Summary
Verizon's FiOS project is one of the most ambitious examples of how telecoms operators around the world are moving into television services, in direct response to the march of cable operators into the voice market. The snag from the telecoms firms' point of view is that whereas it costs very little to provide voice services over an existing cable network, it is very expensive to upgrade telecoms networks to deliver television over broadband internet connections, a technology generally referred to as internet-protocol TV (IPTV). "FiOS has been an extraordinary hit with our first customers in other states," said Bone. "We are building the communications network of the future to provide customers unmatched network reliability, incredible speed and exciting new options for voice, data and video connections."
Analysis
As part of Verizon's plans, the company made the following announcements: Verizon will substantially increase FiOS video availability in New Jersey. The company plans to invest $1.5 billion in Verizon's fiber network that will bring cable choice and competition quickly to hundreds of municipalities in the state. As Verizon considers deployment of available investment resources throughout its service territory, areas with a clear path to television franchises will be a priority. Verizon will add jobs and bring savings and better services to consumers. Verizon currently has more than 1,000 technicians building the FTTP network around the state. As a result of New Jersey's streamlined franchise rules, the company expects the accelerated deployment will lead to hundreds of additional jobs in New Jersey. In addition, experts have estimated that competition in the cable TV market is expected to result in more than $200 million a year in consumer savings, as well as more choices and improved services. Verizon is building a major video hub office in Freehold. This high-tech video control center will be the primary facility to transmit all video services in most of the state. The multi-million-dollar center will collect the video feed off the company's national fiber-optic video ring and then blend in local channels (network affiliates, PEG channels, etc.) to complete the overall FiOS TV product within the region. "Today's announcement will make New Jersey one of the most 'fibered' states in the nation, and we fully expect these new franchise rules will open the door to even more competitors," said Dennis Bone, president, Verizon New Jersey. "We will strive to bring this network to as many communities and consumers as quickly as possible." He added: "New Jersey is on the brink of a communications revolution. By the end of this year, we are planning to start offering consumers the most exciting change to home entertainment this side of color television." As part of the governor's approval of the legislation, he issued an executive order directing the State Board of Public Utilities to issue rules concerning the deployment to multiple dwelling units, or MDUs. "Bringing our network to apartments and high-rise buildings is a clear part of our deployment plan," said Bone. "This is a tremendous market for Verizon. We've been serving customers in these types of dwellings for decades. "We look forward to working in partnership with the state of New Jersey in ensuring that Verizon is not locked out when we begin negotiating with building owners." Customer reaction to FiOS has been very positive, with broadband subscribers more than doubling in the company's inaugural FiOS market of Keller, Texas, just outside Dallas/Fort Worth.
With its FiOS project, Verizon is one of a handful of operators around the world to have taken the most expensive route of all, “fibre to the premises” (FTTP), ie, running fibre right up to customers' homes. The others are NTT and SoftBank in Japan, KT in South Korea, and operators in parts of Sweden, Italy, Denmark and a few other countries. The cost involved has weighed on Verizon's share price, and its credit rating has been downgraded. “The market is very sceptical of FiOS spending,” according to Blake Bath, an analyst at Lehmann Brothers, earlier this year. But the service seems to be proving popular: in Keller, Texas, the first suburb where the fibre network was rolled out, over 35% of homes have already subscribed to FiOS TV, and over 40% to the broadband service. This bodes well for Verizon's plan to achieve 35-40% market penetration for broadband and 20-25% for TV in the areas covered by its new network, which already includes parts of Texas, Virginia and Florida.
