Verizon (NYSE: VZ) ended its self-imposed FiOS FTTH service deployment moratorium in April, announcing plans to build out FTTH to Boston. Under a six-year plan, Verizon will invest $300 million to replace the city's aging copper network infrastructure with fiber. Why the sudden about-face?
Donna Cupelo, Northeast regional president for Verizon, sees two key factors in the company's decision to bring FiOS to Boston: the city's diverse business landscape and gaining cooperation from local and state government leaders.
What also made Boston a viable choice for Verizon to roll out FiOS was the notion that fiber-based broadband connectivity can fuel new innovation coming out of local Boston-based universities and startup companies.
"For Verizon, Boston is a leader in growing the innovation economy," Cupelo said. "You can't turn right or left and not see the great collaboration that is growing between higher educational institutions, different corporations like ourselves that have innovation labs for R&D, and working with different startups."
Cupelo, who also serves as the chairman of Massachusetts Governor Charlie Baker's Workforce Development Board, said bringing FiOS to Boston could attract more entrepreneurs as well as helping local employers get the best candidates to work at their companies.
"This would give us an opportunity to build and design a unique platform based on fiber optics and really do some things that have never been done, which will touch not just residents and businesses, but will do some things that will have some impact on quality of life and attracting and retaining college graduates," Cupelo said. "Talent is a big priority in the tech industry, so when we look at the opportunity to bring talent and retain talent and build stronger neighborhoods and communities, we think this is a very exciting opportunity to do that with technology that we pride ourselves in being an expert in."
Initially, Verizon will target the neighborhoods of Dorchester, West Roxbury and Dudley Square with FiOS service. Later deployments will take place in Hyde Park, Mattapan, and other areas of Roxbury and Jamaica Plain.
And while the initial focus will be on providing consumer services, the new FiOS network will serve as a platform for business services, backhauling 4G LTE and later 5G wireless traffic, and supporting smart city-specific applications like smart traffic lights.
A key element in moving this plan forward was gaining cooperation with city leaders. Verizon has also adopted the same pre-ordering process that Google Fiber (NASDAQ: GOOG), TDS Telecom and C Spire have taken with their FTTH deployments.
Lowell McAdam, CEO of Verizon, told investors in May that Boston Mayor Marty Walsh's administration was "more willing to help us get rights of way, help us push fiber into the neighborhoods, and do more pre-subscription a la the Google model."
Simplified permitting will speed buildout
A key element in making the FTTH commitment to Boston a success will be in gaining access to necessary rights of way along existing utility poles and other infrastructure.
To get access to this infrastructure, Boston has pledged to help expedite the permitting process to encourage the new FTTH buildout.
Being an incumbent telco that's been providing traditional phone and DSL service to Boston for decades, Verizon under Title II of the Communications Act can build any network with any technology throughout Boston along the existing public right of way.
After building out FiOS in other parts of the country, Cupelo said having an upfront network plan and a strategy with each city where it plans to build service will make the process smoother.
"We have learned our lessons throughout the country as to how you can design and build a network very efficiently," Cupelo said. "You need to have access, you also need the ability to streamline the permitting processes, not just for industries like ours but for others was paramount, and you can see that since the mayor took office there's been improvements."
Verizon's Boston Fiber Zones
Taking a cue from Google Fiber's "Fiberhood" concept, Verizon has divided up its FiOS buildout plan for Boston into four zones. Verizon has invited residents in each of its zones to vote at a site to be the first to get service.
What made the Roxbury and Dorchester areas attractive were how the community leaders worked with residents and businesses to get a handle on what the future of these communities will look like.
"Roxbury is an area which has done some really good work in analyzing its needs and the Roxbury innovation center is an area we have funded to help spur innovation outside of the seaport innovation district," Cupelo said. "In Dorchester we had done some initial fiber investments and did not go throughout the entire community, but had started there."
Cupelo added that West Roxbury was also key "because it allows us to serve through our video capabilities we use in 113 communities throughout the state."
By reaching out to each neighborhood in the city, the service provider can look at how each area conducts business and wants a build done, which streamlines the process of Verizon's interface to the city and the city's interface to telecom providers.
"This notion of having of ideas of looking at things not singularly, but in areas which we are calling fiber zones, looking at complete areas at a time and not having planning departments guess what we are doing," Cupelo said. "It is a more of a community area, which facilitates their way of thinking about what else do they have going on in that area and when they are going to open up streets, for example."
Verizon is hardly alone in working with cities to streamline the permitting process to build fiber networks. Fellow telco AT&T (NYSE: T), for example, struck a deal with the North Carolina Next Generation Network (NCNGN), a regional initiative focused on stimulating the deployment of next generation networks to North Carolina, to get access to a streamlined permitting process.
Understanding network, city infrastructure
With the sale of its wireline facilities in California, Florida and Texas to Frontier in April, Verizon's wireline network is now relegated to the Northeast, a region where there are a lot of historical buildings and infrastructure.
Being an older historical city, Boston requires taking into account a number of issues. This includes gaining an understanding of where the telco's own equipment and infrastructure is, such as fiber, conduit and Central Offices (COs).
Besides its own infrastructure, there are a number of elements in Boston that make it challenging to build out a fiber network. This includes back-yard utility pole lines, historical district restrictions, and gaining access to multi-dwelling units (MDUs), which house a mix of businesses and apartments.
"Some of the things we'll look at closely is where do we have our existing equipment and what equipment needs to be updated," Cupelo said. "We work through the streamlined permitting process, and we have also started to take a look at the building complexity."
By devising a plan in advance, Verizon can give potential users a clear picture if a specific neighborhood is or isn't feasible to build out service. Among the potential limitations could be that a landlord of a particular apartment or condominium complex has an arrangement to carry a cable provider's service in that property, for example.
"Most of what our experience tells us in a city like Boston is the ability to work with landlords is going to be paramount because the landlords in some cases may have had exclusive arrangements with other providers, receive compensation for marketing that provider's services, and there may be contracts in place that prohibit us from going into certain places," Cupelo said. "Our intent would be to work with landlords, the public housing authorities and also any other developers that are at either the beginning of a development or are mid-way to say 'how might we provide services to your tenants.'"
4G LTE, smart city apps also benefit
While providing high-speed broadband and video services to residential customers via FTTH is a key priority, Verizon's FiOS build in Boston is based on a holistic approach that will address other needs, including its ongoing 4G LTE wireless rollout and smart city applications such as traffic light management.
Traditionally, if Verizon was building out a fiber network to deliver Ethernet and cloud services for a specific business customer, the telco would build fiber dedicated to that business only. The telco would not address other adjacent opportunities that reside near that particular business.
"What makes this design and build very unique is that typically most providers, including Verizon, if we had a large commercial customer like GE we would be building the network that GE wanted," Cupelo said. "We would not be looking all around the landscape around GE and saying: 'oh, there's residential, there are also wireless capabilities that are needed, and there are some smart city functions that will be needed.'"
Based on its plan, Verizon will map out how the fiber network can support various applications in each part of the city that it builds out facilities.
"We're taking a holistic look view and every fiber zone throughout the city will be looked at very carefully for all possible applications, which is a very unique approach to design and building," Cupelo said. "It's a more expensive approach, but we believe it will be a more efficient approach in the long term."
The Boston fiber network will also address its current 4G LTE rollout, particularly to support the advent of small cells, which require more fiber connections.
Fran Shammo, CFO and EVP of Verizon, told investors during the recent MoffettNathanson Media and Communications Summit 2016 event that the Boston FiOS build was driven by a desire to fulfill its wireless LTE and business service desires.
"When we looked at running the fiber for wireless, we said, well that will enhance what we can do from an enterprise perspective and by the way, it's only $300 million more over the next six years to actually deploy fiber to the home from that same fiber," Shammo said.
Besides becoming a hub for backhauling wireless traffic, the Boston FiOS network will be a foundation to support various smart city applications such as smart traffic management.
Verizon will conduct a smart city trial with Boston called "Vision Zero," which includes a combination of traffic and public safety plans. Set to run from June through December, Vision Zero looks at the corridor along Massachusetts Avenue to address various issues including: traffic management, traffic signaling, congestion as well as public safety with a particular focus on pedestrian and bicycle traffic.
"With the introduction of bicycle lanes, Boston does not have the widest roadways so with the combination of all of those different modes of transportation and pedestrian traffic there really is a need to look at issues in a different way," Cupelo said. "I think the city has taken some great steps on its own already looking at the analytics associated with traffic and traffic congestion and other key indicators throughout the city."
Additionally, Mayor Walsh's administration uses big data to manage city services like trash collection and parking, for example.
Boston has established a partnership with BigBelly Solar, a provider of self-powered waste management and recycling solutions. The BigBelly system incorporates a CLEAN Management Console, which delivers actionable data from a city or enterprise site's customized configuration of BigBelly and SmartBelly stations.
"We have a very forward thinking administration that uses big data in a way to anticipate and to help manage city services," Cupelo said. "We thought as we looked to do a proof-of-concept trial here for smart cities, Boston would be a great partner because they have already done some great things like the BigBelly Solar trash management and they have introduced a new parking application."
Eying next-gen PON
Another key question is how will Verizon apply next-gen FTTH architectures in Boston? This includes the advent of NG-PON, a technology that can deliver up to 10 Gbps of capacity to support enhanced business services while serving as another means for business services and wireless backhaul.
Already, the service provider has been testing NG-PON technology and how it can fit into future FiOS deployments. In August 2015, Verizon tested NG-PON2 technology from a central office in Framingham, Massachusetts, to a FiOS customer's home three miles away and to a local business. The trial, which used equipment from Cisco and PT Inovação, was able to deliver broadband speeds of 10 Gbps and higher.
A number of vendors, including Nokia (NYSE:NOK) via its acquisition of Alcatel-Lucent, Huawei and others have been talking up the potential for NG-PON2, which can accommodate high-capacity applications such as 4K and 8K video as well as provide backhaul for wireless networks and deliver premium business services.
Since Boston is close to Verizon's LTE and FiOS innovation labs in Waltham, Verizon will look for ways to further test NG-PON capabilities throughout the city.
"We will be trialing new things in Boston where we have trialed them in the labs or in other parts of the country," Cupelo said. "Being in close proximity to our innovation lab in Waltham, we will be trialing the next-generation of GPON and the next generation of wireless services."
Streamlining video franchising
Whether it's delivering traditional linear video, Go90 or its skinny bundle, video continues to be a major piece of Verizon's consumer experience. After completing the franchise licensing process, Verizon says it expects to offer FiOS TV service in Boston.
But in order to make those services a reality in this latest Boston FiOS rollout, Verizon still has to gain a video franchise agreement in each area of the city.
Thus far, Cupelo has signed over 100 video contracts; the majority of them are very similar and the process has become less time intensive in recent years. Like any other state Verizon operates in, the telco has to comply with various terms and conditions set by the state.
"I have signed 113 cable franchises and they are pretty much identical so it's always made me very interested in understanding what's truly required," Cupelo said. "When we started out it took 18 months to get a cable franchise and when we finished up it took only took only 6 months so the reality is there's not variation between communities."
Because the terms are similar under state law, Cupelo said it gives "the community a 6-month period to be able to provide their input about what's important to them."
What's unique about the way Verizon is applying for video franchises in Boston is that it is filing for a franchise in the areas in which it's building first and not the entire city.
Verizon conducted this process in Medford, for example, which it launched FiOS service back in 2012. After two years of negotiations, the service provider and the city officially signed the video franchise agreement on Feb 3. Previously, the telco put the Medford FiOS buildout on hold in 2010 following a company-wide decision to halt FiOS installation in new communities and stop franchise negotiations with communities like Medford.
"We did this in Medford and we filed first for a franchise in the areas that we are building and after those were built and we filed an addendum to the original master contract so there's some precedent for that in Massachusetts," Cupelo said. "As we move across the city we will file for amendments to the master licenses."
While communities have embraced Verizon as a competitor to Comcast and other local cable operators, Cupelo said a number of cities and towns don't have full time staff to process the applications.
As part of the franchising process in Massachusetts, a city or town has to put out a request for proposals (RFP), post notices, set the RFP requirements, and give service providers time to respond.
"We have been a welcome second provider throughout the Commonwealth," Cupelo said. "Sometimes the delays are because cities and towns have volunteers who are responsible for cable licensing and some of them have town managers, some of them have selectmen, some have boards, and many times it was a matter of scheduling."
Verizon has set forth a sound strategy to build out FiOS in Boston, but the next question is will it apply that in other Massachusetts towns or other parts of its territory? While it has not indicated any other plans, it's a good sign that if this is successful, it could look for opportunities elsewhere.