In the escalating war between telecom and cable companies, Verizon Communications recently unveiled plans to offer video service via fiber-optic lines running directly into homes. According to Wharton experts and others, however, the company's ambitious agenda faces a number of obstacles, including equally ambitious agendas from competitors like Comcast, Cox Communications and Cablevision.
On Oct. 21, Verizon announced that it would expand its fiber-to-the-premises (FTTP) service to homes in Virginia and parts of Delaware, Maryland, Massachusetts, New York and Pennsylvania. The service is already offered in California, Florida and Texas. The goal for Verizon - one of the original Baby Bells with annual sales now topping $70 billion - is to reach one million homes and businesses with the new technology by the end of the year and two million by the end of 2005. SBC Communications - another former Baby Bell, which dominates the southwest and western part of the U.S. - is planning a similar rollout to offer video service in 2005. According to a report in the November 17 New York Times, SBC will pay $400 million to Microsoft for software that can be used to deliver TV programming over high-speed lines.
FTTP, based on the same fiber-optic technology used in telephone networks, offers speeds up to 20 times faster than current digital subscriber line and cable technology. Here's why: Current telecom broadband connections - known as digital subscriber lines (DSL) - are slowed by the traditional copper wiring used for telephone service. Although a connection may start on a fat fiber-optic pipe, it ultimately goes onto a slower copper wire before entering a household. It's like connecting a fire hose to a straw. Verizon's plan to run fiber-optic cable directly to homes would connect a broadband fire hose to a home, enabling video on demand. Its broadband Internet access services will offer download speeds of up to 5 Mbps (megabits per second), 15 Mbps and 30 Mbps for a bundle of services at a base cost of $34.
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