Will Verizon Finally Announce a Fiber To The Node Product?

The New York Times ran an Associated Press article a few days ago titled Verizon winds down expensive FiOS expansion. Here's a couple of interesting quotes from the piece:

.... Verizon is nearing the end of its program to replace copper phone lines with optical fibers that provide much higher Internet speeds and TV service. Its focus is now on completing the network in the communities where it's already secured ''franchises,'' the rights to sell TV service that rivals cable, said spokeswoman Heather Wilner.

That means Verizon will continue to pull fiber to homes in Washington, D.C., New York City and Philadelphia -- projects that will take years to complete -- but leaves such major cities as Baltimore and downtown Boston without FiOS.

Here's more:

Verizon doesn't appear to have ruled out further FiOS expansion, but doesn't have any plans, either. The economics apparently are not attractive enough: TV service carries fairly low margins compared to Verizon's phone business, according to analyst Craig Moffett at Sanford Bernstein.

And some more:

The recruitment of new FiOS TV subscribers slowed last year. In the fourth quarter, it added 153,000 subscribers, little more than half of the number it added in the same period the year before.

At the end of last year, Verizon had 2.86 million FiOS TV subscribers and 3.43 million FiOS Internet subscribers (most households take both).

Wiring a neighborhood for FiOS costs Verizon about $750 per home. Actually connecting a home to the network costs another $600.

The total cost from 2004 to 2010 was budgeted at $23 billion by Verizon.

In 2004 FiOS seemed like a smart technical decision for Verizon. At the time AT&T was trialing a Fiber To The Node (FTTN) product (now called U-verse) and were having technical difficulties getting it to work. Over the past few years though FTTN bugs have been worked out and both AT&T and Qwest have launched successful implementations.

Back in late 2008 I posted the following question in a blog post Will Verizon Offer A Fiber To The Node Product In 2009?. I stuck my neck out then and said Verizon would in 2009. I was wrong then but I'm thinking I may have missed it by a year. So....... I'm now predicting Verizon will be offering a FTTN product sometime in 2010.

The only other competitive option the company has right now to get into areas not already served by FiOS is 4G LTE (Long Term Evolution) wireless service based. This could bypass land-line delivery completely....... but....... can LTE handle the load?

Will Verizon Offer A Fiber To The Node Product In 2009?

Yesterday, AT&T president and chief executive of telecom operations John Stankey announced the company was on track to add its one millionth U-Verse TV subscriber sometime next week. Stankey also announced plans to make the service available to 17 million homes by the end of 2009. AT&T's U-verse Fiber To The Node (FTTN) implementation involves running fiber out to a neighborhood node and then completing the connection over a copper connection to provide voice, video and data services.

AT&T has spent considerably to develop FTTN technology and along the way has had a few false starts. Launched in 2006, Project Lightspeed (as U-verse was first called) was a $4.6 billion investment aimed to reach 19 million homes in 13 US states by 2008 using a combination of fiber optic and copper network technologies.

FTTN relies heavily on set-top box techology - you can't get the same amount of bandwidth out of a piece of copper that you can out of a piece of fiber. Bandwidth limitations are made up for using caching. Early boxes had low end 386-based processors and limited memory and storage capacity. Trials in Europe were not favorable and the company had to go back to the drawing board a few times. Costs rose - in May 2007 AT&T announced the capital expenditure of Project Lightspeed would increase from $4.6B to $6.5B and the number of homes passed would decrease to 18 million; down a million homes.

Fast forward to today - the company hung in there with the technology it looks like the bugs have been worked and they've got it scaling!

Around the same time in 2006 and in technical competition (not market since the telcom footprints do not overlap) Verizon decided to go with a Fiber To The Home (FTTH) implementation - what we know as FiOS. FiOS runs an optical fiber directly to a subscribers home to deliver voice, video and data services and I've seen total Verizon investment estimates for the product anywhere between $18 and $23 billion. Initial Verizon plans were to pass 3 million homes per year starting in 2006 until they reached approximately 60 percent of their 2006 customer footprint. Estimates have changed slightly with the Verizon sell-off of Maine, New Hampshire and Vermont to Fairpoint Communications but you get the idea.

Why only 60% of the Verizon customer footprint? It's too expensive to run fiber to every home. I'm a perfect example - I live in a rural small town in Western Massachusetts. My house is on a private 1.5 mile road with copper from Verizon buried down the road along with another 300 plus feet buried under my driveway. There are only 7 homes on my road, all with at least 150 feet of buried copper between the road and the house. I'm guessing but I would say my neighborhood is pretty low on the FiOS list. As an alternative, Verizon is offering me ADSL but..... I'd like a little more data bandwidth and what about video services - you can't do that over ADSL.

My only real option - cable service from Comcast (which I love and probably not give up even if I had a choice). Verizon does not have a voice/video/data product they can even try to sell me unless I go with a Verizon/DirecTV option and put a satellite dish on my house. I don't really want to do that.

Back in June of this year I wrote an entry titled Will Verizon Put More Gas In The Fiber Engine? In that piece I questioned whether Verizon was considering FTTN technology to reach out into the more difficult areas and better compete with the cable companies and their aggressive DOCSIS 3.0 rollout plans. With this recent announcement by AT&T showing FTTN technology works and scales I don't see how Verizon can ignore an FTTN option in neighborhoods like mine.

I'm gonna stick my neck out on this one with my first prediction for 2009 - Verizon will announce an FTTN product sometime next year.

Will Verizon Put More Gas In The Fiber Engine?

Reuters posted an interesting article yesterday titled Verizon mulls alternatives to all-fiber FiOS. The article describes how Verizon will continue to roll FiOS out through 2010 passing 18 million customers at a cost of over $20 billion. The article also hints at some plans for beyond 2010.

In an interview yesterday at the NXTcomm telecommunications industry conference in Las Vegas, Verizon Chief Technology Officer Mark Wegleitner told Reuters the company is looking at continued expansion after 2010. Here’s a few quotes from the article:

Wegleitner said "What we'd look for is another approach to Fiber to the Premise (FTTP)."

He sees room to expand FiOS after 2010 to another 18 million users, but shifting away from FTTP could help expand high-speed Internet and video into sparsely populated areas where it is too expensive to build out an all-fiber network.

"I'm not sure what the trigger point would be. There still could be more gas in the engine for FTTP," he said.

I’ve always found the 18 million customer number disturbing because it only covers about 60% of Verizon’s original footprint. With Verizon's sell-off of Maine, New Hampshire and Vermont to Fairpoint Communications the 60% figure goes up a little bit but not by much.

It looks like the company may be considering Fiber to the Node (FTTN) technology to reach out into the more difficult areas. FiOS is selling extremely well so it makes sense to expand beyond the original plan. I also suspect Verizon is feeling some pressure from the cable companies and their aggressive DOCSIS 3.0 rollout plans.

Fiber Deployment Status in the U.S.

The FTTH Council has released an interesting report detailing broadband and fiber to the home deployment in the U.S. Here's some key information points from the report:

Current Status of U.S. Internet Use:

22% No Internet
17% Dial-up Only
61% Broadband (based on the 200 Kbps FCC broadband definition)

Fiber to the Home is being used for services such as television, Internet, telephone, security, and meter reading. Here's March 2008 U.S. data from the report:

11,763,000 FTTH Homes Passed
10,082,065 FTTH Homes Marketed
2,912,500 Homes Connected

Even though coverage is expanding, it is not evenly distributed:

In the U.S. in areas covered by Verizon or Tier 3 ILECS (representing about 1/3 of homes) 5.8% of homes are directly connected with fiber.
In the U.S. in areas covered by AT&T, Qwest or Tier 2 ILECS (representing about 2/3 of homes) 0.6% of homes are directly connected with fiber.
In North America Outside of the U.S., only 0.1% of homes are connected with fiber.

Regarding television (March 2008 data):

8,061,620 homes have been offered television over fiber 1,641,000 homes are currently subscribed to television over fiber

Higher speed data service have yet to be offered widely by providers (March 2008 data):

Only 17,021 homes offered 100Mbps Internet

The FTTH Council has been a strong advocate for 100 Mbps services, urging legislators and regulators to adopt a “100 Megabit Nation” policy and reduce barriers to next-generation broadband deployment.

The overall customer take rates are increasing in areas where FTTH services are being offered and providers are offering a variety of delivery technologies.

The biggest concern of some, including myself, is uneven distribution and the potential creation of a "broadband divide" with broadband "haves" and "have nots" in the U.S.

There is an excellent 32 page presentation from the FTTH Council titled North American FTTH/FTTP Deployment Status in PDF format linked here.

Verizon FiOS Progress Update

Following my post a couple days ago on AT&T's Project Lightspeed progress update, let's take a look at what Verizon is doing with FiOS. FiOS is Verizon's Fiber to the Home (FTTH), also know as Fiber to the Premise (FTTP) product offerring. The service provides high-bandwdtih data, voice and video services. The company has posted some interesting data on their policy blog for the third quarter of 2007. Here's a summary:

Fiber Implementation: http://www.verizon.com/fiberoptics

FiOS is currently available in parts of 16 states: California, Connecticut, Delaware, Florida, Indiana, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Texas, Virginia and Washington.

At the end of September 2007, Verizon had passed about 8.5 million homes and businesses – installing more than 457 million feet of fiber in parts of 16 states.

Verizon expects to continue passing some 3 million premises annually through 2010,

when the company expects to have passed about 18 million homes, or over half the homes

it serves.

Verizon will begin boosting speeds and capabilities on its all-fiber network when it begins

deploying advanced G-PON electronics in 2007. This technology can increase

downstream broadband speeds by up to four times, and upstream speeds by eight times.

Verizon is investing nearly $23 billion in the FiOS project, between 2004 and 2010.

Broadband Products: http://www22.verizon.com/Content/ConsumerFiOS/

At the end of September 2007, Verizon was marketing its industry-leading, high-speed FiOS Internet service – with downstream speeds of up to 50 Mbps and upstream speeds of up to 20 Mbps – in over 2,000 communities in all 16 states where the company is building its fiber-to-the-premises (FTTP) network.

As of September 30, 2007, Verizon has more than 1.3 million FiOS Internet customers, an

increase of 202,000 during the third quarter of 2007 – or about 3,600 new FiOS Internet

customers every business day.

Verizon expects to attract up to 7 million FiOS Internet customers by year-end 2010 – a

penetration rate of 35 percent to 40 percent.

Video: http://www.verizonfios.com/tv

At the end of September 2007, Verizon’s all-digital FiOS TV service was available to over

4.7 million premises in 12 of the states where the company is building FTTP: California,

Delaware, Florida, Indiana, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Texas and Virginia.

As of September 30, 2007, Verizon has over 717,000 FiOS TV customers. During just the

third quarter of 2007, Verizon added a net of 202,000 new FiOS TV customers -- or about

3,200 new customers every business day.

Verizon's FiOS TV delivers hundreds of digital video and music channels, high-definition

programming, video-on-demand content, a robust interactive media guide and other

customer-friendly features.

Verizon expects to attract from 3 million to 4 million FiOS TV customers by 2010, which

would be a market penetration of 20 percent to 25 percent.

As of September 2007, Verizon had 862 local video franchises covering about 11.2 million households.

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