Verizon halts FiOS build-out

Verizon Communications Inc. has halted its nationwide build-out of its $23 billion high-speed broadband, TV and phone network, known as FiOS, with most of Rhode Island’s largest communities connected to the service.
In Rhode Island, the FiOS network now covers 29 of the state’s 39 cities and towns, including Providence, Pawtucket, Cranston and Warwick. Of those 29 communities, 26 have been “wired” into the system, with work just starting on the build-out in Westerly, Richmond and Hopkinton, according to Phil Santoro, Verizon’s media-relations spokesperson.
Rhode Island fared better than some other states in getting the service. A number of major cities served by Verizon – including downtown Boston and Baltimore – have not had the service installed.
The economic impact of broadband build-out can be directly tied to growth in jobs, according to Donna C. Cupelo, Verizon’s New England president. “For every 1 percent increase in broadband penetration, employment can rise as much as 2 to 3 percent,” she said at a recent conference of IT industry leaders in Franklin, Mass.
Left out of the FiOS network in Rhode Island were 10 communities – Barrington, Bristol, Warren, Jamestown, Little Compton, Middletown, Newport, Portsmouth, Tiverton and New Shoreham. “We look at a number of factors in determining FiOS TV deployment, including market potential, competition, and, of course, costs of all kinds,” Santoro said, explaining Verizon’s decision not to build out its FiOS system in these communities.
Some 18 million households nationwide served by Verizon will be connected to FiOS by the end of 2010. Santoro declined further comment on the company’s decision to halt the nationwide build-out, first reported March 30 in the Wall Street Journal.
Nicholas Vantzelfde, managing partner at Communications Media Advisors, LLC, in Boston, sees Verizon’s decision as a shift in strategy. “I think Verizon’s general attitude is: Now it’s time to start delivering higher penetration and increased adoption of services, instead of increasing the build-out, and drive success where they are already deployed.” Telecommunications consultant Bruce Leichtman, president and principal analyst at Leichtman Research Group, Inc., in Durham, N.H., called it “a bottom-line decision. Verizon looked to build the FiOS network where there was the greatest return, and where it was important from a competition standpoint,” he said.
Verizon, because it was making a huge investment in upgrading its infrastructure, Leichtman continued, “was looking for where the best payback would take place – generally in the more affluent suburbs in the Northeast.”
From a business standpoint, Leichtman saw Verizon’s FiOS deployment decisions as a defensive move, “more of a protection of their existing business clients.” From a consumer perspective, it was a more offensive strategy, he said, allowing Verizon to gain a greater share of the TV market. “Verizon now has 25 percent penetration of the TV market where FiOS is available,” he said.
Linda Maaia, president and CEO of Full Channel in Warren, which proudly advertises itself as the “only local, family-owned broadband company in Rhode Island,” said Verizon “has done a really great job of branding FiOS,” although she doesn’t think the consumer fully understands exactly what it means.
Today, Maaia said, cable companies have a fiber-rich delivery system that allows for the delivery of high-quality video. The bottom line, she said, “is that our pictures are equally as fabulous.” Further, DOCSIS 2.0 and 3.0 [Data Over Cable Service Interface Specification] technologies allow the cable industry to be competitive with providing the same kinds of Internet speed that FiOS can, she continued.
Cox Communications Inc., which expanded into Rhode Island’s East Bay in 2002, is currently available to more than 98 percent of the Ocean State. Cox has invested heavily to boost its network’s spectrum capacity to 1 Gigahertz (GHz). FiOS provides 850 Megahertz (MHz).
The difference in spectrum capacity, according to Leichtman, involves “the ability to deliver more TV channels to customers.” Leichtman said he saw no significant differences between the products offered by Verizon and Cox. Amy Quinn, Cox’s director of public relations, disagreed with that analysis. “Our robust broadband network is capable of delivering the services our business and consumer customers demand,” she said. Cox’s system is a hybrid of fiber optics and coaxial cable, she said. “It’s not about the number of channels offered, but the quality of the products and services provided. Our small- and medium-business customers want services that bring value to their business. For instance, restaurant and tavern owners choose Cox for our exclusive local sports programming, including University of Rhode Island and Providence College men’s basketball and the Pawtucket Red Sox.”
Vantzelfde said that Cox was one of the first cable companies to deploy voice. In turn, he saw Verizon’s FiOS as a way to be able to compete against cable operators.
Quinn said Verizon’s decision not to expand FiOS to all Rhode Island communities “is not surprising given the intense video competition in Rhode Island already. Fortunately, nearly every Rhode Island home and business has access to state-of-the-art video and broadband services from Cox Communications and other competitors.”
The R.I. Economic Development Corporation is currently creating a map of broadband availability across the state, under the direction of Stuart Freiman, the EDC’s business- development manager for IT and digital media. It is being funded with $1.5 million in federal stimulus money awarded in December 2009.
A new website, broadband.ri.gov, created by the EDC, is asking Rhode Islanders to visit the site and take a “speed test” to show how fast their Internet connections are as part of the mapping process.
No data on Rhode Island’s broadband infrastructure is currently available publicly, according to the EDC. Roughly 700,000 of Rhode Island’s nearly 1 million residents used the Internet either at home or elsewhere in 2009, up from 653,000 in 2007, according to the U.S. Census Bureau. The state ranked 25th in Internet use among the 50 states and Washington, D.C. &#8226