After winding down Fios buildouts several years ago, Verizon yesterday announced plans to deploy its fiber-to-the-home technology in Boston, raising questions about possible future Fios deployment plans. Verizon said it would invest more than $300 million in Boston over the next six years and that it would partner with the city on a smart city trial. That trial will focus on traffic safety and congestion, the announcement said.
Verizon also presented the city of Boston with a $100,000 “Digital Equity” contribution that will be used to support a mobile hotspot lending program at the Boston Public Library. The program is designed to enable families to use the technology on an as-needed basis.
Of all the major carriers, Verizon has appeared the least interested in residential landline investment in recent years. In addition to curtailing Fios deployments and selling off its landline residential business in numerous states, Verizon was the only major carrier that declined to accept Connect America Funding to bring broadband to high-cost rural areas of its local service territory. Some industry observers have gone so far as to say that Verizon has essentially abandoned non-Fios markets on the residential landline side of its business. And Verizon may have been moved to make Fios plans in Boston, in part, as a means of improving its public image on that front.
The question now is whether Verizon may have other Fios deployment plans.
Driving Fios Deployment Plans
De-emphasizing Fios enabled Verizon to spend money on higher-growth mobile services. But now that the company has completed its LTE buildout, perhaps it will reconsider the Fios freeze – particularly considering other pressures the company faces.
In addition to the aforementioned political and image pressures, the company also faces increasingly strong competition from cable companies like Boston’s incumbent Comcast, which has announced plans to roll out DOCSIS 3.1. That technology is a relatively easy upgrade for most cable companies, enabling them to support ultra-high-speed broadband services at speeds of a gigabit per second or higher.
Unlike some other carriers, Verizon has not yet begun offering residential gigabit service — and unlike similar announcements from other big carriers, the Boston announcement doesn’t mention gigabit. Nevertheless Fios infrastructure could support gigabit service with a relatively simple upgrade. In non-Fios markets, however, Verizon risks losing substantial business to the cable companies unless it reconsiders its Fios freeze.
Fios Economics Revisited
When Verizon wound down its Fios deployments, some industry observers viewed the decision as a smart one, arguing that there were many markets where Fios economics didn’t work. But even if that was true then, it’s undoubtedly less true now.
Today, mayors and city administrators nationwide have realized that permitting processes and other deployment requirements can have a big impact on service providers’ willingness to deploy FTTH. And Boston Mayor Martin J. Walsh is no exception, as yesterday’s press release about the Boston Verizon deployment illustrates. The release references an “expedited permitting process” and notes that the agreement will enable Verizon to attach equipment to city street lights and utility poles to support its wireless business.
At least one financial analyst has noted, though, that the biggest step a city can take to motivate a service provider to deploy broadband is to not require a citywide deployment. The city of Boston doesn’t appear to have gone that far, as the release talks about the deployment spurring economic opportunity in “all neighborhoods.” The city did offer some flexibility, however.
The release states that Verizon will determine which neighborhoods will get service first by using a “free online registration process” that will “assess demand” and help the service provider “prioritize its fiber-optic network construction schedule.” Verizon has established Fios Fiber zones to help determine where and when Fios will be deployed, depending on interest at the zone level – a similar process to the Google Fiber Fiberhood approach.
How many more markets could replicate conditions in Boston closely enough to give Verizon an equivalent Fios investment case? There could be quite a few.
As Telecompetitor has previously noted, Verizon initially passed over some sizeable markets – including the likes of Baltimore and Alexandria, Virginia – when it curtailed Fios deployments. Perhaps some of those markets could be next for Fios deployment plans.