New IP

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.

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 5/19/2015 | 6:20:22 PM
Smart Re: "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."

Smart.  Very smart.  There's an old Chinese proverb that goes something like "Every big problem was once a small problem."  Verizon is tackling the situation while the problem is still relatively small.  Brilliant move on their part, I think, and I suspect it will pay off.

Now if only they could figure out the difference between two cents and two tenths-hundredths of a cent...
KBode 5/20/2015 | 8:47:14 AM
Re: Smart This is pretty interesting with the rumors floating around that (according to one utility) Verizon wants to be out of the fixed-line network business in a decade. I imagine some of the un-upgraded DSL customers on the OTHER end of that CO connection wish some of this new bullishness toward fiber would head their direction (read: Buffalo, Boston, Baltimore, Binghamton, Alexandria, etc.).
brooks7 5/20/2015 | 9:24:27 AM
Re: Smart I found it interesting that they would talk about this in a forum done by Genband.

And yes, that whole bit about lowering Opex had a lot to do with FiOS and we spent countless hours working with Verizon on looking for ways of improving that.  

The whole DS0 thing is a challenge, which I saw on the Powerpoint.  These older services are a problem for them and trying to get rid of them is very hard.  They are a small percentage of lines but if you have to keep odd ball gear in place then you haven't solved the problem.


Ariella 5/20/2015 | 9:28:54 AM
Re: Smart This must be the LightReading article that was cited by http://www.theregister.co.uk/2015/05/20/verizon_fibre_is_so_much_cheaper_than_copper_were_going_allfttp/
Duh! 5/20/2015 | 10:59:22 AM
Re: Smart It's hard to reconcile this with what Shammo and McAdam have been telling the investment community and the many local communities which have been begging them for FiOS.  The message has consistently been that they've achieved their targets and have no appetite for more.  

Did Sampath go rogue? Or is this a signal that they're re-evaluating their strategy?

mendyk 5/20/2015 | 12:30:43 PM
Re: Smart It looks to me as though he's talking about rewiring the COs themselves, but maybe Sarah can clarify further.
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.
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. 
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?


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.
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