Verizon's Tightrope Between Burning Copper Bridges and Building New Fiber

April 25, 2016
By: Doug Mohney

The most important people at Verizon (News - Alert) are still on strike today, April 25.  Unionized workers, the blue collar, hard-hat wearing guys who intimately know the, ‘ins and outs’ of the company's legacy copper network.  I suspect part of Verizon's hard-line push against the union contract is the company wants to cut more jobs as it cuts copper out of its network. But the company will need an experienced workforce to successfully shut down its legacy network and install and maintain the new fiber it must build to support 5G and prevent municipalities from building their own broadband networks.

Verizon has made no secret of its disdain for its copper network.  FiOS (News - Alert) was supposed to be the replacement, with the company focusing on an all fiber network, eschewing a hybrid approach of fiber and copper adopted by AT&T (News - Alert).   At the time, I believed AT&T had taken the wrong approach with an incremental build out because carriers would ultimately have to bite the bullet and go from end-to-end with fiber.

About a decade later, I can say I was wrong and AT&T was right. 

AT&T's continued use of copper and every-increasing DSL technologies to boost copper from tens of megabits to hundreds of megabits with the potential for gigabit speeds with G.fast has proved to be a better strategy.  AT&T has managed to retain ownership of many more of its customers, adding fiber and gigabit services when necessary to stay competitive with Google and cable offerings, but also continuing to eke every last potential dollar out of copper while steadily moving fiber out from its central offices and deeper into neighborhoods.

Six years have passed since a March 2010 announcement when Verizon said it was stopping FiOS deployments to new territories, leaving Boston, Baltimore, Buffalo, Alexandria and other cities in its service footprint in the lurch.   LTE (News - Alert) was supposed to be the magic technology of the future, actually being able to replace copper for everything.

How times change.  At the beginning of this month, Verizon announced it reached at $300 million, six year deal to build out fiber in Boston.   Ignore the irony that the workers to install and maintain that fiber went out on strike a few days later.  Verizon CFO Fran Shammo made noises at the company's first quarter earnings call last week that the company might revisit cities like Alexandria, VA or Baltimore for FiOS.

Why the sudden interest in restarting the expensive process of fiber installation after a six year hiatus? Necessity. 

All the talk of 5G multi-gig wireless speeds means that somewhere or another you have to have multi-gig fiber connectivity for cellular backhaul at the very least.  Multi-gig wireless speeds require pretty much line-of-sight cell towers due to the frequencies involved and more of them.  Given the adventures of building out 4G LTE networks, putting in 5G cells at sufficient densities and locations is likely to be another level of challenges.

Consider another future not-so-hypothetical - The local Starbucks or McDonald's wants to offer 5G service to bring in more customers, just like free WiFi works today.  Suddenly, you need to have gigabit fiber service in all of those locations. In theory, you could do a workaround with bonded G.fast copper pairs to support a 5G small cell, but if you're Verizon and have neglected investment in the baseline copper plant, you don't want to put more money into legacy infrastructure.

And if you need to build out fiber for the wireless network, you might as well use it to squelch infrastructure builds by municipalities.  The city of Alexandria, Virginia has offers from 10 private firms to build a muni-owned fiber network, with a price tag (News - Alert) of $8 million. Officials expect some operational cost savings by moving city facilities from Comcast broadband and there's also the possibility of access to Federal Communications Commission (FCC) E-rate grant monies to connect schools and libraries. 

If municipalities like Alexandria build their own fiber network, Verizon will be at the mercy of the local government to purchase access  for connecting 5G cell sites.  To be fair, I've yet to hear of a muni-fiber deal where the government got the better part of the deal, but city officials may not feel exceptionally generous with leasing terms given that Verizon's failure to deliver FiOS in Alexandria has left Comcast with a broadband monopoly.




Edited by Stefania Viscusi