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Verizon Assails Cable With Amped Upstream

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
6/22/2009
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Verizon Communications Inc. (NYSE: VZ) has rolled out a handful of new initiatives to get consumers to "dump cable," including speedier FiOS Internet tiers, tech giveaways for new subscribers who sign up for service bundles, and two new "hyper-local" video channels.

Although Verizon's speed upgrades take the downstream into account, the latest tiers emphasize a speedier upstream and target cable's historic challenges in this area.

Here's how the new tiers stack up. Note that speeds are higher (and approaching symmetry) in Verizon's New York-area FioS footprint, where it crosses swords with Cablevision Systems Corp. (NYSE: CVC) and Time Warner Cable Inc. (NYSE: TWC).

Table 1: Old vs. New

Tier Old Upstream New Upstream Old Downstream New Downstream
Entry-level 2 Mbit/s 5 Mbit/s 10 Mbit/s 15 Mbit/s
"Flagship" mid-level 5 Mbit/s 15 Mbit/s 20 Mbit/s 25 Mbit/s
Entry-Level (NY area) 2 Mbit/s 15 Mbit/s 10 Mbit/s 25 Mbit/s
"Flagship" mid-level (NY area) 5 Mbit/s 20 Mbit/s 20 Mbit/s 35 Mbit/s
Source: Verizon Communications




"Cable companies continue to focus on downstream connections," Mike Ritter, the CFO of Verizon's telecom business, said during a Monday morning briefing with press and analysts, pointing to an In-Stat study indicating that the average cable upstream connection is 2.68 Mbit/s.

"That's not nearly fast enough for today's two-way Internet experience," he claimed. Broadband "is not fast unless it's two-way fast."

The cable industry is fighting off FiOS and other fiber-to-the-premises (FTTP) competition with Docsis 3.0 , a CableLabs platform that uses channel bonding techniques to produce shared speeds in excess of 100 Mbit/s. Most of those deployments, however, are focused on bonded downstream speeds as MSOs and their vendors vet how to do the same in the upstream.

Only one cable modem termination system (CMTS) vendor, Casa Systems Inc. , has gained CableLabs certification for a feature set that includes upstream channel bonding. However, Japan Cablenet Ltd. recently began deploying upstream channel bonding using CMTS gear from Arris Group Inc. (Nasdaq: ARRS). (See CableLabs Cheers Casa Chassis, Cisco, Arris & Casa Make the CableLabs Grade, A Decade of Docsis , and Japan Cablenet Swims Upstream .)

Comcast Corp. (Nasdaq: CMCSA, CMCSK) CTO Tony Werner indicated in a recent video interview that the MSO was on course to begin upstream channel bonding lab tests this year.

In the meantime, Cablevision is going after Verizon with a wideband service that offers 101 Mbit/s downstream and 15 Mbit/s upstream for $99.95 per month. Time Warner Cable has already identified NYC as a candidate for its first Docsis 3.0 launch, indicating that it will likely start off with a wideband tier of 50 Mbit/s down by 5 Mbit/s up for $99 per month. (See Cablevision Debuts 101-Mbit/s Wideband Service.)

Cablevision will likely be able to tout downstream bragging rights for a while yet, since Verizon has no near-term plans to offer a 100 Mbit/s FiOS Internet tier.

"We're really not seeing a demand for 100-Mbit/s service now," Ritter said, adding that faster uploads is where Verizon is focused. However, the underlying FiOS technology "will allow us to go much faster than where we are today," he added, taking a moment to point out the $300-plus charge Cablevision requires for turning on and provisioning its new Optimum Online Ultra tier. (See Activating Wideband .)

In addition to the straight-up speed increases, Verizon is also trying to attract cable customers by giving away either a Compaq Mini netbook or a Flip Ultra camcorder to some new voice and broadband customers. Those customers need to agree to a one-year contract for the telco's double- or triple-play bundles that include specific speed tiers. The promo also applies to some current subscribers who add those Internet speed tiers. (See VZ Gives Netbooks, Flip Cams to New FiOS Subs and Cisco's Latest Buy: Flippin' Sweet.)

The telco is also launching two "hyper-local" networks -- FiOS1 Long Island and FiOS1 New Jersey, complementing a similar network Verizon launched in Washington, D.C., about two years ago. Those networks (here's an example), which won't be offered for carriage on cable systems, will focus on local news, sports, traffic, and weather info. (See Verizon Extends FiOS Net.)

Verizon will be using all of these promos and speedier service tiers to beef up its FiOS subscriber figures and steal some away from cable MSOs and satellite TV service operators. The telco ended the first quarter with 2.2 million FiOS TV subscribers, and 2.8 million FiOS Internet customers. The company claims an average FiOS TV penetration of 24 percent, and 28 percent for FiOS Internet.

— Jeff Baumgartner, Site Editor, Cable Digital News

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Menotomy
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Menotomy,
User Rank: Light Beer
12/5/2012 | 4:02:17 PM
re: Verizon Assails Cable With Amped Upstream


Jeff,


Do you have the current package prices for Verizon? I'm curious to see how they line up with the MSOs and ATT for similar speeds.

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:02:17 PM
re: Verizon Assails Cable With Amped Upstream


http://www22.verizon.com/Resid...


 


seven


 


PS - This required a pretty simple Google Search on "Verizon FiOS".


 


 

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:02:17 PM
re: Verizon Assails Cable With Amped Upstream


http://www22.verizon.com/resid...


seven


 

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 4:02:16 PM
re: Verizon Assails Cable With Amped Upstream


Here's VZ's marketing spiel for resi bundles:  


http://www22.verizon.com/residential/bundles/fiosbundlesab

rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 4:02:15 PM
re: Verizon Assails Cable With Amped Upstream


For me it's cable internet for $45 per month with 6Mbs/15Mbs down (actual measured)


Internet Access from a colo (which includes a virtual machine w/16Gbytes storage) for $21 per month - symetric 80Mb/s (actual measured).


VZ FiOS doesn't sell internet by itself but offers phone/internet (5Mbs/15Mbs theoritical) for $90 per month (according to the link.)  Considering landline phone is of little value you're pretty much paying $90/mo for internet for the equivalent MSO service.


Pricing seems about right since VZ will have to recover the sunk costs of new fiber plants while an MSO doesn't.  It doesn't make financial sense to sink the money into a new OSP merely to offer a me too service for twice the price.  Probably better to go to Gig links but PON can't do it and doesn't scale easily (and they probably want to protect their T1/T3 revenues anyway.)

Menotomy
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Menotomy,
User Rank: Light Beer
12/5/2012 | 4:02:13 PM
re: Verizon Assails Cable With Amped Upstream


Honestly I was trying to get LR to make a nice comparison chart for me. ;-)


Thanks for the links Jeff and Seven.

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 4:02:10 PM
re: Verizon Assails Cable With Amped Upstream


Hmmm...evidently the new tiers come with a price increase, which is pretty gutsy nowadays.  Also, the 20/20 symmetrical service will no longer be offered to new customers.  So some of the new upgrades are approaching symmetry, but the one that did that will be going away save for those folks who already signed up for it.  


 


 




rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 4:02:07 PM
re: Verizon Assails Cable With Amped Upstream


These 20% upgrades of max througputs are really on the margin.  A sixfold increase from 1Mbs to 6Mbs (AT&T to Comcast) makes a bit of a difference for posting some photos (scaled down ones) while real photo sharing is still pretty much bandwidth limited by the oligarchs.  A typical photo shoot of around 30 pics (4Mbytes per pic) is 960Mb is a 16 mintue upload.  Real video isn't worth the effort to upload. 


Fixing it so "consumers" can publish decent video requires untangling the bundling conflict inherent to the so-called "triple-play" business/regulatory model, i.e. the network providers can't be in the mass market video distrubtion business and in the enabling business.  I think of it like Iran's attempt to maintain its power structure via shutting down fundamental human rights and not until a society realizes we're being sold a bunch of b.s. do most of us stop running around believing anything the ideologues preach (while the opportunists sell out any integrity or character in order to make a buck, regardless.)


 


 

rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 4:02:06 PM
re: Verizon Assails Cable With Amped Upstream


ok, I was looking at the double play bundle.


Now using your link and making a closer apples apples comparision VZ monthtly is $60 while Comcast is $43.  Note: I did pay for my own cable MODEM at $99 instead of renting one at $5 per month.  I don't know what VZ charges.  Also, the install was free (self install).  VZ probably can't do free install.


Just for a comparison of modern labor rates -  I had  a local Home Depot contract out an install of a garbage disposal (which is a very easy install and takes about 15 minutes.)  The cost for the install plus some minor pumbing was around $210 (equipment purchased at the store separately.)  Home Depot doesn't hire union labor nor make GM pension promises so it's probably about as cheap as one can get without using illegals or doing it yourself which means a customer premise visit needs to be in the $200 range to cover sending a guy (or gal) out. 


Also, for a comparison w/muni build outs (which don't have to earn profits hence the incumbents incessant screaming of "unfair competition") one can look at Glasgow, KY and see their pricing. 


It all suggests that the real fiber projects to households in suburban America with current labor rates are not economically viable for the average joes.  VZ needs to rethink their model.  It may be better to run gig links and charge per bit delivered (after a certain cap) like is done at the colos, though that still may not generate enough revenue to justify the spend.

rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 4:02:06 PM
re: Verizon Assails Cable With Amped Upstream


The chart is pretty simple - you don't need LR to do it.


Fios is 2X the cost of Comcast for the same basic offering and still probably is underpriced w/respect to generating a return on the sunk costs.  Only hope is that naive investors will subsidize the projects. (Maybe paint the fiber cladding green or call it organic?)


Comcast is 2X the cost of an internet colo at about 1/5 the performance.  Equipment costs (PCs) are on the consumer for comcast while a colo throws in a virtual machine for free.  Both the cable co's and internet colos were built out with bubble mania money so they're done for awhile.


 


 


 


 

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