Verizon sees value in transforming network to IP, fiber, but conversion challenges remain

ORLANDO, Fla.--When the 2012 Hurricane Sandy destroyed all of its copper facilities in its Manhattan Broad Street Central Office (CO), Verizon decided to rebuild the site from scratch with fiber, kicking off a widespread copper-to-fiber migration across all of its network.  

Speaking at the Genband Perspectives 15 conference, Sampath Sowmyanarayan, senior vice president of transformation for Verizon, said by converting that CO to only fiber, it was able to realize immediate new revenue opportunities because it could extend FiOS to more customers in New York City.

"This was the first CO where we transferred everything from copper to fiber, so this is a whole CO that does not have an ounce of copper in it," Sowmyanarayan said. "In that process, we created new revenues because we were able to bring fiber to more premises, a new cost model and truly transforming the network."

Sowmyanarayan added that the telco has a long way to go until it can claim network transformation throughout the company. It still has another 2,000 sites to convert from copper to fiber.

"We have done this copper-to-fiber conversion seven times now, which is the good news," Sowmyanarayan said. "We now have 2,000 more to go."

Progress on the copper-to-fiber transformation has continued to gain momentum. It has focused on converting what it calls "chronic" copper-based DSL and POTS voice customers to its FiOS fiber-to-the-home (FTTH) platform.

The telco has been able to convert a number of its consumer customer POTS lines and DSL to fiber, while converting wholesale DS1 lines to GPON. However, it's still working on developing migration solutions for its Centrex and DSO service lines.

"We have solutions today, but they need to be cost effective," Sowmyanarayan said. "If I am going to get $50-$60 in monthly revenue, I can't put a $16,000 box at the end to make that work."

During the first quarter, Verizon migrated 47,000 customers off of copper and onto fiber, helping it come closer to reaching its 2015 goal of 200,000 conversions for the year. At the same time, the telco is in the process of decommissioning ten COs.

Internally, the copper-to-fiber migration will produce a number of savings for Verizon, including real estate, power, maintenance and network dispatching. Unlike copper, fiber is also less prone to damage from water or other environmental issues, meaning it can reduce truck rolls to solve customer issues.  

By converting a CO to fiber, Verizon can reduce real estate space by 60-80 percent. In decommissioning a legacy Class 5 switch and related copper, they can reduce their CO footprint from 13 floors to just one or two floors, for example.  

"We have 50 million square feet of Central Office real estate and we think there's 60-80 percent we don't need," Sowmyanarayan said. "We don't need the Class 5 switches with 200 or 300 racks and the underlying copper frames that take up two or three floors or the Digital Loop Carrier (DLC) equipment."

In addition to internal cost savings, the conversion to fiber has three benefits for its customer base: improving customer satisfaction, lowering service costs and a long-term opportunity to upsell customers FiOS TV and data services.

Despite fiber's allure in terms of speed and the ability to bundle in other services like TV, one of the near-term challenges Verizon faces is that it still has to run a parallel copper network because there are users that want a copper-based POTS phone line.

"There are some areas--even in the FiOS markets--where users still want copper," Sowmyanarayan said. "We tried to get them on fiber, but they still love their copper so we have to run two parallel networks."

During the copper-to-fiber migration, the telco takes a two-pronged approach where they convert lines to fiber, migrate subscribers, and then shut down the copper network in a particular area.

Sowmyanarayan said converting subscribers from copper to fiber is the biggest challenge "because there's always one grandmother who wants a POTS line and one fire station that wants to use the POTS line so for that one line, we have to keep the whole network up and running."

Besides the reluctance of some of its elderly customers to move from copper to fiber, there are a number of hidden challenges, particularly in decommissioning legacy services and cleaning up old records at each CO site.

The telco has to begin planning almost a year in advance to get rid of old records on the 100-plus-year-old network. Some of these older records include lines that were dedicated for technicians conducting remote monitoring.

Service migration is also an issue, particularly for DSO services. Verizon will continue to find ways to offer equivalent services on its optical network for business and wholesale customers.  

"DSO services are 64 Kbps channels that were built for the copper environment and don't flow well into the fiber world," Sowmyanarayan said. "We're committed to supporting our wholesale customers so we'll do the TDM handoffs."

Despite the challenges it will face, migrating away from copper make sense for Verizon. Like other telcos, it is seeing its copper revenue source decline 8-10 percent every year, but there's still fixed property tax costs and power that continue to escalate.

"We tend to have very high fixed costs on the copper network," Sowmyanarayan said. "We're taking out huge amount of huge fixed costs and creating new sources of revenue."

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