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Cable Tech

Verizon: HD VOD Is Coming

CHICAGO -- NXTcomm -- What's the next big thing that's going to ride down Verizon's FiOS network to consumer homes? High-definition video on demand, according to the company's executives attending the NXTcomm show this week.

After a press dinner on Monday, Verizon Communications Inc. (NYSE: VZ) CTO Mark Wegleitner remarked that a high-def VOD service was "in the lab stage" and that the current fiber network "could support it right now."

Wegleitner added that "there is an internal time table for its launch that is currently being debated." So the launch date's not clear, the service specifics are still being refined, but Verizon is solidly moving toward the biggest, best offering possible in VOD.

During the NXTcomm related event in Chicago, Wegleitner also outlined to a room full of press the reasoning for the decision to go with an FTTP network and shed some light on future technological changes that will be coming, including a move beyond GPON.

"We are looking beyond GPON with a three- to five-year timeframe," said Wegleitner. The next step will be a move to wavelength-division multiplexing (WDM), a technology that would give each customer its own wavelength to its home which translates to about 1 Gbit/s for each individual household. "WDM is ahead of us."

Wegleitner also said that Verizon is moving toward IPTV and that it has an evolution plan in place that would take "two years minimum" to begin. "It's going to be an all IPTV world within a three- to five-year time frame."

— Raymond McConville, Reporter, Light Reading

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rjmcmahon 12/5/2012 | 3:05:55 PM
re: Verizon: HD VOD Is Coming 3 Million Homes passed per year is no small investment. If you do not believe those numbers, then I guess you are also saying that Tellabs results are fraudulent. These are also audited.

Seven, do you have the information to balance what VZ spent in 2006 on FiOS with the accounts receivable of vendors?

Here is what the 2006 annual report gives.

"Capital Allocation GĒō Our capital spending continues to be directed toward growth markets. High-speed wireless data (Evolution-Data Optimized, or EV-DO) services, replacement of copper access lines with fiber optics to the premises, as well as expanded services to business markets are examples of areas of capital spending in support of these growth markets. Excluding discontinued operations, in 2006, capital expenditures were $17,101 million compared to 2005 capital expenditures of $14,964 million. Of the increase, $1,602 million was primarily attributable to capital spending related to the former MCI, with the remainder in support of growth initiatives. In 2007, Verizon management expects capital expenditures to be in the range of
$17.5 billion to $17.9 billion"

Where is the FiOS breakout?

From what I can tell, Tellabs received $370M in 2006 for fiber access products but don't know how much was from VZ. Also, how much went to GLW?

All of this in theory should be a trivial exercise. One reason the US is a place to invest is because of our claims of transparency so a simple exercise of balancing FiOS books should be an easy thing to accomplish.
rjmcmahon 12/5/2012 | 3:05:55 PM
re: Verizon: HD VOD Is Coming So, you are accusing Verizon of financial fraud and violating securities fraud. All financials of public companies are audited.

No that's not what I'm saying. I'm saying that FiOS is not independently audited and the numbers I've read have been pro forma. It implies that the project is not completely transparent though does not say it violates securities law. Rather it makes it hard for an outsider to discern the real costs.

A muni project, at least by CA law, has to be much more transparent and cannot cross subsidize. This ability to cross subsidize can be advantage for VZ, but I think chasing TV is a misallocation of resources and is a mistake.

3 Million Homes passed per year is no small investment. If you do not believe those numbers, then I guess you are also saying that Tellabs results are fraudulent. These are also audited.

That's the fine line VZ has to walk. Passing millions of homes but having guys like OldPOTS having a price expectation of $20 a month. (Even the iphone, without all that fiber sunk costs and using a poor quality AT&T network is pricing at $60mo.)

So my argument is that a fiber project can't initially stand on its own without a subsidy. Hence, the suggestion that an ecommerce tax be considered (as well as much higher initial prices for high speed internet access.)

Or another way to think of it. How did VZ start their wireless projects? In house or by creating a subsidiary? I really don't know but I would expect a profitable FiOS to use the same mechanisms.
paolo.franzoi 12/5/2012 | 3:05:56 PM
re: Verizon: HD VOD Is Coming
So, you are accusing Verizon of financial fraud and violating securities fraud. All financials of public companies are audited.

Your perception is incorrect. 3 Million Homes passed per year is no small investment. If you do not believe those numbers, then I guess you are also saying that Tellabs results are fraudulent. These are also audited.

seven


rjmcmahon 12/5/2012 | 3:05:56 PM
re: Verizon: HD VOD Is Coming By the way, Verizon has published its costs for a home passed and a home connected. Why not read for yourself.

What I read of FiOS in the past was bs. I don't believe FiOS is being independently audited. Maybe that's changed. I perceive FiOS as being used as a puff piece for Wall St. and the FCC. A muni project would be more accountable in my opinion. There the challenges of the projects have shown the take rates needed for a ROI, even over the mid to longer terms, are much too aggressive. Anybody claiming a 10 year return I am extremely skeptical of. I don't think Glasgow achieved that even though the picked up their HFC plant at bankruptcy prices.
rjmcmahon 12/5/2012 | 3:05:56 PM
re: Verizon: HD VOD Is Coming But since you seem not to understand the difference between WIRELINE networking and WIRELESS networking, I am betting about now you wish you had not cut and paste that little post.

Cut and paste was the quickest way to get there. Came from RUS and USDA. Broadband for them is both wireless and wireline. I suspect muni projects will have to support both and they won't be isolated networks, similar to corporate america where both networks operate in a seamless fashion.
paolo.franzoi 12/5/2012 | 3:05:57 PM
re: Verizon: HD VOD Is Coming
Great rj,

Of course, you have no idea what you are talking about. But since you seem not to understand the difference between WIRELINE networking and WIRELESS networking, I am betting about now you wish you had not cut and paste that little post. Unless you really believe that Radio Engineering is part of a Fiber Optic buildout.

By the way, Verizon has published its costs for a home passed and a home connected. Why not read for yourself.


mg,

The basic problem is that government investment in "The Internet" at this point is US taxpayers funding overseas development. So unless we reach some kind of global government, we are in a rock and a hard place.

And Finally,

Utopia is a mixed bag. It is covering a very small number of communities. Some new ones have joined. Some original ones have dropped out. There is a considerable number of municipally owned phones companies (aka some of the IOCs - see OPATSCO for more info). Some are doing either fiber, video or both. The vast majority are not at this time. Those that are not, are generally in areas where cable is not strong and many folks buy satellite.

seven
rjmcmahon 12/5/2012 | 3:05:57 PM
re: Verizon: HD VOD Is Coming No conflicts of interest

Great. You have also demonstrated your financial skills on these boards in the past as well. In your ten year return calculation and, only focusing on projects costs, can you share your results for:

o Detailed breakdown of the Network & Access Equipment Cost. Examples of the items to be included on this schedule are next-generation switches, video headends, optical equipment, digital line concentrators, digital subscriber line access multiplexers, middleware, video-on-demand equipment, radio equipment, data routing equipment, etc.

o Detailed breakdown of the Outside Plant Costs. Examples of the items to be included on this schedule are fiber cable (aerial, buried, underground, and submarine), conduit systems, poles, network interface devices (NIDs), miscellaneous construction units, make-ready costs for aerial plant, etc.

o Detailed breakdown of Building Costs. This shall include the cost of constructing new buildings, renovating existing buildings, and any site preparation cost involved with installing pad-mounted equipment.

o Detailed breakdown of the Land Costs. This schedule shall only include those sites that will be purchased.

o Detailed breakdown of the Tower. This shall include the cost for the construction of new towers and any costs involved with structural changes to existing towers.

o Detailed breakdown of Customer Premise Equipment. Examples of the items to be included in this section are wireless subscriber units, modems, set-top boxes, etc.

o Detailed breakdown of the Operating Equipment cost. This shall be broken down into different categories (Office Equipment, Office Furniture, Work Equipment, and Vehicles).

o Detailed breakdown of all the different engineering costs (site engineering, Radio Frequency engineering, network engineering, project management, etc.) involved in designing and constructing the project.

o Detailed breakdown of any existing notes that are requested to be refinanced to support the project.
deauxfaux 12/5/2012 | 3:05:59 PM
re: Verizon: HD VOD Is Coming No conflicts of interest
rjmcmahon 12/5/2012 | 3:06:00 PM
re: Verizon: HD VOD Is Coming Also, you forgot to comment if there is a conflict of interest or not. Can you say you have no finanicial interests in the outcome of FiOS? I'll take an absence of a actual response to the question as that you cannot.

I don't. I don't own any VZ stock. I don't sell them anything. They are not my phone company. I did listen to their CEO speak once and found him a quality guy.
rjmcmahon 12/5/2012 | 3:06:00 PM
re: Verizon: HD VOD Is Coming Arguing with zealots is a waste of time. I think it is a viable 10 year investment and a fantastic 20 year investment.

Ok, again from an outsider's perspective, you've been specific on critique of BKHM's financials but have chosen to make sweeping generalizations when it comes to FiOS. Anything specific to back it up?
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