Verizon Pulls Back on FiOS: A Dream Deferred -- Or Completed?

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Verizon is slowing construction of its FiOS fiber service. That's big news, though why exactly it's happening isn't entirely clear.


The Associated Press reports that Verizon will not go beyond the major markets in which it already is rolling out the service. The company will continue to seek franchises, the story says, in small communities, mostly in New York, Massachusetts and Pennsylvania. Ongoing construction will continue in New York City, Philadelphia and Washington, D.C., but cities such as Boston and Baltimore will be left out in the cyber cold, at least from FiOS's point of view.


There are many possibilities about why this is happening. The most direct is that Verizon has finished expanding into the areas that it wanted to and the cessation of major new activity is part of its established plan.


Why stop with the most boring explanation, however? DigitalBeat looks at the expense. The site notes that the cost -- $750 per home for neighborhood wiring and $600 for an actual connection-was "an issue with Verizon's investors in 2004" and has became even more so during the recession.


However, the recession that may have caused the company to change direction is ending-albeit slowly-and the need for broadband shows no sign of anything but increasing. Says the story:

The FiOS slowdown could be seen as bad timing for Verizon though - given the growing importance of broadband Internet access in America with the National Broadband Plan, and Google's own plans to roll out a fiber network in certain U.S. markets. It certainly deserves credit for being an early adopter of fiber technology, but it seems odd to slow down its roll out now that others are catching up.

There are a couple of other possible reasons that Verizon is slowing down FiOS. Back in January, ReThink Wireless reported that wireless data was the big driver of the carrier's fourth-quarter 2009 results. If this trend is expected to continue-and there is no reason, with the advent of the iPad and other wireless devices to think that it won't accelerate -- the prudence of shoveling money into the ground becomes suspect. Related to that is the possibility that 4G (Verizon is rolling out the Long Term Evolution flavor) is taking the lion's share of investment dollars and corporate attention.

The emergence of the Google's broadband network and the start of the process of putting together the National Broadband Plan, as noted by DigitalBeat, perhaps cut revenue projects. Finally, Gary Kim at IP Carrier suggests that the move may be a precursor to some sort of broad deal or change in relationship between Verizon and Vodafone, its partner in Verizon Wireless.

Verizon's FiOS project was, for a long time, the face of incumbent carrier fiber projects. The fact that the company is toning it down is interesting and symbolic. What isn't entirely clear is the most important thing: Why?