Bucking the gigabit trend, Verizon has announced a new Internet service tier with speeds reaching 750 megabits per second. The upgraded service will start rolling out on January 14 in New York City, northern New Jersey and Richmond, with Verizon planning to extend to portions of Boston and Norfolk before the end of the first quarter. The service will be available initially at nearly 7 million locations -- both homes and businesses -- and will eventually be offered as an option to all Fios customers.
Although the Verizon Communications Inc. (NYSE: VZ) news is merely an incremental speed boost above the ISP's current 500Mbit/s offering, a few things stand out about the company's announcement.
First, Verizon isn't jumping to gigabit speeds with its new Fios Instant Internet option despite the fact that its Fios footprint is entirely based on fiber-to-the-home infrastructure, which should make gigabit broadband eminently feasible. And not only is Verizon fully deployed with FTTH for Fios homes and businesses, but the company is at the leading edge of new technologies including 5G and NG-PON2 that will ultimately deliver multi-gigabit speeds. (See Verizon Proves NG-PON2 Interoperability.)
So why isn't Verizon upping the ante?
According to spokesperson Ray McConville, "We'd rather under promise and over deliver." He notes that many broadband providers offer speeds "up to" a gigabit, but that their services aren't guaranteed at that level. McConville adds that Fios Instant Internet delivers at least 750 Mbit/s "and frequently performs well into the 900Mbit/s range."
That sounds good, but it doesn't have quite the same ring as gigabit service.
Second, Verizon is continuing to push the message that symmetrical broadband is better than Internet service with high downstream speeds and mediocre upstream capacity. While most customers need significantly higher downstream capacity than upstream, Verizon's symmetrical offering is still a differentiator. As cable companies introduce their initial gigabit offerings with DOCSIS 3.1, those services are still limited to upstream speeds of well under 100 Mbit/s. Once the cable industry starts deploying Full Duplex DOCSIS, the upstream limit will increase, but as a Heavy Reading report found recently, FDX isn't likely to hit the market until 2019, and it will require cablecos to make significant upgrades to their last-mile infrastructure. (See How Cable Plans Symmetrical Gigabit via FDX.)
Third and finally, Verizon is making a statement with the pricing for its new Internet speed tier. At $150 per month for standalone service, the price tag is higher than many ISPs charge for full gigabit delivery, and may indicate a new standard in pricing now that pressure from Google Fiber has eased and a new regulatory environment in the US makes it unlikely the government will actively try to rein in monthly Internet costs. (See Trump Win Will Reshape FCC .)
Perhaps even more importantly, Verizon is bundling video and phone service with the new 750Mbit/s tier for a total fee of only $170 per month. The price differential illustrates how Verizon is devaluing TV and phone service, while also making it less attractive for customers to buy those service elsewhere. If subscribers are already spending $150 per month for broadband from Verizon, there's less incentive to consider third-party over-the-top packages when an additional $20 (also paid to Verizon) gives them the complete triple-play bundle.
Is the pricing play the start of a new, more dramatic trend toward costly broadband and cheaper video and voice services? For providers like Verizon where broadband access is their strongest asset, that would certainly make sense.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading