Verizon’s Broadband Plans

Knowledge@Wharton writes:

On Oct. 21, Verizon announced that it would expand its fiber-to-the-premises (FTTP) service to homes in Virginia and parts of Delaware, Maryland, Massachusetts, New York and Pennsylvania. The service is already offered in California, Florida and Texas. The goal for Verizon – one of the original Baby Bells with annual sales now topping $70 billion – is to reach one million homes and businesses with the new technology by the end of the year and two million by the end of 2005. SBC Communications – another former Baby Bell, which dominates the southwest and western part of the U.S. – is planning a similar rollout to offer video service in 2005. According to a report in the November 17 New York Times, SBC will pay $400 million to Microsoft for software that can be used to deliver TV programming over high-speed lines.

FTTP, based on the same fiber-optic technology used in telephone networks, offers speeds up to 20 times faster than current digital subscriber line and cable technology. Here’s why: Current telecom broadband connections – known as digital subscriber lines (DSL) – are slowed by the traditional copper wiring used for telephone service. Although a connection may start on a fat fiber-optic pipe, it ultimately goes onto a slower copper wire before entering a household. It’s like connecting a fire hose to a straw. Verizon’s plan to run fiber-optic cable directly to homes would connect a broadband fire hose to a home, enabling video on demand. Its broadband Internet access services will offer download speeds of up to 5 Mbps (megabits per second), 15 Mbps and 30 Mbps for a bundle of services at a base cost of $34.95.

“DSL was a lame technology because it was fiber going to copper wire,” says Wharton business and public policy professor Gerald Faulhaber. “The connection is only as strong as the weakest link. I’m surprised DSL did as well as it did. At least the telecoms leveraged DSL to get into broadband.”

The big question is not whether Verizon, which is spending $800 million on the FTTP rollout, can install super-fast broadband pipes, but whether it can bundle video with Internet access, local and long distance phone service and wireless to poach customers from cable providers. “In the big picture, everyone in telecommunications will have to provide a full bundle and compete in TV and voice,” says Wharton legal studies professor Kevin Werbach.

the company’s FTTP efforts could reinvent video service. With a fiber-optic pipe running into homes anything is possible, especially at speeds that could reach 30 mbps to 100 mbps, says Klugman. Indeed, the way consumers get TV might change. Consumers could pick and choose channels and access independent networks produced by amateurs armed with video cameras over the Internet. “Once the pipe is fat enough, you have convergence and can deliver anything,” says Werbach. “For instance, I pay Comcast for 200 channels, but I’d be more than happy to have constant access to two or three channels and pick a few on demand from there.” In one regard, Verizon could relegate video to just another part of a big bundle. “If you think of video as part of a vast stream of content from commercial and amateur sources, TV may look different.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.