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Verizon Saves 60% Swapping Copper for Fiber

ORLANDO -- Genband Perspectives 2015 -- Verizon has transformed only seven of its central offices from copper to fiber, but the benefits realized from the first seven have convinced it to do the same with its remaining 2,000-plus central offices.

Speaking here at Genband Inc. 's annual conference, Sowmyanarayan Sampath, SVP of transformation for Verizon Communications Inc. (NYSE: VZ), explained how the carrier was forced to transform one of its largest central offices in New York after Hurricane Sandy destroyed it in 2012. Rather than rebuild the 100-year-old network with copper, it chose to go all fiber.

As a result, Sampath said, the carrier created new revenues by enabling it to do fiber-to-the-premises. It has since done this transformation to six other central offices and plans to (eventually) transform the rest as well. Sampath said Verizon is the only carrier in the world that has made an attempt to upgrade its entire CO footprint from copper to fiber.

Transformation Time
Verizon's Sampath makes the case for network transformation, whether forced to do it by a natural disaster or not.
Verizon's Sampath makes the case for network transformation, whether forced to do it by a natural disaster or not.

Bulding out fiber was the first opportunity Verizon found to make this wholesale change. The second was to migrate subscribers off copper and on to fiber, a sometimes formidable challenge with those who wanted to keep their POTS around awhile longer, which would necessitate keeping the entire copper network up and running. The third opportunity, Sampath said, was to create a growing fiber business with very healthy margins. (See Line-Powered Phone Lines: A Hot Topic Again.)

"The economics of fiber are fascinating," he said. "At the end of the day, the customer wins."

The numbers, as Sampath broke them down, are pretty compelling. Verizon has 50 million square feet of CO real estate today, he said, 60% to 80% of which it does not need. It can take these locations down from 13 floors to only one or two, bringing about cost savings by paying less property tax and leasing the space for other usage.

And fiber has proven to be 70% to 90% more reliable than copper depending on the typology, he said. Verizon can pass some of the savings on to the customer. Overall, Verizon ends up realizing about 60% savings in dispatches and about 60% savings in energy and is able to create new revenues from upgrading its customers.

"When you do these business cases, almost 60% [of savings] come from new revenue as folks without fiber before get fiber," he said. "We see a fair amount of folks who use this opportunity to get better services. We've proven time and again this pays for itself. It is sustained pay back."


Want to know more about network transformation? This will be just one of the many topics covered at Light Reading's second Big Telecom Event on June 9-10 in Chicago. Get yourself registered today or get left behind!


Sampath also shared some of Verizon's biggest lessons learned from its first seven CO transformations. Among these: Verizon learned that it needs to start cleaning data six months to a year in advance because so much of it is old and outdated. It also needed to start letting companies and consumers know about the migration early -- about a year ahead of time. And Verizon had to be careful to find reasonable product substitutes for its customers and pay careful attention to certain segments, like government, that require special handling, Sampath said.

Challenges
Sampath called a central office transformation a 'project manager's dream' as it has a lot of moving parts that have to be figured out, scaled and taken into account alongside legacy infrastructure.
Sampath called a central office transformation a "project manager's dream" as it has a lot of moving parts that have to be figured out, scaled and taken into account alongside legacy infrastructure.

As to why Verizon is taking on this huge project now, at a time when no one is complaining about their copper networks, he said it's because copper revenue declines 8% to 10% every year and remains a fixed cost. The transition takes out a huge amount of cost for the carrier.

"The copper network today does not serve the need of our customers," Sampath said. "This is our way of truly transforming the network."

Network transformation is, of course, a big theme of Genband's, as the vendor is keen on helping operators migrate away from TDM to IP, financed entirely by the money saved on power and water when switching to its next-gen network gear. But, as Sampath pointed out, Verizon is one of the first carriers in the world to actually start overhauling its network. Genband's new CMO Patrick Joggerst said that most carriers are just now getting started. (See Genband Appoints New CMO and Genband Plots Funding of TDM Death March.)

Addressing the Perspectives audience, Genband President and CEO David Walsh reiterated why they might want to start soon. There are more than 30,000 central offices in North America, he said, many of which aren't needed anymore. The PSTN remains a $100 billion annual revenue business in the US alone, but it costs $63 billion just to power it.

"The value of the carrier assets is amazing, and they're being repurposed," Walsh said, later adding, "Now is the time to make this move and make the shift."

— Sarah Thomas, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editorial Operations Director, Light Reading

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Joe Stanganelli 5/29/2015 | 2:23:17 PM
Re: Smart Well, Boston is not known for having good infrastructure or for being ahead of the technological curve (which is pretty funny, considering how many startups we have, how many tech firms the state has, and that Harvard and MIT are just across the river in Cambridge).

Heck, it wasn't until this month that the State House finally got Wi-Fi!  (And it was only because our new governor was like WTF about it.)
KBode 5/26/2015 | 9:01:30 AM
Re: Smart Everything I read suggests they really shouldn't be holding their breath. Odd, a city that size simply being left out of the proceedings. I think Verizon was annoyed about the state's plan to repeal a law freeing them from all property tax...
Joe Stanganelli 5/22/2015 | 10:28:22 PM
Re: Smart Indeed, Bostonians are happy to have any Verizon connectivity at all (to free themselves from Comcast's reign) -- let alone fiber.  ;)
steve q 5/20/2015 | 6:02:56 PM
Re: Smart Hi my question is the same why will verizon say they doing this but not going to push fios . The cost to switch everything to a fiber optic co, and not use it for a data base for there fios network is dum. And who are the people that will put it into those co , with the aug 8th coming and a contactwill the union have a say in this. Or does vverizon see fiber the as accheap way to push the 5g .
jayja 5/20/2015 | 5:23:35 PM
About time.... I attended a Verizon presentation almost 15 years ago where they said they could serve the entire Philadelphia service area (including Wilmington, DE) with 4 fiber-based COs.  They've been showing these types of operational savings for fiber from their FiOS experience for several years to smaller audiences.  Hopefully a presentation like this helps it sink in for everyone.
mendyk 5/20/2015 | 2:00:59 PM
Re: Smart So putting two and two together to make five, we can also speculate that Verizon will focus on the COs in its FiOS markets, and then put its non-fiber markets up for sale in the first step of its journey out of the wireline business.
sarahthomas1011 5/20/2015 | 1:37:50 PM
Re: Smart I can follow up for more clarity, but he didn't speak to whether the COs were inside the FiOs footprint or not. He joked about having job security because Verizon has 2,000 more COs to go, and the goal is to do upgrade them to fiber for the cost savings and potential new revenue from fiber services that it will bring.
brooks7 5/20/2015 | 1:33:43 PM
Re: Smart Copper based COs...into Fiber based.

 

Okay so I want to make sure we are talking about the same thing.  Sarah, you are too young to remember but us old warhorses recall the first "All Fiber" CO that BellSouth did back in the early 90s.

That CO (because I personally visited it) had no copper exiting the facility.  Inside the facility, the various systems were connected with DS3s and there were a few T-1s run over to D4 channel banks to terminate DS0s.

So, converting copper into fiber for what exactly?  The way I read your response it is...Verizon wants to eliminate all Copper exiting COs that are part of FiOS.  Is that correct?

seven

 
sarahthomas1011 5/20/2015 | 12:41:22 PM
Re: Smart He was talking specifically about transforming Verizon's central offices that are copper based with fiber, not necessarily about expanding into new fiber territories. 
sarahthomas1011 5/20/2015 | 12:40:39 PM
Re: Smart Yeah, interestingly Genband announced its transformation project two years ago but has yet to announce any customers yet. Expect, of course, now it's safe to assume that Verizon is the first one.
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