The Lightwave Blog

Verizon’s new cableco spectrum deal does not doom FiOS

By Stephen Hardy

Verizon, Comcast, Time Warner Cable, and Bright House Networks announced a market-changing alliance last Friday. The cable companies agreed to sell 122 Advanced Wireless Services (AWS) spectrum licenses covering 259 million PoPs to Verizon for a whopping $3.6 billion – or slightly less than what AT&T will have to pay Deutsche Telekom as a breakup fee if it can’t convince the U.S. government to approve its planned purchase of T-Mobile. As significant as this deal could be to the wireless industry (assuming this deal passes muster with regulators), those in the optical communication community have wondered about another aspect of the deal. According to the press release issued Friday:


“The companies also announced that they have entered into several agreements, providing for the sale of various products and services. Through these agreements, the cable companies, on the one hand, and Verizon Wireless, on the other, will become agents to sell one another’s products and, over time, the cable companies will have the option of selling Verizon Wireless’ service on a wholesale basis. Additionally, the cable companies and Verizon Wireless have formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services.”


While the announcement doesn’t provide further details of these agreements, Neil Smit, president of Comcast Cable, blogged that four years from now Comcast will be wholesaling Verizon Wireless services, while Verizon Wireless will be selling its products in its stores. Smit says that Time Warner Cable and Bright House Networks have similar deals in place with Verizon Wireless.

A quote from Time Warner Cable President and COO Rob Marcus in the press release makes it clear that wireline services from its new cable MSO partners will be among the offerings Verizon Wireless will eventually sell.

So where does this leave Verizon’s FTTH-enabled FiOS?

Some have speculated that the deal is a sign that Verizon is surrendering the competitive fight in broadband services. I see this more as a confirmation that Verizon had no desire to expand beyond the FTTH footprint it created during its initial roll out, which only covers about 14% of U.S. households. Through its deals with Frontier and Fairpoint, Verizon shed service areas where it didn’t believe it could make money with FTTH. It’s also refrained from running fiber into certain urban markets where it believes installation costs are prohibitive. Verizon therefore was already limiting where it planned to play in broadband services going forward. It now does little harm for Verizon Wireless to sell services from cable operators in areas where Verizon will face a competitive disadvantage versus DOCSIS 3.0-enabled offerings that it had no plans to overcome – or where it’s not offering wireline broadband at all.

As for the 14% of U.S. subscribers Verizon can address with FiOS, I expect the company to continue to market its services just as fiercely as ever. Smit already has told reporters that he still expects to compete with Verizon Communications for these broadband subscribers.

Details of how Verizon Wireless will sell cable MSO offerings – and, just as important, at what prices compared to Verizon’s own offerings – remain unresolved. But it seems logical to me that Verizon didn’t sink billions of dollars into FTTH networks just to see them rot. And it now appears just as logical to conclude that we won’t see another massive FTTH roll out from Verizon any time soon.


 

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Stephen Hardy

Stephen has covered fiber optics for more than a dozen years, and communications and technology for more than 25 years. He is responsible for establishing and executing Lightwave's editorial strategy across its digital magazine, website, newsletters, research and other information products. He has won multiple awards for his writing.

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