Verizon’s McAdam: Our multiuse fiber approach offers more cost efficiencies

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Verizon says that its “One Fiber” approach is going to simultaneously satisfy multiple consumer and business needs while offering an opportunity to get a more favorable return on total investment.

Lowell McAdam, Chairman and CEO, told investors during the J.P. Morgan Global Technology, Media And Telecom Conference 2017 that the service provider’s new multi-purpose architecture is a more efficient method to build out fiber networks. 

“This multi-use architecture is far more cost effective than the old purpose built fiber,” McAdam said. “If you look at the manufacturing capabilities of a company like Corning from our perspective, the number of fibers you put in the cable are a matter of pennies per foot so you’re far better off today doing what we’re doing in Boston which is putting in 1,700 strand cables in the main feeder routes.”  

RELATED: Verizon’s fiber build could be an upside for Dycom and Zayo, says analyst

Lowell McAdam Verizon
Lowell McAdam

McAdam said the wireless division’s 4G and 5G builds lend themselves to a more dense fiber network.

“The architecture we’re building in Boston and in other cities is multi-use,” McAdam said. “It turns out building fiber requirements for wireless in a 4G with a dense small cell deployment is the best architecture for everything because you’re going run right by the enterprise, run by the small business, and it sets you up for delivering things like smart cities.”

A grid approach

Unlike the initial fiber builds Verizon made previously were done to accommodate specific network functions, Verizon says the new approach batches various needs.

When Verizon began building out FTTH for Fios, Verizon would dedicate one set of fiber cables to deliver broadband to homes and another for its wholesale division, for example.

“When you think about Fios it was a purpose set of fibers where it went into the neighborhood and we delivered a fiber to each resident and you aggregated up to maybe 144 fibers in a cable,” McAdam said. “We had a parallel network for wholesale, meaning if we were selling dark fiber to AT&T for a cell tower or Verizon Wireless was buying their fiber it was much more point to point.”

Set to be built over a 10-20 year period, the new network build mentality is really a point-to-multipoint configuration that has multiple endpoints.

“If you’re expecting a 4G dense network or a 5G high capacity network, you need to come in and build a grid approach,” McAdam said. “It’s much more like the cardiovascular system if you look at it than point to point.”

Verizon’s “One Fiber” initiative in Boston could be an attractive asset for a host of financial companies, education and even GE, which relocated to Boston.

“If you look at what businesses like GE, who just relocated to Boston and what bandwidth the financial institutions require, it’s a decade or two decade kind of build,” McAdam said.

Fiber commitment beneficiaries

The service provider is so confident that its approach will work it signed two significant fiber and component deals with its main suppliers Corning and Prysmian. Verizon will purchase up to 20 million km (12.4 million miles) of optical fiber each year from 2018 through 2020 from Corning and over 17 million kilometers (10.6 million miles) of ribbon and loose tube cables from Prysmian.

Analysts say Verizon’s decision to build more of its own fiber network could have a positive effect to the telco’s supporting cast.

Jennifer Fritzsche, senior analyst for Wells Fargo, said in a research note that Verizon’s plans could be positive for fiber “arms dealers” like Dycom, which recently cited Verizon as its fourth-largest customer, generating 10.2% of its revenue.

But the other question is what does Verizon’s commitment mean to other dark fiber suppliers like Zayo?

Zayo, which is set to become the largest standalone fiber player after CenturyLink completes its Level 3 deal, is confident that it will still play a large role with Verizon as the service provider has a number of contracts for fiber and other services with Verizon.

Verizon plans to look at various fiber expansion options, including a mix of its own fiber or purchasing fiber from other providers, to satisfy its current 4G and upcoming 5G network roll outs.

“Revenue is under long-term contracts and they have even said they will do both and likely end up some mixture of build, buy or lease,” said Ken desGarennes, CFO of Zayo, during last week’s MoffettNathanson Media and Communications Summit