OCTOBER 31, 2008 -- The worldwide PON equipment market grew 17% to $486 million in 2Q08, thanks primarily to Verizon, whose FiOS build out prompted a huge increase in BPON ONT and GPON OLT shipments, reveals a new report from Infonetics Research.
The PON equipment market is driven by service provider investments in broadband access networks to deliver bandwidth-intensive services such as IPTV bundled with voice and high-speed Internet services.
Verizon's purchase of GPON OLTs from Alcatel-Lucent and Motorola led the GPON equipment segment to surge 77% sequentially in 2Q08, according to the report, "PON and FTTH Equipment and Subscribers."
"Though GPON growth is expected to be healthy across the board, some major vendors are dropping out of the race to focus their efforts and R&D resources on next-generation PON technologies like WDM-PON and 10G EPON," notes Jeff Heynen, directing analyst for IPTV at Infonetics Research. "The GPON vendor landscape was due for some contraction, and with vendors like Nokia Siemens and Tellabs abandoning GPON for WDM-PON, the big winners in the GPON market look to be Alcatel-Lucent, Huawei, Motorola, ZTE, and Ericsson," he reports.
Heynen added that Infonetics adjusted its PON revenue forecasts down based on conversations with service providers who are postponing fiber upgrades until they are confident subscriber uptake of ultra-broadband services will justify the expense associated with extending fiber to buildings and residences. Today's global economic climate solidifies their rationale for holding off on new investments. However, there are many service providers who had already committed budget to fiber upgrades, such as Verizon, NTT, KT, and Hanaro, who see fiber as a strategic advantage and who continue to aggressively roll out new fiber.
Other report highlights include the following:• Mitsubishi continues to lead the overall worldwide PON equipment market, although competitors continue to chip away at its lead, with Tellabs and Alcatel-Lucent now neck and neck for second position.• In 2Q08, Alcatel-Lucent retains first place in worldwide GPON revenue, and Motorola posts a 451% sequential jump in revenue, propelling it to second position--ahead of Huawei--for the first time.• PacketFront and Cisco are running neck and neck in the worldwide Ethernet FTTH equipment market, with PacketFront ahead by far for CPE and Cisco ahead by far for switches.• Between 1Q08 and 2Q08, worldwide BPON manufacturer revenue increased 25% and ports climbed 52%.• Worldwide BPON, EPON, and GPON subscribers are forecast to top 46 million in 2011.• The expense of WDM-PON systems is expected to be too high for most carriers in the early phases of the market, leading carriers to use WDM-PON for DSLAM backhaul applications, as opposed to FTTH deployments, until WDM-PON prices come down.
Infonetics' report tracks PON equipment revenue and ports, including BPON, EPON, GPON, WDM-PON, and OLTs and ONTs with FTTH vs. FTTB splits; Ethernet FTTH equipment (CPE vs. service provider); and total FTTH equipment (CPE vs. non-CPE). The report also tracks PON, POTS, Ethernet, and DSL ports; and PON, PON FTTH, and Ethernet FTTH subscribers.
Friday, October 31, 2008
Wednesday, October 29, 2008
Corning 2008Q3 Results
CORNING, N.Y., Oct 29, 2008 (BUSINESS WIRE) --
Corning Incorporated today announced results for the third quarter 2008.
Third-Quarter Highlights
-- Sales were $1.56 billion, about even with last year's third quarter.
-- Earnings per share (EPS) were $0.49; including net special gains of $36 million or $0.03 per share.
-- Excluding special items, EPS was $0.46,* up 21% over last year's results, due in part to favorable exchange-rate movements.
-- Display Technologies' combined LCD glass volume, including Corning's wholly owned business and Samsung Corning Precision Glass Co., Ltd. (SCP), was up 2% sequentially and 18% year over year. Volume from Corning's wholly owned business decreased 10% sequentially and 2% year over year. Samsung Corning Precision's volume increased 12% sequentially and 38% year over year.
Fourth-Quarter Outlook Summary
-- Sales are expected in the range of $1.2 billion to $1.3 billion.
-- EPS before special items are expected in the range of $0.20 to $0.28.*
-- Combined LCD glass volume is expected to be down in the range of 10% to 20% sequentially, with the wholly owned business down 20% to 30% and SCP down 5% to 15%. Year over year the combined glass volume is expected to decrease by 2% to 13%
-- For the full year, combined LCD glass volume growth is expected to be 20% to 22%.
For more details go to http://www.marketwatch.com/news/story/Corning-Announces-Third-Quarter-Results/story.aspx?guid=%7B981773E1-21EC-4AF5-A6CD-860893899F26%7D
Corning Incorporated today announced results for the third quarter 2008.
Third-Quarter Highlights
-- Sales were $1.56 billion, about even with last year's third quarter.
-- Earnings per share (EPS) were $0.49; including net special gains of $36 million or $0.03 per share.
-- Excluding special items, EPS was $0.46,* up 21% over last year's results, due in part to favorable exchange-rate movements.
-- Display Technologies' combined LCD glass volume, including Corning's wholly owned business and Samsung Corning Precision Glass Co., Ltd. (SCP), was up 2% sequentially and 18% year over year. Volume from Corning's wholly owned business decreased 10% sequentially and 2% year over year. Samsung Corning Precision's volume increased 12% sequentially and 38% year over year.
Fourth-Quarter Outlook Summary
-- Sales are expected in the range of $1.2 billion to $1.3 billion.
-- EPS before special items are expected in the range of $0.20 to $0.28.*
-- Combined LCD glass volume is expected to be down in the range of 10% to 20% sequentially, with the wholly owned business down 20% to 30% and SCP down 5% to 15%. Year over year the combined glass volume is expected to decrease by 2% to 13%
-- For the full year, combined LCD glass volume growth is expected to be 20% to 22%.
For more details go to http://www.marketwatch.com/news/story/Corning-Announces-Third-Quarter-Results/story.aspx?guid=%7B981773E1-21EC-4AF5-A6CD-860893899F26%7D
FCC chairman faces growing pressure to delay votes
WASHINGTON (AP) — Nearly 75 members of Congress are urging the head of the Federal Communications Commission to delay next week's vote on a proposal to overhaul key pieces of telecommunications regulation, arguing that the matter should get public review.
FCC Chairman Kevin Martin wants to significantly reorder the complicated menu of fees that phone companies pay to connect calls with each other's networks. He advocates more uniform, lower rates.
The proposed changes are backed by the two largest phone companies, Verizon Communications Inc. and AT&T Inc. They argue that existing rules are outdated and based on obsolete regulatory distinctions.
But the plan faces opposition from a broad coalition of competing carriers and rural phone companies, which fear it could erode the money they get for completing phone calls to their subscribers. And consumer advocates warn that it could lead to higher phone bills — particularly for rural customers — as phone companies seek to recover lost access charges from other sources.
Martin is also seeking major changes to the $7 billion-plus Universal Service Fund, a federal program that subsidizes telecom service in rural and poor communities through a surcharge on phone bills. Among other things, Martin would require carriers to use Universal Service money to invest in broadband networks in parts of the country that lack high-speed Internet connections.
Martin, one of three Republicans on the five-member FCC, has scheduled a vote on these issues for Nov. 4. A spokesman, Robert Kenny, pointed out that the FCC faces a Nov. 5 deadline, imposed by a federal court, for reforming part of the complex access fee system.
In a letter sent this week, however, 61 House members called on the chairman to release the proposal for public review and comment for at least two months.
"The public deserves the opportunity to provide fully informed comments, and the commission stands to gain by understanding the positions of all parties interested in its potentially sweeping decision," the letter says. It was written by Virginia Democrat Rick Boucher and Nebraska Republican Lee Terry, who have sponsored legislation to reform the Universal Service Fund.
That sentiment was echoed in two other letters that lawmakers sent to Martin this week, including one signed by 10 senators who expressed concerns that the details of Martin's proposal could end up hindering the construction of rural broadband networks.
Kenny, Martin's spokesman, said the chairman intends to move ahead with next week's vote on his broad reform proposal. Kenny added that while the plan has not been put out for public comment in its current form, most of the main elements have been debated in Washington for years.
Kenny also insisted that the proposal will not necessarily lead to higher phone bills and will help expand high-speed Internet connections in underserved parts of the country.
"Chairman Martin continues to work with the other commissioners on what we know is a very complex and complicated proposal that we hope will bring meaningful reform for the benefit of consumers," Kenny said.
Kenny said Martin also intends to move ahead with a vote on another contentious item on the Nov. 4 agenda: a proposal to open up unused portions of the television airwaves known as "white spaces" to deliver wireless broadband services.
Public interest groups and many of the nation's biggest technology companies, including Google Inc. and Microsoft Corp., hope the plan will lead to universal, affordable broadband.
But the proposal has run into fierce opposition from the nation's big TV broadcasters, which argue using the fallow spectrum to deliver wireless Internet services could disrupt their over-the-air signals. Manufacturers and users of wireless microphones have also raised concerns about interference with audio systems at concerts and sporting events.
In recent days, a wide range of sports leagues, church leaders and performers — from Dolly Parton to Guns N' Roses — have written the FCC urging the vote to be delayed.
FCC Chairman Kevin Martin wants to significantly reorder the complicated menu of fees that phone companies pay to connect calls with each other's networks. He advocates more uniform, lower rates.
The proposed changes are backed by the two largest phone companies, Verizon Communications Inc. and AT&T Inc. They argue that existing rules are outdated and based on obsolete regulatory distinctions.
But the plan faces opposition from a broad coalition of competing carriers and rural phone companies, which fear it could erode the money they get for completing phone calls to their subscribers. And consumer advocates warn that it could lead to higher phone bills — particularly for rural customers — as phone companies seek to recover lost access charges from other sources.
Martin is also seeking major changes to the $7 billion-plus Universal Service Fund, a federal program that subsidizes telecom service in rural and poor communities through a surcharge on phone bills. Among other things, Martin would require carriers to use Universal Service money to invest in broadband networks in parts of the country that lack high-speed Internet connections.
Martin, one of three Republicans on the five-member FCC, has scheduled a vote on these issues for Nov. 4. A spokesman, Robert Kenny, pointed out that the FCC faces a Nov. 5 deadline, imposed by a federal court, for reforming part of the complex access fee system.
In a letter sent this week, however, 61 House members called on the chairman to release the proposal for public review and comment for at least two months.
"The public deserves the opportunity to provide fully informed comments, and the commission stands to gain by understanding the positions of all parties interested in its potentially sweeping decision," the letter says. It was written by Virginia Democrat Rick Boucher and Nebraska Republican Lee Terry, who have sponsored legislation to reform the Universal Service Fund.
That sentiment was echoed in two other letters that lawmakers sent to Martin this week, including one signed by 10 senators who expressed concerns that the details of Martin's proposal could end up hindering the construction of rural broadband networks.
Kenny, Martin's spokesman, said the chairman intends to move ahead with next week's vote on his broad reform proposal. Kenny added that while the plan has not been put out for public comment in its current form, most of the main elements have been debated in Washington for years.
Kenny also insisted that the proposal will not necessarily lead to higher phone bills and will help expand high-speed Internet connections in underserved parts of the country.
"Chairman Martin continues to work with the other commissioners on what we know is a very complex and complicated proposal that we hope will bring meaningful reform for the benefit of consumers," Kenny said.
Kenny said Martin also intends to move ahead with a vote on another contentious item on the Nov. 4 agenda: a proposal to open up unused portions of the television airwaves known as "white spaces" to deliver wireless broadband services.
Public interest groups and many of the nation's biggest technology companies, including Google Inc. and Microsoft Corp., hope the plan will lead to universal, affordable broadband.
But the proposal has run into fierce opposition from the nation's big TV broadcasters, which argue using the fallow spectrum to deliver wireless Internet services could disrupt their over-the-air signals. Manufacturers and users of wireless microphones have also raised concerns about interference with audio systems at concerts and sporting events.
In recent days, a wide range of sports leagues, church leaders and performers — from Dolly Parton to Guns N' Roses — have written the FCC urging the vote to be delayed.
Wednesday, October 22, 2008
US FTTH Update
FTTH Council: 3.76 million North American households connected
SEPTEMBER 25, 2008 -- The upgrading of North America's last mile networks with end-to-end fiber is continuing at a robust pace, with fiber to the home (FTTH) arriving at more than 1.6 million households over the past year, according to a study released this week by the Fiber-to-the-Home Council. The total number of FTTH subscribes in North America now stands at 3.76 million. The study, by RVA Market Research , pegged the annual growth rate for FTTH in North America at 76%, the highest of any country or region in the world. The updated deployment statistics were announced at the FTTH 2008 Conference & Expo, which is being held this week in Nashville, TN.
The study also shows FTTH networks now passing 13.8 million North American homes, up from 9.55 million a year ago. The number of homes receiving video services over FTTH more than doubled over the past year, from slightly more than one million in September 2007 to nearly 2.2 million today. Meanwhile, the overall "take rate"--the percentage of those offered FTTH service who decide to subscribe--went up for the fifth straight six-month period, and now stands at more than 30%. "This continued growth in the number of connections and in the take rate is evidence of what consumers think about fiber to the home--it is fast becoming the technology of choice for receiving high-bandwidth Internet and superior video services," contends Joe Savage, president of the FTTH Council. "In addition, we are continuing to see enormously high customer satisfaction rates for FTTH services when compared to other types of broadband and video providers." The study also found that average data download speeds for FTTH subscribers continued to rise--to 7 Mbits/sec from 5.2 Mbits/sec a year ago--as providers increased available bandwidth in their service offerings. This compares to a median real-time Internet download speed of 2.3 Mbits/sec among all Internet users, as determined by the Communications Workers of America in their recent Speed Matters survey of more than 230,000 people.
Mike Render of RVA LLC, who authored the study, notes that the sustained high growth rate for FTTH connections is disproving many of the claims that skeptics made about the technology just a few years ago.
"They said FTTH would never work for overbuilds, in rural areas, in multi-tenant buildings or in places where there was already competition to provide these services," he recalls. "They said no one would ever need or pay for 7 megabits of download speed. And now we are finding that those concerns are not panning out."
SEPTEMBER 25, 2008 -- The upgrading of North America's last mile networks with end-to-end fiber is continuing at a robust pace, with fiber to the home (FTTH) arriving at more than 1.6 million households over the past year, according to a study released this week by the Fiber-to-the-Home Council. The total number of FTTH subscribes in North America now stands at 3.76 million. The study, by RVA Market Research , pegged the annual growth rate for FTTH in North America at 76%, the highest of any country or region in the world. The updated deployment statistics were announced at the FTTH 2008 Conference & Expo, which is being held this week in Nashville, TN.
The study also shows FTTH networks now passing 13.8 million North American homes, up from 9.55 million a year ago. The number of homes receiving video services over FTTH more than doubled over the past year, from slightly more than one million in September 2007 to nearly 2.2 million today. Meanwhile, the overall "take rate"--the percentage of those offered FTTH service who decide to subscribe--went up for the fifth straight six-month period, and now stands at more than 30%. "This continued growth in the number of connections and in the take rate is evidence of what consumers think about fiber to the home--it is fast becoming the technology of choice for receiving high-bandwidth Internet and superior video services," contends Joe Savage, president of the FTTH Council. "In addition, we are continuing to see enormously high customer satisfaction rates for FTTH services when compared to other types of broadband and video providers." The study also found that average data download speeds for FTTH subscribers continued to rise--to 7 Mbits/sec from 5.2 Mbits/sec a year ago--as providers increased available bandwidth in their service offerings. This compares to a median real-time Internet download speed of 2.3 Mbits/sec among all Internet users, as determined by the Communications Workers of America in their recent Speed Matters survey of more than 230,000 people.
Mike Render of RVA LLC, who authored the study, notes that the sustained high growth rate for FTTH connections is disproving many of the claims that skeptics made about the technology just a few years ago.
"They said FTTH would never work for overbuilds, in rural areas, in multi-tenant buildings or in places where there was already competition to provide these services," he recalls. "They said no one would ever need or pay for 7 megabits of download speed. And now we are finding that those concerns are not panning out."
Tuesday, October 7, 2008
Verizon bets big on network infrastructure
From Verizon CIO Shaygan Kheradpir's 38th floor apartment on the Upper East Side of Manhattan with panoramic views of the East River, I saw first-hand the fruits of the company's $23 billion gamble to build a new fiber network directly to customers' doorsteps and a glimpse into where the strategy will lead next.
Kheradpir had invited a handful of journalists to his swank pad to show off the latest enhancements to Verizon's Fios TV service. The new features, which include everything from new widgets for getting weather and local traffic to a specially designed ESPN fantasy football application to remote control of DVRs, are rolling out across Verizon's Fios footprint right now with New York, Verizon's largest market, expected to get the enhancements starting October 9th.
While its cable competitors look for ways to curb their customers' usage of their networks by either slowing down certain applications or metering usage, Verizon plans to spend about $23 billion through 2010 to take fiber directly into people's homes to actually increase the amount of bandwidth people consume. The company also recently spent $9 billion on 700Mhz spectrum in the Federal Communications Commission's auction, which it plans to use to build a new fourth-generation wireless broadband network, again with the hope that people will choose bandwidth-intensive applications.
Verizon plans to spend about $23 billion through 2010 to take fiber directly into people's homes.(Credit: Verizon)
Verizon's commitment to betting big on bandwidth could cement its dominance in the communications market for years to come. But these bets don't come cheap. And as network operators find themselves in tighter competition with Internet giants such as Google, they could end up simply becoming dumb pipe providers, competing on speeds and feeds rather than services.
There's no doubt that service providers are caught between a rock and a hard place. Not only must they compete with each other, but they also have to think differently and innovatively to compete against new Internet competitors, who are using the service providers' high-speed infrastructures to deliver competing voice and video services.
While other service providers, like AT&T and the cable companies, have tried to deliver new services and enhancements by incrementally upgrading their infrastructure, Verizon has gambled all its chips by spending billions of dollars on fiber infrastructure that it believes will future-proof its network.
Verizon's Kheradpir admitted that Verizon's fast fiber pipes will likely be used to deliver new applications and services that Verizon may never be able to monetize. But the super fast infrastructure also provides Verizon with a blank canvas that its own developers can use to create new services.
"The network that Verizon has created with Fios is a dream for software developers," he said. "It's what we all dreamed of when we were in school. It's basically an unlimited pipe that can be used to develop whatever you want."
The main thing the ultra-fast fiber network enables is the ability to deliver rich content, namely high-definition video. According to J.D. Power and Associates, the number of households that report viewing high-def programs has nearly doubled since 2007, reaching 55 percent this year.
Kheradpir also believes that HD doesn't stop with TV. People will increasingly want high-definition Web video and high-definition digital music. That's why Verizon is promising at least 100 HD channels as part of its Fios service in places like New York City. But high-definition content eats up bandwidth, making it difficult for many of Verizon's competitors to keep up with demand. Verizon's competitors are also introducing enhanced offerings. Time Warner Cable, which competes with Verizon in New York City and the surrounding area, is also pushing for 100 HD channels by the end of the year.
Still, Kheradpir believes Verizon is better positioned with its all-fiber network to stay ahead of the HD curve.
Building the network at homeAs home networks increasingly look more like corporate local area networks, Kheradpir also sees an opportunity for service providers to manage their networks. He calls this the "consumerization" of IT. The difference between networks in the home and in the office is that instead of shuttling corporate data back and forth, people are sharing digital pictures and music, watching high-definition video and using VoIP services to stay connected to family and friends. And this basic difference means that service providers have to think differently about serving these customers.
"IT in the corporate environment is all about improving efficiency," Kheradpir said. "But in the home, it's about improving quality of life."
Verizon CIO Shaygan Kheradpir(Credit: Verizon)
And that is where Kheradpir believes Verizon can add value. Not only can it provide the basic infrastructure, but it can build the applications that ride over this infrastructure to improve users' experiences. This means allowing people to access their digital content from wherever they are on whatever device they want, he explained. And because few people have IT managers living with them, it also means hiding the complexity and management of the technology in the network far from the end user.
Verizon has worked this concept into its latest Fios TV upgrade. Its new set-top boxes will automatically discover all connected devices whether they're wired or wireless, and it will allow people to view photos or video or listen to music from any device on the network. This means that you can share pictures from a PC hard drive on a computer. Eventually it could also allow people to listen to the digital music that's stored at home on their PC while on their cell phones.
"The consumer doesn't want to think about where they store their content," Kheradpir said. "Our view is that people should leave their pictures and music where it is. And we will extend the network to get it for them."
The latest version of Fios TV will also include remote DVR control. Initially, this feature will allow users to control their DVR from an Internet-connected PC. But the company also demonstrated how it can be done via a cell phone. Using a mobile Web site on phones such as the LG Voyager and the enV, subscribers will be able to set recording schedules, search for recorded shows, and enable parental controls.
In addition to needing someone to manage their home "IT" needs, Kheradpir believes that consumers want more personalized content. Again, a high-speed network can help facilitate this. For example, Verizon has added widgets to its latest Fios upgrade that allow third-party developers to create applications for personalized local weather, traffic, and horoscopes. One Verizon engineer even created a Facebook application so that people can access status updates on their TV screens.
Verizon has also included a "What's Hot" application that anonymously keeps track of what people are viewing to show people the most popular TV shows in their areas. Kheradpir said that Verizon is able to offer more personalized services because of the bi-directional nature of its network. Not only can Verizon broadcast content to its subscribers, but it can collect information and allow for individual interaction to provide consumers with a more personalized experience.
Seeing returnsSo far, Verizon's gamble appears to be paying off. In areas where it sells Fios TV, Verizon has been able to steal customers from cable and satellite providers. And as of the end of June this year, Verizon had increased its Fios TV penetration rate to 19.7 percent from 13.3 percent in 2007. In total, the company has 1.4 million Fios TV subscribers.
Verizon is also getting high marks from customers. In a recent J.D. Power and Associates survey, Verizon Fios TV ranked higher than cable or satellite in terms of customer satisfaction. Specifically, customers said Fios TV's picture clarity and programming exceeded their expectations. AT&T, which provides its U-Verse service, also got high marks for its IPTV offering.
Verizon's goal is to attract 4 million customers by 2010, giving it a market penetration of about 25 percent. And it hopes to attract about 7 million Fios Internet customers, for a penetration rate of 35 to 40 percent.
But Fios is just the beginning. Verizon is also in the early stages of planning its fourth-generation wireless network that will be used to deliver the connected experience to wireless devices. While Kheradpir admits it is still in the early days on the wireless front, he sees it as an important piece of the strategy.
"Wireless is a key lever," he said. "From the time we wake up until we go to bed we generally have a wireless device within reach. So it makes sense to extend this strategy to those devices as well."
Indeed, everyone in the communications sector sees wireless as the next major frontier. Verizon's cable competitors Comcast and Time Warner Cable have invested in the new Clearwire joint venture, which will combine Sprint Nextel's WiMax assets with Clearwire's to build a next generation wireless network. Google has also made various wireless investments. Verizon has clearly staked much of its future on a high-capacity wired infrastructure. But it remains to be seen how aggressively the company will bet on its next-generation wireless network.
Kheradpir had invited a handful of journalists to his swank pad to show off the latest enhancements to Verizon's Fios TV service. The new features, which include everything from new widgets for getting weather and local traffic to a specially designed ESPN fantasy football application to remote control of DVRs, are rolling out across Verizon's Fios footprint right now with New York, Verizon's largest market, expected to get the enhancements starting October 9th.
While its cable competitors look for ways to curb their customers' usage of their networks by either slowing down certain applications or metering usage, Verizon plans to spend about $23 billion through 2010 to take fiber directly into people's homes to actually increase the amount of bandwidth people consume. The company also recently spent $9 billion on 700Mhz spectrum in the Federal Communications Commission's auction, which it plans to use to build a new fourth-generation wireless broadband network, again with the hope that people will choose bandwidth-intensive applications.
Verizon plans to spend about $23 billion through 2010 to take fiber directly into people's homes.(Credit: Verizon)
Verizon's commitment to betting big on bandwidth could cement its dominance in the communications market for years to come. But these bets don't come cheap. And as network operators find themselves in tighter competition with Internet giants such as Google, they could end up simply becoming dumb pipe providers, competing on speeds and feeds rather than services.
There's no doubt that service providers are caught between a rock and a hard place. Not only must they compete with each other, but they also have to think differently and innovatively to compete against new Internet competitors, who are using the service providers' high-speed infrastructures to deliver competing voice and video services.
While other service providers, like AT&T and the cable companies, have tried to deliver new services and enhancements by incrementally upgrading their infrastructure, Verizon has gambled all its chips by spending billions of dollars on fiber infrastructure that it believes will future-proof its network.
Verizon's Kheradpir admitted that Verizon's fast fiber pipes will likely be used to deliver new applications and services that Verizon may never be able to monetize. But the super fast infrastructure also provides Verizon with a blank canvas that its own developers can use to create new services.
"The network that Verizon has created with Fios is a dream for software developers," he said. "It's what we all dreamed of when we were in school. It's basically an unlimited pipe that can be used to develop whatever you want."
The main thing the ultra-fast fiber network enables is the ability to deliver rich content, namely high-definition video. According to J.D. Power and Associates, the number of households that report viewing high-def programs has nearly doubled since 2007, reaching 55 percent this year.
Kheradpir also believes that HD doesn't stop with TV. People will increasingly want high-definition Web video and high-definition digital music. That's why Verizon is promising at least 100 HD channels as part of its Fios service in places like New York City. But high-definition content eats up bandwidth, making it difficult for many of Verizon's competitors to keep up with demand. Verizon's competitors are also introducing enhanced offerings. Time Warner Cable, which competes with Verizon in New York City and the surrounding area, is also pushing for 100 HD channels by the end of the year.
Still, Kheradpir believes Verizon is better positioned with its all-fiber network to stay ahead of the HD curve.
Building the network at homeAs home networks increasingly look more like corporate local area networks, Kheradpir also sees an opportunity for service providers to manage their networks. He calls this the "consumerization" of IT. The difference between networks in the home and in the office is that instead of shuttling corporate data back and forth, people are sharing digital pictures and music, watching high-definition video and using VoIP services to stay connected to family and friends. And this basic difference means that service providers have to think differently about serving these customers.
"IT in the corporate environment is all about improving efficiency," Kheradpir said. "But in the home, it's about improving quality of life."
Verizon CIO Shaygan Kheradpir(Credit: Verizon)
And that is where Kheradpir believes Verizon can add value. Not only can it provide the basic infrastructure, but it can build the applications that ride over this infrastructure to improve users' experiences. This means allowing people to access their digital content from wherever they are on whatever device they want, he explained. And because few people have IT managers living with them, it also means hiding the complexity and management of the technology in the network far from the end user.
Verizon has worked this concept into its latest Fios TV upgrade. Its new set-top boxes will automatically discover all connected devices whether they're wired or wireless, and it will allow people to view photos or video or listen to music from any device on the network. This means that you can share pictures from a PC hard drive on a computer. Eventually it could also allow people to listen to the digital music that's stored at home on their PC while on their cell phones.
"The consumer doesn't want to think about where they store their content," Kheradpir said. "Our view is that people should leave their pictures and music where it is. And we will extend the network to get it for them."
The latest version of Fios TV will also include remote DVR control. Initially, this feature will allow users to control their DVR from an Internet-connected PC. But the company also demonstrated how it can be done via a cell phone. Using a mobile Web site on phones such as the LG Voyager and the enV, subscribers will be able to set recording schedules, search for recorded shows, and enable parental controls.
In addition to needing someone to manage their home "IT" needs, Kheradpir believes that consumers want more personalized content. Again, a high-speed network can help facilitate this. For example, Verizon has added widgets to its latest Fios upgrade that allow third-party developers to create applications for personalized local weather, traffic, and horoscopes. One Verizon engineer even created a Facebook application so that people can access status updates on their TV screens.
Verizon has also included a "What's Hot" application that anonymously keeps track of what people are viewing to show people the most popular TV shows in their areas. Kheradpir said that Verizon is able to offer more personalized services because of the bi-directional nature of its network. Not only can Verizon broadcast content to its subscribers, but it can collect information and allow for individual interaction to provide consumers with a more personalized experience.
Seeing returnsSo far, Verizon's gamble appears to be paying off. In areas where it sells Fios TV, Verizon has been able to steal customers from cable and satellite providers. And as of the end of June this year, Verizon had increased its Fios TV penetration rate to 19.7 percent from 13.3 percent in 2007. In total, the company has 1.4 million Fios TV subscribers.
Verizon is also getting high marks from customers. In a recent J.D. Power and Associates survey, Verizon Fios TV ranked higher than cable or satellite in terms of customer satisfaction. Specifically, customers said Fios TV's picture clarity and programming exceeded their expectations. AT&T, which provides its U-Verse service, also got high marks for its IPTV offering.
Verizon's goal is to attract 4 million customers by 2010, giving it a market penetration of about 25 percent. And it hopes to attract about 7 million Fios Internet customers, for a penetration rate of 35 to 40 percent.
But Fios is just the beginning. Verizon is also in the early stages of planning its fourth-generation wireless network that will be used to deliver the connected experience to wireless devices. While Kheradpir admits it is still in the early days on the wireless front, he sees it as an important piece of the strategy.
"Wireless is a key lever," he said. "From the time we wake up until we go to bed we generally have a wireless device within reach. So it makes sense to extend this strategy to those devices as well."
Indeed, everyone in the communications sector sees wireless as the next major frontier. Verizon's cable competitors Comcast and Time Warner Cable have invested in the new Clearwire joint venture, which will combine Sprint Nextel's WiMax assets with Clearwire's to build a next generation wireless network. Google has also made various wireless investments. Verizon has clearly staked much of its future on a high-capacity wired infrastructure. But it remains to be seen how aggressively the company will bet on its next-generation wireless network.
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