Verizon pledges massive DSL investment

On the heels of the FCC’s triennial review of unbundled network elements (UNEs), Verizon today announced a major broadband initiative designed to make 10 million more access lines DSL-capable by the end of the year and to deploy fiber to the home starting in 2004.

The RBOC will deploy DSL equipment in an estimated 3500 to 4000 fiber-connected remote terminals and an additional 1000 central offices. The overall outlay is expected to make DSL available to 46 million, or 80%, of Verizon’s lines. Verizon didn’t make any cost projections for the deployments, but Vice Chairman Lawrence Babbio said Verizon would be shifting funds in its estimated $12 to $13 billion capital expense (capex) budget to focus on broadband.

Babbio said the initiative was fueled by last month’s FCC ruling granting the ILECs broadband relief and by advances in DSL and hybrid fiber technologies allowing Verizon to extend the reach of its access networks. The FCC’s ruling not only exempted incumbents from unbundling fiber or hybrid loops, and from making line-sharing available as a UNE. Many competitive carriers use the high-frequency portion of the loop to provision DSL.

“We now believe we can begin an aggressive deployment into rural and suburban areas,” Babbio said. “By the end of 2003 Verizon’s [DSL footprint] will be better or comparable to that of any broadband service provider’s.”

While Verizon claims the main impetus for the massive deployment is broadband relief, the carrier and its fellow RBOCs have faced massive pressure from the cable companies to expand their broadband networks. The MSOs already have significant leads in cable broadband deployments and many industry experts believe that DSL build outs were inevitable regardless of the FCC’s decision last month. The ruling, however, gives the RBOCs the incentive to invest in new technologies without fear of turning them over to competitors, which should lead the other incumbents to announce similar deployment plans.

“This is a smart business decision because Verizon needs to remain competitive with the cable companies,” said Matt Flanigan, President of the Telecommunications Industry Association. “We’re hoping the other ILECs will follow suit.”

Though Verizon said it planned to work within its existing capital expenditure budget for 2003, it said it wasn’t committed to leaving the numbers alone. Flanigan said he expected capex industry wide to increase in the second half of the year as the rest of the RBOCs fall in line behind Verizon. The FCC’s ruling and Verizon’s subsequent announcement should send stock prices up and give Wall Street more confidence in the lackluster telecom industry, which in turn will unlock new capital for further deployments, Flanigan said.

Verizon’s competitors were not as optimistic. AT&T, which runs the largest CLEC business in the country, said Verizon was merely trying to curry favor with regulators by promising investment. “Given the Bell’s less than stellar history I would bet that they’ll soon find an excuse not to keep this promise too,” AT&T spokeswoman Claudia Jones said.