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Demand Density

12:15 PM -- Last week, Embarq Corp. (NYSE: EQ) became the latest carrier to throw itself into the telco TV fold, albeit very gingerly. (See Embarq to Test Telco TV Service.) If you compare it to a pool party, Embarq, it seems, is bashfully dipping its toes in the water, while AT&T Inc. (NYSE: T) conservatively stays in the shallow end watching Verizon Communications Inc. (NYSE: VZ) do backflips off the diving board into the deep end. Meanwhile Qwest Communications International Inc. (NYSE: Q) is walking around asking everyone how cold the water is.

Tom Nolle, of CIMI Corp. describes the concept of "demand density" that each of the carriers considers when deciding where to deploy video. As the name implies, demand density is the dollar value per square unit in a given market. Of the three Tier 1s in the U.S., you can probably easily guess which has the highest demand density just by looking at a political map. Verizon is first, followed by AT&T and then Qwest.

So is it any coincidence that Verizon is, by a large margin, pursuing the most aggressive video-over-fiber strategy? Carriers like Qwest talk about the future dynamics of watching video being centered around an on-demand, delayed viewing type of environment, where sports is the only thing people will really want to see live. If everything we watch has been recorded, the logic follows then that spending billions on a high-bandwidth fiber network does not make sense.

I happen to disagree with this notion that bandwidth won't matter in the future. I think Verizon has the right idea of offering as much bandwidth as possible. But at the same time, while I like the strategy, I wouldn't sell it if the demand didn't make it profitable. So would Verizon sell it if its footprint had states like Wyoming where there are more horses than people? Unless Old Dobbin has a credit card, probably not.

And would Qwest be boasting of a bold initiative to bring fiber to each home if it had the most densely populated states in the union at its disposal, as Verizon does? Given its financial situation, it's certainly not a given, but it would make a whole lot more sense than if they were pitching it in North Dakota.

— Raymond McConville, Reporter, Light Reading

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