Verizon Hopes Entrepreneurs Use Bandwidth

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Grapevine, Texas -- Now that they’re building it, will the YouTubes come?

Verizon Communications is taking a leap of faith that “entrepreneurs and innovators” will create new ways to consume the massive quantities of bandwidth the telco expects to deliver through its FiOS fiber-to-the-home network, said Brian Whitton, the company’s executive director of network design and integration, in the lead keynote speech at the Telco TV conference here.

He cited the transformation from dial-up Internet connections to widespread broadband services as the key enabling factor behind the burst in popularity of video-distribution sites, including YouTube (www.youtube.com), as well as those from AOL, Google (www.google.com), MySpace (www.myspace.com) and others.

“Bandwidth is vital,” he said. “It’s what creates the innovative spark for these services … There is no monopoly on ideas and the ability to create new applications.”

However, Whitton did not address a report that Verizon is in talks with YouTube to deliver YouTube’s video content to consumers over TVs and wireless devices.

The Wall Street Journal said Monday that Verizon is in discussions to offer some YouTube video clips via its V CAST wireless phones and as an on-demand service, but the newspaper noted that talks could still fall apart. Google announced plans last month to buy YouTube for $1.6 billion (www.multichannel.com/article/CA6379474.html).

Verizon has placed a $23 billion bet that the FiOS high-bandwidth fiber network -- which could someday deliver as much as 100 megabits per second or more to a single home -- will be the key differentiator from cable and satellite TV providers.

Cable operators, Whitton said, would need to engage in a similarly large-scale -- and expensive -- buildout to match the capabilities of Verizon’s FTTH network. “We feel that there are few options for [competitors] to economically respond, short of going back and engaging in a significant network upgrade,” he added.

Whitton predicted, “The order of magnitude of bandwidth enabled by bringing fiber to the consumer’s home will create a new market ... a whole new generation of applications.”

So, what kinds of applications? Whitton didn’t provide a definitive vision there. But clearly, Verizon sees offering a wide smorgasbord of video content of one form or another as a major one.

He predicted that with a high-capacity FTTH network, “Today’s model of gradual introduction of one to two new channels per year” will be obsolete. “The new model will be rapid introduction of services, through IP [Internet-protocol] networking,” Whitton said.

Video-on-demand will be a major focus for Verizon in 2007, according to Whitton. The telco currently offers about 3,000 titles through its Verizon FiOS TV service -- a library he said will increase over the next year. “Clearly, there’s a huge appetite in the United States for content and high-definition content,” he added.

The Verizon FiOS network is well-suited for delivering unicast VOD, he said, compared with bandwidth-constrained cable networks. In VOD, “The interaction between a customer and network-based asset is a one-on-one relationship … We’ve already built a network to accommodate that narrowcast IP environment.”

It’s still early to tell whether Verizon’s FiOS experiment will pay off. By the end of 2006, Verizon will have passed 6 million households and businesses, with plans to pass 18 million households by 2010. But only 1.8 million households will be able to order FiOS TV by the end of this year.

Still, Whitton claimed, “Based on our current trajectory, we’re on our way to be a top-10 video provider in the United States by the end of this year.”

FiOS TV offers on average 450 linear broadcast channels in market, of which about 25 are HD. Whitton said with greater demand generated from the availability of HDTV sets and high-bandwidth networks like FiOS, more HD programming will be offered in the months ahead.

In other Verizon news,the telco said last week that it expects to file the first application for a video franchise in New Jersey under the state's newly enacted video-franchise law.

The company said if New Jersey's Board of Public Utilities approves its application, it expects to begin offering television service to some communities in the state as soon as the second half of December.

In its initial filing, Verizon is seeking authorization to offer its Verizon FiOS TV service in 316 communities in New Jersey, covering 2.1 million households. The company said that represents 70% of the homes in the state.

"We will soon serve more communities in New Jersey than any of the current cable-TV operators have served in the past three-and-a-half decades," Dennis Bone, president of Verizon New Jersey, said in a prepared statement.

Also last week, Verizonwas granted franchises for its Verizon FiOS TV service in Delaware and Massachusetts, and the regional Bell operating company began offering FiOS TV in several other communities.

In Delaware, a unanimous Public Service Commission vote Tuesday gave the telco authorization to offer FiOS TV in Kent, New Castle and Sussex counties, joining Bellefonte, Delaware City, Newark, Odessa and Townsend in the state.

As for Massachusetts, franchise approvals in Lexington, Tyngsborough and West Newbury will bring Verizon’s total number of communities in the state to 26 and add some 13,200 potential households.

And FiOS TV is now available in Camarillo and Los Alamitos, Calif., joining Apple Valley, Banning, Beaumont, Hermosa Beach, Lake Elsinore, Malibu, Manhattan Beach, Murrieta, Ontario and Temecula in the Golden State.

In New York, FiOS TV is now available in parts of the Westchester County community of Greenburgh, as well as the Town of Clarkstown hamlets of New City, Congers, Bardonia and Rockland Lake in Rockland County.

Next up for the RBOC pending New York State Public Service Commission approval: the Long Island communities of Smithtown, Huntington, Valley Stream and Farmingdale, as well as the Westchester County village of Irvington.

And in Virginia, the telco began offering FiOS TV service to consumers in parts of the Lee Hill district of Spotsylvania County.

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