Verizon touts potential FiOS expansion, but is it real or a bluff?

Sign outside a Verizon Wireless store

Verizon's (NYSE: VZ) CEO Lowell McAdam told investors during the telco's second quarter earnings call earlier this week that it could replicate the same FiOS build it agreed to carry out in Boston in other cities.

McAdam said Verizon's "one fiber" strategy in Boston -- one that will serve a mix of residential, business as well as serving as backhaul for wireless and IoT smart city applications -- could be replicated in other cities.

In April, Verizon broke away from its moratorium on new FiOS builds announcing that it would spend $300 million to build out fiber throughout the city over five years. Taking a cue from Google Fiber (NASDAQ: GOOG), Verizon is also breaking out the city into "fiberhoods" where it will assess demand and prioritize its fiber network construction schedule.

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But a key concern for Boston FiOS build itself is how much of the $300 million will be actually allocated for consumer and small business FTTP applications.

Given Verizon's increasing focus on wireless, delivering FTTP service is just one part of its vision. The service provider's platform is focused on developing a platform for Internet of Things applications like smart traffic applications and, of course, the upcoming 5G roll out.

"No longer are the discussions solely about local franchise rights, but how to make forward-looking cities more productive and effective," McAdam said.

The desire to create a backbone to support IoT reflects the telco's move to get a larger piece of smart applications market that cities can use to be more productive and improve residents' lives. Previously, Verizon purchased Hughes Telematics, deepening its presence in the automotive-technology market, for example.

Alongside the IoT play will be the upcoming 5G build. McAdam also took time to tell investors that by using millimeter wave wireless to create what he calls "wireless fiber" the telco will be able to reduce deployment costs. Still, the reality is that the millimeter wave equipment will be hooked up to a fiber connection for backhaul and to carry information to the broader internet.

At the outset, having a common fiber platform that can serve a mix of traditional wireline FTTP, wireless and IoT applications makes sense as it can maximize the network investment it is making in each city.

Not surprisingly, details about what cities or where they would replicate the Boston model were lacking.

While not revealing any specific areas where it could go, an obvious target for Verizon could be other Massachusetts cities -- one of Verizon's largest states.

As Verizon moves forward with its Boston plans, the call to get FiOS in more cities will grow even louder.

Calls to bring FiOS to other Massachusetts towns and cities continues to rise. The mayors of Peabody and Salem sent Verizon a letter pleading with the telco to build out its FTTH service in their towns. With Comcast and satellite services being the only two service options, the city leaders of these North Shore towns say they continue to get requests from residents for an alternative service choice.

Outside of Massachusetts, 14 mayors on the East Coast called on Verizon previously to expand its FiOS FTTH network into more areas that have limited access to high speed services.

What also stood out about McAdam's statement was that it could consider building FiOS and other services outside of the traditional wireline footprint. Besides purchasing dark fiber solutions from other dark fiber providers, Verizon could use the XO fiber as a backbone to carry FTTH and 5G services.

"We obviously just purchased XO, giving us 40 metro fiber rings, which gets us into a very strong position," McAdam said.

But before cities get excited that the telco may wire up their city, critics say that the build in Boston, or any other planned FiOS fiber build, is just another ploy to fund its wireless ventures.

"Verizon's Boston plan, which we highlighted, represents the 'end game' -- to shut off all wires except what the Wireless company will use, (with fiber-to-the-home as an afterthought), to hand over the business to the wireless company, as well as block competitors as these 'new buildouts' are not required to be 'open' to competition," said Bruce Kushnick, director of the New Networks Institute, in a Huffington Post article.

Communities that want fiber should be wary, given their record in other cities like Philadelphia and New York City. Verizon has come under fire over about alleged broken promises related to their FiOS build in New York City.

An audit conducted by New York City's Department of Information Technology and Telecommunications found that Verizon failed to deliver on its promise to provide fiber-optic service for television and broadband to anyone who wants it by 2014.  

A Verizon spokesman dismissed the audit, saying that it was based upon erroneous information and incorrect interpretations of the company's franchise deal that was signed with the city in 2008, which allowed it to deploy FiOS throughout the city. 

With so little details about the telco's plans, it's unclear what Verizon will actually do. But the Boston expansion certainly raises the hopes of broadband-thirsty cities. The ultimate question for Verizon is whether a new FiOS expansion in truly in the cards -- or is their announcement just a bluff that will ultimately dash those cities' hopes?--Sean

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