Bizology: Verizon, and the age of bandwidth dominance

In a post a few months ago I wrote about how I switched off my regular phone service and switched to Comcast cable. Unfortunately, due to substandard quality of their voice service and the relatively low Internet speed did not make it as good a deal as I imagined (to be fair, several friends that have Comcast voice are happy with their service). Luckily, Verizon recently made their fiber-optic FiOS service available in my area. Of course I decided to make the switch back to Verizon.

FiOS is no small installation. It took the technician an entire day run fiber to my house, install a box on the outside and the inside of my house, and tap off the existing coax cable (very clever) and twisted pair wiring inside the house to make the TV, Internet, and phone live. Their install process is substantially more structured and formal then Comcast's. I also felt that the installer was much more qualified to do the job of hooking up all three service and even spent time to explain how everything works. The bandwidth is now at 20 megs, I have a lot more TV channels, and the voice service is as clear as the service I used to have with copper wires.

The FiOS service is Verizon's security blanket. Without investing $23 billion in infrastructure it's hard to believe that they would be able to survive as a company. The Telecommunications Act of 1996 required equal access to competition to the "last mile" of communications service. This last mile is typically owned by a local telephone carriers - the regional Bell operating companies (RBOCs). Now that the last mile is being converted into fiber, and offering much more then just Internet access, the 11 year old telecom act may not be so relevant anymore.

One category of service providers that compete with Verizon on offering bandwidth - the DSL providers that helped bring high speed Internet access to businesses and residences - are in trouble. Verizon has no obligation to let competitors ride on their fiber network. Once a services like FiOS is installed it's not possible to have a DSL line, because there are no more copper lines from the telephone poll. A consumer would need to order a new, regular copper phone line (called a POTS line for Plain Old Telephone Service) and then contract a competitor like Covad or SpeakEasy to deliver DSL. However, this would make the entire process cost prohibitive and provide less bandwidth to the consumer (DSL bandwidth varies but typically is not as nearly as high as the 20 megabyte standard service offered by FiOS).

The cable companies also have a problem. Verizon, and the other RBOCs, have more resources and are more recognized for voice services. And they are offering the same services as Verizon that cost more and deliver less value. So the cable companies better start thinking of a new business model or strategy because it is possible that those coax cables hanging on telephone poles (see the irony here?) might go dark one day.

Of course running fiber is no small task and it will take years for Verizon to offer this product to the masses. But they are getting faster, so the competition should start thinking about where they will be in the new world order of communications.