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Verizon Stalls in Beantown

The Cable Pipeline
The Cable Pipeline
The Cable Pipeline
7/29/2009

1:20 PM -- Verizon Communications Inc. (NYSE: VZ) has reportedly delayed its commitment to wire Boston with FiOS, the fiber-rich platform the telco is using to deliver the triple-play to some smaller, rural suburban communities in the Northeast U.S.

In response, Boston Mayor Thomas M. Menino suggested that Verizon "is exacting payback for the city’s unsuccessful efforts to change a state law that exempts Verizon, which also supplies telephone services, from paying millions in taxes on its network switches.”

Verizon’s spokesman, Phil Santoro, has a different view of the circumstances surrounding a delay in the build, telling the The Boston Globe that it's "based solely on the company’s capital spending priorities, and pledged that Boston will have its day. 'It’s just a matter of when.' ”

There probably is some truth in both viewpoints in that Verizon is taking a financial hit on expenses regarding taxes for providing its phone service within the state; and it also may be mired in red ink attempting to introduce FiOS in highly competitive and apartment-heavy metro markets.

While rural or suburban construction of plant per mile is reasonable, the cost of wiring a city like Boston, with its high percentage of apartments, must be a construction nightmare.

This is because of the fiber-to-the-premises (FTTP) architecture Verizon has chosen to build out the new platform, requiring the negotiation of street conduits and apartments that sometimes need rewiring. This, in turn, will result in higher overall construction costs, with a probable backlash by apartment owners who have to live among the heavy construction.

Verizon is currently in various stages of wiring New York and Washington, D.C., which will also be capital intensive (particularly in New York) due to the same apartment easement holdups as Boston.

The competition in Boston comes from Comcast Corp. (Nasdaq: CMCSA, CMCSK) and RCN Corp. , which, of course, both use less expensive hybrid fiber/coax technology.

Verizon is going after a highly penetrated and competitive market where construction costs may outweigh both the short- and long-term financial returns, as these economics are very different than those required to wire up mostly rural and suburban markets with limited competition and where construction costs tend to be much less.

— Leonard Grace, a cable industry vet, is a telecom strategist and blogger. He can be reached at [email protected]. Special to Cable Digital News.

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