Verizon to spend $18 billion on FTTP

* Verizon's gives update on its fiber-based FiOS service rollout

Verizon provided an update on its fiber-based FiOS service rollout in an effort to appease squeamish investors and analysts on the project's ROI.

FiOS is Verizon's fiber-to-the-premises () buildout intended to bring high-speed Internet and video services to homes and small business. The project's total cost is $18 billion over six years - $23 billion in the fiber rollout minus $5 billion in spending on copper.

Wall Street tends to cringe at that figure, believing that Verizon may be spending too much to run fiber directly to homes, while AT&T and BellSouth are running it only to the curb or neighborhood node, a strategy some believe could provide comparable service at reduced cost. FiOS provides bandwidth tiers of 5Mbps to 30Mbps downstream, with 50Mbps downstream in a few select areas, and plans to boost rates to 100Mbps.

Verizon said it plans to pass 18 million premises with its fiber network by the end of 2010, or more than 50% of the approximately 33 million households in the company’s 28-state wireline service area. The FiOS network buildout is on target to pass a total of 6 million premises by year-end 2006, with an additional 3 million a year planned through 2010, the carrier says.

Approximately 70% of FiOS Internet subscribers are new Verizon broadband customers. The carrier has set a target of 725,000 FiOS Internet customers by year-end, with the service available for sale to 5 million premises.

Verizon said that FiOS will generate positive operating income beginning in 2009, based in part on growing revenue from FiOS services combined with declining operational costs due to fiber network efficiencies. The project will generate profitable growth within four years of initial investment, the carrier says, based on expectations of attracting up to 7 million Internet customers and up to 4 million TV customers by the end of 2010.

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Copyright © 2006 IDG Communications, Inc.

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