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Preston Gralla's picture
Preston Gralla

Seeing Through Windows

Why Verizon's fiber project could kill the company

Verizon is alone among the major telcos in building an extremely expensive fiber to the home (FTTH) network rather than less-expensive fiber to the node (FTTN). This extra cost could end up killing the company.

In Verizon's FTTH network (also called fiber to the premises, or FTTP), fiber is laid all the way to people's home. With FTTN, by way of contrast, fiber goes to a neighborhood node, and existing copper lines carry the signal to the home. FTTN is far less expensive than FTTH.

Verizon argues that it's worth the cost, because it will be able to deliver higher-quality services, and get increased revenue because of that. But that doesn't appear to be the case. Other telcos say that they can deliver the same services, but at far lower cost.

The most recent critic is Paul Reynolds, CEO of BT Wholesale, part of BT, formerly known as British Telcom. According to Telecommunications Online, Reynolds recently gave a speech at the DigiWorld 2006 Summit, where he said, "I really don’t see a business case for widespread FTTH. It is not immediately apparent where the incremental revenue would come from that."

Reynolds isn't alone. Other telcos say the same thing. And Verizon is in essence betting the company on FTTH, because it's enormously expensive to deploy it, far more expensive than FTTN. The Mercury News, back in September, noted that AT&T's FTTN project will cost about $5.1 billion to wire up 19 million homes. The newspaper added, "That's less than a quarter of the capital commitment Verizon is making to completely rewire markets serving 18 million homes."

There's simply no way Verizon can compete with companies deploying a far-less costly network. It's betting the company on FTTH, and that may kill it.

What People Are Saying

Verizon is a leader in

Verizon is a leader in telecommunications. First was copper (slow) next was cable (fast) now the newest medium is fiber (fastest). It will not kill the company at all, FTTP will in fact make the company so much money that it will invade into ATT turf. Then ATT will play catch up paying double to bring fibers into peoples home. I realized the internet was developed in the USA and guess who has the fastest net pipes, KOREA.

I have Verizon fiber to my

I have Verizon fiber to my house. I wouldnt have it any other way. It is 10mb service, 3 times faster than the cable modem service i had previously, and its dedicated, not shared bandwith. It is $30 bucks a month cheaper than the cable, and get this, its also my phone, and it will host tv service as well.
Who would use cable or DSL if they could have fiber?

Verizon and UTOPIA have got

Verizon and UTOPIA have got it right with the FTTP networks they are building. UTOPIA is currently selling internet, digital phone and digital video in various Utah cities. FTTP eliminates the costly physical and administrative node translation to copper. These virtual x-connects inject costs through maintenance and administration that seldon are identified in ROI studies. Verizon is the only "telcom" company that will be able to compete with the Cable and UTOPIAs of the future. AT&T has always been great at smoke screens.

Then why is Verizon also

Then why is Verizon also aggressively pursuing anti net neutrality provisions.
Whats the points of having a 100/100 connection if Verizon is blocking all the traffic to Google.com because they didnt pay this months extortion fees.
Verizon is attempting to re roll out a monopology and people are too blind to see it because they are blinded by the high speeds and temporary low cost.

I should suppose that That

I should suppose that That Guy is uniquely in possession of damning evidence that Verizon is actually blocking Google or that he is exceptionally gifted as a seer and thus can actually prove that Verizon will in future block Google? Either way I would think the watchful bureaucrats at the FCC are eagerly anticipating such proof as they fire up their Letter of Inquiry. Until such time we may dwell upon Section 201(b) of the 1934 Communications Act pursuant to sections 4(i), 4(j), 218, and 403 which the FCC recently hammered Madison River Telephone Company with for blocking access ports to VoIP competitor Vonage.

Preston, Kill the company?

Preston,
Kill the company? Bold statement, however innaccurate. In case you have yet to notice, there is a little global revolution unfolding in front of us - that little gadget called the Internet, aka The People's Network. True interactive broadband video applications, like distance education and telemedicine, can only be accomodated with an unthrottled network; as in wide open (spelled FTTH). The people, thanks to the internet, are finally being heard. The internet is without a doubt the most democratizing force on the planet, and innovative companies will "salute the people", and drive innovative, useful solutions across these new high speed networks. And those innovative companies will prosper wildly. Hats off to Verizon for their courage and commitment. Everyone else will (eventually) be following suit in FTTH. People will rarely buy something they neither need nor want. Verizon, in their wisdom, are setting themselves up to be the neighborhood pizza store (FTTH) while the others are still selling cold sandwiches (DOCSIS & DSL). Wanna guess who wins?

Mr. Gralla, I always

Mr. Gralla,

I always appreciate different perspectives; however, I disagree whole heartedly with your suggestion that FTTH could kill Verizon. FTTH technology is a quantum leap over FTTN. More importantly, Verizon is a visionary competitor while the monster of AT&T, BellSouth, and SBC is a monopolistic Neanderthal. First, under ideal situations, FTTN (assuming VDSL technology is deployed) can provide faster data rates than ADSL (but no where near that of FTTH) but AT&T will never be able to offer a cost effective and competitive video package on FTTN (despite what their lobbyist say). Second, AT&T won’t admit for sometime that the answer is FTTH because they are preoccupied with the recreation of Ma Bell and aren’t ready to swap out their entire plant. Third, if they scrap FTTN (which will happen), Bell South will have to admit that Peter Hill’s moronic strategy of FTTC was a massive waste of money, which it was (I live in Atlanta, have BellSouth FTTC available but only can get 1.5 Mbps). Fourth, the only reason AT&T is making lots of noise (but little to no deployment of FTTN, except San Antonio, TX) is to show Congress and the FCC that they are trying to “do good” so they can get their merger approved and continue their anti-competitive practices. You cant’ believe AT&T, BellSouth, and SBC – they are compulsive liars created through a century of monopolistic thinking. Verizon on the other had has said what it was going to do and has done what it said it was going to do since it started deploying FTTH in 2004. No Incumbent in my life time has ever did what they said they were going to do (aside from suing competitors out of business). Verizon should be praised for its decision to deploy FTTH. I firmly believe the public, Wall Street, and subscribers will reward Verizion for its brilliance. If anything, AT&T should follow Verizon’s lead or they will risk losing their subscriber base to the cable companies; heck, maybe Verizon will overbuild AT&T. I’d like to suggest Atlanta for a start.

Leonard Ray
lray@atlantic-engineering.com

Set to the timeless argument

Set to the timeless argument of short term versus long term I am compelled to redress the ROI misconceptions of Verizon's ambitious FTTP deployment. From a singularly tech perspective any Node/Curb network is inevitably dependent on high maintenance copper plant which carries obvious video and data limits like a 24Mbps ceiling while FTTP is capable of an unshared data stream up to 100Mbps. Unlike passive FTTP any FTTx (curb or node)is still dependent upon network failure points like repeaters to convert signals in the loop. Concerning upkeep and maintenance FTTP systems are redundant, fully automated, and immune to both the electromagnetic and climatological interference which plague high speed copper lines. Although the initial rollout costs make hesitant investors tense in the all important long term an FTTP network will ultimately bestow overall reductions as evidenced by a recent Bernstein Research analysis which shows that Verizon will "realize cost savings averaging $114 per connected line, or 61% of the comparable costs in a legacy copper network" while AT&T's FTTN "would enable savings of just $60 per line." And to cite Paul Reynolds is to court proprietary skepticism as BT is the preeminent copper DSL provider in Great Britain. If I were a rich man...I'd buy Verizon.

Mr. Gralla, I was at the

Mr. Gralla,
I was at the session in France last week during which Mr. Reynolds made his comment about FTTH being too expensive. He also cited a cost of $6000 per subscriber - a figure four times higher than Verizon's experiences to date. So, his cost estimates are obviously skewed to show FTTH as very expensive.
And, Verizon is not alone in pursuing fiber to the home. NTT has more than 3 million FTTH subscribers and DSL subscriptions are declining while FTTH subscriptions are climbing rapidly.
On the issue of FTTN vs FTTH, France Telecom has shifted their strategic direction to FTTH. And, AT&T, now more than 1 year behind schedule on Project LightSpeed, is finding FTTN costs to be much higher than their budgeted CapEx estimates that you cite in your posting.
FTTH will save Verizon, not kill it.
Joe Savage
President FTTH Council North America