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Does Verizon Cable Deal Spell Death of FiOS Expansion?
The New York Times Certainly Seems to Think So
by Karl Bode 02:39PM Thursday Dec 29 2011
For more than a year we've noted that with the exception of markets that have signed franchise obligations (New York, Washington DC, Philadelphia), Verizon's fiber to the home FiOS build is essentially over. The company had previously stated that they wanted to ramp up user penetration in deployed markets to somewhere around 40% before continuing the build -- if they continue the build at all. Verizon's been selling off older DSL networks, and with roughly 50% of their subscribers still on DSL, there's absolutely no indication that's going to change anytime soon for those users.

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An editorial being run over in the New York Times argues that if FiOS expansion plans weren't dead already, Verizon's new deal with the cable industry to offer LTE services will certainly make sure of it. The Times logic is that in exchange for $3.6 billion in spectrum and easy wireless sales access to cable customers, Verizon potentially agreed to halt any future FiOS expansion (and thus competitive threat):
Verizon’s cable deals squashed hopes that cable carriers’ purchases of wireless spectrum would lead to more competition against the dominant players, AT&T and Verizon Wireless. And it puts in doubt whether FiOS will ever be a serious competitor to cable, reducing the likelihood that video transmitted over broadband could break up cable’s regional oligopolies.
I'll assume that neither cable operators or Verizon are going to let us see the deal fine print to confirm the Times guess, but the logic fits Verizon's strategy. Verizon already cherry picked the most valuable FTTH upgrade markets, and has shown total disinterest in further upgrades. This deal allows them to save money on FTTH upgrade costs, instead soaking up remaining customers with LTE -- which we noted was the plan some time ago. This deal is very bad news to the rural telcos without the cash for large-scale upgrades (CenturyLink, Frontier, Fairpoint, two of which Verizon sold aging DSL networks to), and for satellite broadband providers.

Cable operators in turn get to offer a compelling quadruple play, without having to worry about the one thing that has driven what passes for competition in their makets the last decade: FiOS. Such a wink-and-handshake noncompete clause is something consumer advocacy groups like Free Press have urged regulators to investigate. Given the FCC's total disinterest in seriously promoting real landline broadband competition -- the folks over at Free Press probably shouldn't hold their breath.

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Etobicoke, ON

3 recommendations

reply to fifty nine

Re: Not VZ, but someone else?

said by fifty nine:

The average home user doesn't need more than 1Mbps upload, if that much.

power users can get by with 10 or 15Mbps.

and 640k is enough for everyone. Get real corporate shill.



2 recommendations

Fiber is the future. And short-sighted money grabs are what the legacy telcos and cablecos have sought out.

While DOCSIS 3.0 is very capable, I think the market will be there for FTTH and if Verizon/AT&T/Comcast aren't interested in bringing it, they run the risk of being displaced out of the market by someone else.

Companies have done this for years. Think short-term, lose long-term. This is why always being pressured by Wall Street has sunk a lot of companies. They want to milk existing industries for all they're worth, but never invest in what's new. Imagine if Sears got into discounting, Kodak into digital photography, Blockbuster came up with streaming first. Companies that have been deemed irrelevant by a changing world could have embedded themselves for future generations.

The only difference is that telcos and cablecos have the advantage of government largely colluding to protect them. That's why some of these things are so alarming in this industry.