Net links and high-capacity networks to deliver video and voice communications services with all the extras, like software for security…Seidenberg thinks ubiquitous broadband will transform broad swaths of the economy. High school students, for instance, could download the video of a biology lecture they missed. Doctors could use crystal-clear videoconferencing to examine patients in hard-to-reach rural areas. “The cable industry focuses on entertainment and games. The broadband industry will focus on education, health care, financial services, and essential government services,” he says. “I think over the next five to 10 years, you will see five, six, seven [segments of the economy] reordering the way they think about providing services.”

Over the long term, the strategy will put Verizon into completely new businesses. Though video may not be its primary focus, the company says that within five years it expects to distribute video services, which could include TV programming and movies on demand, so it can compete directly with cable companies.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.