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Verizon CEO: Fios Deployment 'Almost Religious'
Threatens limited deployment without franchise changes

The Washington Post explores how investors are still scared of Verizon's Fios deployment, despite the fact it stands to place Verizon at the top of its game for the next decade. "This is almost religious," says Verizon CEO Ivan Seidenberg about Fios deployment. "Religious with proper financial accounting."

The company insists the cost of deployment is dropping, and argue the new fiber network will be cheaper to operate than its aging copper counterpart. The company takes the time to issue a political threat: if government doesn't eliminate local state-franchises, they say they may just deliver Fios to the larger ones.
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NewMariner
join:2005-06-24

NewMariner

Member

Its all up to the Stockholders

Unfortunately, its all up to the stockholders in the end. If they start seeing stocks drop to low they will sell and pull out, thus causing a min-panic. Then Ivan will be replaced with a more conservative CEO...and fiber will cease or deploy at a much slower rate...

en102
Canadian, eh?
join:2001-01-26
Valencia, CA

en102

Member

Re: Its all up to the Stockholders

While I don't disagree with fiber deployments, I do think that Verizon's deployment strategy is good, albeit, expensive, and can make investors nervous.
SBC/AT&T deployment is a bit more conservative, and can somewhat fund itself, but has to follow through to complete fiber to the curb (or alternative) after fiber to the node is completed with VDSL/ADSL2+, etc. is completed.
grandpinaple8
join:2006-01-03
New York, NY

grandpinaple8

Member

Re: Its all up to the Stockholders

Except when SBC builds out their network it will be worthless because they will be attempting to squeeze through 100 times more content through a pipe that is only 10 times as big. Then they will have to upgrade to all fiber making their prior investements at least partially worthless, also they lose time while the cable co's get to suck up more of their customers. In 5 years all the telco's will be crying except for Verizon who will be rolling in the cash securely for another 1000 years with no wories of ever having to upgrade their network again except for whatever the PON of the time happens to be.
KONG4
join:2002-04-05
Tampa, FL

KONG4

Member

Re: Its all up to the Stockholders

The real problem at this point in the game is not the cost of rolling out fiber but the short sited vision of America's investors in general.
Americans have developed a drive through investment mentality. Thinking that all investments should create a return about the same speed as ordering a #3 combo meal at McDonald's does.
The press high lights and replays a company that made mad, huge, massive, over sized, big profit over night.
The American investor thinks that they should double their money on investment every six months to a year.
The .com era of investing and day trading has eroded true long term game plans and road maps to keep bitchy stock holders at bay for short sited gains.
A millionaire is created over time not a MillionInaYear.

Maxeh
Woot?
Premium Member
join:2002-12-23
Chicago, IL

1 edit

Maxeh

Premium Member

why?!

Why is this story here every few days? Damn news outlets are regurgitating the same old bs.

anyways, the investors need to stop thinking quick cash and actually look at the long term :|

cdru
Go Colts
MVM
join:2003-05-14
Fort Wayne, IN

cdru

MVM

Re: why?!

said by Maxeh:

anyways, the investors need to stop thinking quick cash and actually look at the long term :|
Depends on which investors you are talking to. You are never going to convince the day trader to look long term. It's the large institutional investors, mutual funds, etc that you want to look long term. Warren Buffet didn't become who he is by holding onto stocks for the short term.

PixelSlave
@pricediva.biz

PixelSlave

Anon

Re: why?!

>> It's the large institutional investors, mutual funds

Unfortunately, the general public bears some responsibility. If your mutual fund is 10% made up of Verizon's stock, but you don't know about it (let's admit it, most people don't know what's in their mutual fund's portfolio.) Later in the year, you see the fund's price tank, you cash out. If enough fund owners feel the same way, and the fund manager determines that the cause has to do with Verizon, what would he do? Dump Verizon's stock!

smajchrz
join:2003-10-11
Chantilly, VA

smajchrz

Member

Re: why?!

But that is exactly the reason funds are made up of numerous holds so that you are more protected against bad performing individual stocks. One holding does not necessarily bring the whole fund down.

cdigioia
Premium Member
join:2005-06-08
korea, repub

cdigioia to cdru

Premium Member

to cdru
said by cdru:

said by Maxeh:

anyways, the investors need to stop thinking quick cash and actually look at the long term :|
Depends on which investors you are talking to. You are never going to convince the day trader to look long term. It's the large institutional investors, mutual funds, etc that you want to look long term. Warren Buffet didn't become who he is by holding onto stocks for the short term.
Agreed, unfortuantely, Warren Buffet doesn't buy technology-ish stocks! Plus he seems to think, and off-hand it seems reasonable, that technology stocks rarely pay good returns in the long-run. The payoff is always to society, but not the investor w/ technology companies.

FFH5
Premium Member
join:2002-03-03
Tavistock NJ

1 recommendation

FFH5

Premium Member

Seidenberg fighting shortsighted on Wall St

Seidenberg has been fighting this battle for a while now. The Wall St analysts can't see past the next quarter and they actually get annoyed when a CEO doesn't bow down and kiss their feet and give in to their collective wisdom. Here's hoping that the Verizon Board of Directors is smart enough to let him implement his Fios plans. It will actually make Verizon strong for years to come.

calvoiper
join:2003-03-31
Belvedere Tiburon, CA

calvoiper

Member

Wall Street's focus may not be that shortsighted

Actually, the analysts are looking at numbers and pointing out some significant trends:

1. DSL, travelling over twisted pair copper, doesn't have the same natural or inherent bandwidth as cable broadband travelling over copper. With broadband speeds increasing, implementing that increase is more expensive over twisted pair than it is over coax.

2. The Bells have a different approach to equipment acquisition and deployment, based on their decades of bureaucratic ossification. They seem to want to wait until they are "sure" about equipment, and then try to deploy it everywhere. Cable companies, long accustomed to dealing with different standards, types of equipment, and even qualities of service as a result of mergers, are more likely to quickly deploy equipment in limited markets to "test in the field" and then expand the deployment of what works best. (Bell mergers tend to work on a more "victor/vanquished" approach--if there are multiple technologies or standards, a winner or loser is quickly chosen and many resources are spent eliminating traces of the loser.) The cable approach is both quicker and cheaper, to say nothing about the inherent risk of making a major mistake when you "place all your eggs in one basket" the way the Baby Bells do--with FIOS now, for example, or with ISDN at earlier times in the digital age.

Looking at the above situation, I'm not surprised that both MegaBabyBell CEOs are adopting extreme tactics--Ivan is threatening the "hold his breath" until he gets what he wants, and both he and Big Ed are trying to extort content providers to pay the freight.

(As a side note, even if the "extortion" or "kickback" approaches of charging content providers works, it won't work for the Baby Bells alone--the cable companies will quickly follow suit, and then the Ed & Ivan show will have to come up with some new scheme to distract the analysts.)

It just doesn't look that good for the Baby Bells, and the vast potential of wireless ISPs further clouds their future.

calvoiper
jdracer47
join:2005-10-16
Auburn, PA

jdracer47

Member

I agree

I agree with the elimination of franchise agreements. This is due to my own personal situation where our locals were duped into signing a 30 year agreement with a pathetic mom and pop cable company. To top it off, Verizon hasn't been able to secure a single franchise agreement in the entire state of PA.

Cable franchise agreements are supposed to be non-exclusive according to the FCC, but this isn't the case at all. I offered Comcast to pay for cable to be run to my home but they would absolutely not violate the area of my current mom and pop provider. What good is "non-exclusive" if the companies are going to have handshake agreements to control consumer choice anyway?

I would rather pay higher taxes than be forced to use a single provider that is protected by an agreement. Where is the consumer protection and choice in the current conditions?
GhostDoggy
join:2005-05-11
Duluth, GA

GhostDoggy

Member

Re: I agree

Same here. Localized franchise agreements are antiquated and typically setup my obsolete social and business practices that have no business in the Informational Age. State-level, all encompassing franchise agreements should supersede anything more local for the benefit of the consumer, not the minute term-serving, official making nice for a couple of years.
DonLibes

join:2003-01-19

DonLibes

Re: I agree

said by GhostDoggy:

Same here. Localized franchise agreements are antiquated and typically setup my obsolete social and business practices that have no business in the Informational Age. State-level, all encompassing franchise agreements should supersede anything more local for the benefit of the consumer, not the minute term-serving, official making nice for a couple of years.
Why stop there? Why not the federal level? I'm all for removing duplication of effort. But I look at my state (and many other states) and see incompetence. And the federal level is even worse. My local level however is extremely active. They're the only ones that give a damn.

I know it's the reverse in some areas but until you can convince me that every state (or fed) gives a damn, I cannot support turning these powers over.
jdracer47
join:2005-10-16
Auburn, PA

jdracer47

Member

Re: I agree

The problem with the local level is that many municipalities don't want, or can't afford a quality telecom/cable lawyer to review contracts so insure the consumers aren't going to get screwed. That was the problem where I live, the lawyer that was on the board wasn't bright enough to realize that:
1. The contract was able to be renewed AUTOMATICALLY by the cable company for an additional 15 years after the initial 15 years expired
2. The contract is written so loosely that the cable company can weasel out of any complaint that is against it.

So, this all ended up with the company not upgrading its' systems for the past 16 years, no HD channels, no PPV, about 60 channels with the digital package, and the worst broadband in the entire country (they think 2 T-1s can supply 2000-3000 subscribers). My DL speed last night was a blazing fast 43K!!! This exceptional service rivals the same price as Comcast in the area.
DonLibes

join:2003-01-19

DonLibes

Re: I agree

said by jdracer47:

The problem with the local level is that many municipalities don't want, or can't afford a quality telecom/cable lawyer to review contracts so insure the consumers aren't going to get screwed.
We don't have telecom lawyers either however we get advice from the same legal company that 300 or so other locals work with. Our LFA also gets assistance from »www.natoa.org as well as a few interested citizens. It's not quite the same thing as having your own legal team but it seems to work.
jdracer47
join:2005-10-16
Auburn, PA

jdracer47

Member

Re: I agree

That is fine though, the locals are actually trying to understand what they are getting into and are researching it. Our locals didn't take as much interest unfortunately. You make great points and your local officials are on the ball, it is too bad it is not the same in all local government.

justin
..needs sleep
Mod
join:1999-05-28
2031
Billion BiPAC 7800N
Apple AirPort Extreme (2011)

1 recommendation

justin

Mod

FIOS haves and have-nots

religious or rich pickings? I ran a small and very unsophisticated analysis of the socio-economic factors of US zips that offer FiOS, and about 95% of the deployed zips sported significantly or drastically higher than national average income, and/or median home prices. Some of the FioS zips were the most desirable in the country, most were just typically affluent mac-mansion suburbs around cities.

For whatever reason the deployment almost always rings cities in the expensive suburbs (see »/gmaps/fios ), without actually entering them. In other words, you can get FiOS if you live in the green-belt commuting districts around new york, washington, and so on, but it hasn't made it to inner city or very built up areas and with no shortage of more top quality suburban zips to invade, it seems FiOS is in no hurry to break ground into zips where a garden is a rare luxury.

I think anyone stuck with regular DSL or overloaded cable would love to have the choice of FIOS, but if you're renting, or your neighbors do not own 2 SUVs and a pool, my bet is it is years away.

Straphanger
Express is Back
Mod
join:2001-12-08
Whitestone, NY

Straphanger

Mod

Re: FIOS haves and have-nots

I wonder what will happen when they start to deploy in big cities like New York. Will they deploy in the affluent neighborhoods of Manhattan and the fringe areas of Queens first while leaving inner-city deployment to the next decade once urban sprawl and renewal will bring higher-income families to once low-income areas?

Even with the threat of FIOS, cable and DSL will probably stay roughly the same in most areas because Verizon fiber can't be everywhere. Competition is a good thing for consumers but not when it's so limited.

justin
..needs sleep
Mod
join:1999-05-28
2031
Billion BiPAC 7800N
Apple AirPort Extreme (2011)

justin

Mod

Re: FIOS haves and have-nots

I can see them wiring the upper east and west side perhaps negotiating building by building, because they can probably easily pull fiber or use existing fiber without digging up the streets and the takup rate would be high.
Can't see them doing queens and brooklyn though

RayW
Premium Member
join:2001-09-01
Layton, UT

RayW to Straphanger

Premium Member

to Straphanger
said by Straphanger:

I wonder what will happen when they start to deploy in big cities like New York. Will they deploy in the affluent neighborhoods of Manhattan and the fringe areas of Queens first while leaving inner-city deployment to the next decade once urban sprawl and renewal will bring higher-income families to once low-income areas?

Yes, that is what they want to do. Saw that down in Salt Lake City where Qwest cherry picked an area to do video distribution. The poor areas will not get it, just the better off areas. Of course Comcast is/was upset because they have to provision all areas as they expand, not just the money making areas. (last news was late November)

NOCMan
MadMacHatter
Premium Member
join:2004-09-30
Colorado Springs, CO

NOCMan to justin

Premium Member

to justin
Why dont you take a look at Lewisville Tx. Population just under 90k. A large chunk of it is lower middle class or worse and they have FIOS.
Talis
join:2001-06-21
Houston, TX

Talis

Member

Re: FIOS haves and have-nots

I'm not sure this means much for the long-term though. Lewisville is in the area where Verizon conducted their first FIOS trials in Texas.

Evergreener
Sent By Grocery Clerks
join:2001-02-20
Evergreen, CO

Evergreener

Member

Re: FIOS haves and have-nots

A good location for publicity...

before they get rid of the requirement for local franchise agreements

and start red-lining

I wouldn't have such a problem with the red-lining, except for the fact that they are using and putting an additional burden on the local infrastructure without any compensation or recompense, i.e. no local standards and/or franchise fees.

MIABye
Premium Member
join:2001-10-28
united state

MIABye to justin

Premium Member

to justin
And the point of your post is what? To state the obvious? Is just makes business sense to deploy a new service where it is more likely to be purchased. By offering FIOS via "rich pickings" they have a better chance of receiving a good return on their investment, and that does not mean they are greedy, evil, or discriminating.

justin
..needs sleep
Mod
join:1999-05-28
2031

justin

Mod

Re: FIOS haves and have-nots

The point of the post was that if you live in areas that are not so easy to tear up for fiber, or not top echelon in income, don't wait for FIOS.

gwion
wild colonial boy

join:2000-12-28
Pittsburgh, PA

gwion to justin

to justin
Let's remember, the fact is that a lot of these areas don't have a huge demand, though... yes, there's a demand, and those who'll take issue with me, here, are the demand...

But face it, if you're here, you already have whatever you can get, in those areas, and you may very well be in a very small minority of your neighbors...

It depends on a lot of demographic factors, but I don't think it's a deliberate snub of a hungry mob... it's based on demographic data available to the telcos, not wealth based, but interest based. It's coincidental that the lower the socio-economic group you poll, the less interest you find in any sort of personal technology, with the possible exception of television. Hmm. Just struck me, in fact, that that's probably the killer app for those areas, from Verizon's point of view. Just a side thought.

At any rate, what I'm saying is that yes, we, here, understand the value of things like internet service and such, but in a lot of these areas, the people mostly "clamoring" for internet service are -- bluntly -- too young to legally sign a contract, or the stark anomoly within their age and area demographic.

Especially in rural or inner-urban areas with significantly older populations, you may even get a few outright belly-laughs if you ask whether they would use fiber for anything besides POTS... and getting fiber into areas where people want to use it for POTS, and couldn't care less for internet or CTV service, doesn't pay for the build in the areas that get built later on.

In other words, there's a degree of simple common sense in this. If you wanted to build a chain of very expensive monster truck exhibition centers, you don't build one in Fox Chapel, another in the Hamptons, and another in Wellesley, first, and expect to finance the ones in Nashville, the Ozarks and southern West Virginia on the immense profits you'll roll in from the first build. It's a matter of building the most profitable projects first, the less profitable ones later...

Trust me, they want everybody's money, not just wealthy peoples' ... but it's just a demographic truism that the wealthier suburbs tend to be the most educated, and the most technologically inclined. The poorer areas tend to be less educated, on the median, and less interested in technology.

The real defining demographic, I think, isn't means, it's perceived interest... if there really is a vast pool of potential first adopters in these areas, they have to speak up and ask for the service... not just one in ten of the population, either, because that won't justify the build...

In an odd moment of deja vu, I recall the earliest CTV builds... I recall that most of the providers, in their franchise agreements, included a clause that provided that they would build a neighborhood if they could get a promise from X persons per linear mile to subscribe... if not, no matter how loudly the two people in the neighborhood desperate for CTV screamed and begged, they would ignore them completely... sometimes, they lucked out, and the cable happened to pass them going somewhere else. More often, they waited, in some places well into the nineties, to be served, even though they lived in a community that had cable since 1976. In some areas, they may still be waiting, in fact. Oddly enough, most of those areas were precisely those "redlined" zipcodes, in inner-urban and rural neighborhoods, that aren't being "redlined" at all, they're just being perceived as areas where the company will put in two million dollars worth of infrastructure to serve a hundred people at fifty bucks a month. That's around thirty years to start seeing a profit (exagerating, perhaps, and grossly oversimplifying the math, a little, but the point's the same)...

In other words, it's not discrimination, it's demographics. The way to overcome that is by stimulating and showing the interest they're looking for. In simplest terms, they're going to fiberize those places where people will use the fiber for value added services and help pay for the rest of the build with their subscriptions, not those places where 65% of the people will use it for exceptionally clear POTS and won't adopt broadband or IPTV for another five years...

I don't think it's any coincidence that Verizon's gained more new subscribers than they've lost, for the first time in a while, past quarter, either. It's fiber, and it's because it's deployed where there's already a large broadband penetration. Fiber may be a naked carrier, but, to the average Joe, internet and competition for cable is the killer app that sells early adoption. In areas with poor broadband penetration, the odds somebody's been doing without high speed internet for the last six or seven years, "until fiber comes along" are pretty much non-existent.

... by the way. "Investors" are, by definition, in it for the long term. Only "traders" are in it for the short run. Most of us are a little of both. My advice on Verizon? Traders, stay away... but investors could find a hell of a lot worse investments than a company paying a 5% effective dividend, and putting earnings into capital infrastructure, instead of management and insider pockets. Just my own two cents, there.

guardlights
join:2003-03-07
Chester Springs, PA

guardlights

Member

Local Franchises

Wasn't one of the main points of the local franchise process that the cable companies encountered in the old days, that the cable service at that time was becoming a monopoly locally, and supposedly the local officials got in the act (with varying degrees of success) to represent the interests of the residents. Of course people still got screwed.

But in the case of Verizon video, generally its no longer a monopoly, and in the long run the market will be efficient and determine those issues.

The costs of the old cable franchises have long since been amortized,and any new ones should be subject to the same regulatory issues as Verizon video services.

I am all for letting the process happen as quickly as possible, and let the services thrash it out.

insomniac84
join:2002-01-03
Schererville, IN

insomniac84

Member

The franchise agreements aren't the problem

It's the lack of competition that is the problem. Your never going to see fiber in a small community with no competition. That's why municipal broadband is so important. The towns can wire themselves and take the risk of losing money in building the fiber network(the risk the telcos don't want to take). Then they sell internet services until they recoup enough money to make the project a success and then either keep the lines exclusive, open them up to competition, or sell the whole network to a telco. No matter which course is taken, the end result is that they now have a fiber to the home infrastructure covering the whole town.

telcotech
IBEW 2222 Boston, MA
Premium Member
join:2004-09-02
united state

telcotech

Premium Member

Re: The franchise agreements aren't the problem

said by insomniac84:

It's the lack of competition that is the problem. Your never going to see fiber in a small community with no competition....
That's not true. Verizon's FiOS is available in Burlington, MA, which like many of the towns surrounding it is also served by Comcast Cable *and* RCN Cable. As a matter of fact, Woburn, MA - which is an adjacent city, granted a license to Verizon for video services as well.

It's been said before - it's a costly proposition for Verizon, it only makes sense to start deploying where the likelihood of subscribers is greatest - just like CATV did. Eventually, it'll all be fiber, as the cost of maintaining an aging copper plant is prohibitive.
caco
Premium Member
join:2005-03-10
Whittier, AK

caco

Premium Member

Writing on the wall

Some big stockholder is not happy with Verizon. That is most likely the reason you keep on seeing stories about cost of Fios on Verizon's balance sheet. Verzion better hope then next couple of quarters, they don't hit any kind of financial speed bump or CEO will be out the door and so will large scale FIOS deployment. What Verizon is doing is great but current Wall street atmosphere is not in the mood for large capital expenditures. It starts with debt rating downgrade, then a couple of firms downgrade the stock. Next thing you know they are calling for Ceo's ouster. I hope this doesn't happend but don't be surprised if you start seeing more and more articles about cost of Fios deployment.
Necronomikro
join:2005-09-01

Necronomikro

Member

Re: Writing on the wall

Actually, I want the stocks to drop in prices. I know they will. Once they do, I'll buy up some shares, assuming the massive fios rollouts are still taking place... I know that fiber WILL pay out in the long run...
grandpinaple8
join:2006-01-03
New York, NY

grandpinaple8

Member

Re: Writing on the wall

Exactly, even I want a piece of that Verizon stock especially when it starts to pay for itself... Oh boy it has incredible potential.

jgkolt
Premium Member
join:2004-02-21
Avon, OH

jgkolt

Premium Member

cleveland

fios would be great if it was offered in the cleveland, ohio area. now i have to wait until sbc can get moving in my area

nekote
join:2000-12-16
Hopkinton, MA

nekote

Member

Gotta' have paying customers, sooner than later

Going after more affluent communities seems just to be ordinary financial common snese, IMHO.

Ya' gotta have a whole lot of paying customers to be able to afford places that don't have *comparatively* as many paying customers.

Makes *NO* financial sense, to me, at least, in essence, to spend the *first* billons wiring places where only likely to get, say, 1% subscribers / revenue, rather than spending those first billons on places where you're likely to get 20% or 50% or 100% subscribers.

Only so many workers to do so many installs.

Why would any business project start a full rollout where *comparatively* fewer people are initially likely to buy the product???

If you had just invented ice cream, would you start operations in hot southern cities in the summer time or in rural Alaska in the middle of winter?

How unhappy would the stockholders be if the rollout was done to gain as little revenue as possible first, instead of gaining the most revenue soonest, per dollar spent?

problemforceo
@nycmny.fios.verizon.

problemforceo

Anon

Goes way beyond franchises, baby...

They have YET to introduct a Television/Multi-Media product that trounces cable-tv offerings, SO FRIGGEN WHAT THEY CAN DO HI-DEF OVER FIBER OPTICS, that's common place now...
Also, they've yet to do their first price cut in lieu of competition in their most competitive market (NY).
So, for these and other reasons, squawking back and forth between early adopters,share-holders, and local municipalities is losing sight of the BIG PICTURE... making the product BETTER!!!!!
Its a snow job to say 15 megabits is good for 5 years, as it is NOT. It's also not a good idea to say we'll just match or be slightly higher than cable companies in terms of price, which by comparison is just, so-so...

If Verizon could leverage fiber 1/1000'th the way they do ceullar, this wouldn't be an issue, but then reality sets in and that hard work must finally begin. It's not as tricky as having 100% hybrid cars and trucks on the roads overnight, but the longer you wait to get started... (you can finish that sentence yourself)