On a quiet residential street in Belmont, Mass., a small town 11 kilometres northwest of Boston, a Verizon Communications Inc. technician has spent more than five hours hooking up one home to the U.S. telephone company's new digital television and Internet network.
He has run a fibre-optic cable from a nearby telephone pole to new equipment mounted on the house, torn out and replaced the old coaxial cable inside the house, and tested the network.
By midafternoon, one small television set in the kitchen is up and running. But the technician still needs to sort out glitches with other TVs and a personal computer before the job is complete and he can move on to another house the next day.
That one home encapsulates both Verizon's challenges and opportunities as it seeks the holy grail for telecommunications providers: a TV service that can break the lock cable operators have on the market.
If everything goes as planned, Verizon believes it will be able to persuade phone subscribers to stay and spend more by adding Internet and TV services, rather than switching to other “triple-play” packages — phone, Internet, and TV services — offered by the cable companies.
Verizon, however, is making a colossal wager to achieve that vision. It's spending $23-billion (U.S.) on the most extensive rollout of fibre-optic cable of any North American carrier. That's more than 20 times what Bell Canada is investing to install more fibre in its network.
The difference is in the size of the upgrade. Verizon, unlike other big phone carriers in the United States and Canada, believes the traditional copper infrastructure won't cut it for TV and Internet services in the future. While carriers like Bell are mostly bringing fibre to a “node” or local point in the neighbourhood (FTTN), Verizon is going straight to the home.
It's a tough but crucial call for carriers as they decide how much bandwidth customers will really need. Nobody wants to be caught out with speeds that are too slow, or tons of costly capacity that sit idle.
To critics, Verizon's strategy doesn't make economic sense. Its share price has suffered, rising just 5.6 per cent over three years, trailing the massive gains of U.S. peers AT&T Inc. (44 per cent) and Qwest Communications International Inc. (102 per cent).
But others believe it's a matter of time before all carriers follow Verizon's lead. Verizon, based in Basking Ridge, N.J., doesn't appear to have any regrets about deciding four years ago to bring fibre to the home (FTTH). In fact, it would like to move faster.
“I'm more confident today then I was four years ago,” said Paul Lacouture, executive vice-president for engineering and technology for Verizon's telecom group, citing the development of bandwidth-hungry applications and client response.
“I'm constantly trying to figure out ways we can build it faster,” he said. “The biggest complaint I have is, ‘why aren't you in my neighbourhood yet?' ”
Why are phone companies moving into the mature TV market? It's all about defence. Their bread and butter, land-line phone service, has come under attack in recent years from cable operators.
The battle's body count so far: The cable firms have poached more than seven million phone customers in the U.S. and 1.45 million in Canada by the end of 2006, according to Moody's Investors Service.
FTTH will eventually deliver speeds of more than 100 megabits per second (Mbps). That kind of bandwidth would allow a family to simultaneously watch two high-definition channels, digitally record an HD show, browse the Web or download files, and use other, yet-unknown applications. It would blow past the 25 Mbps or so that FTTN can deliver.
Observers agree phone companies need a TV service to stay in the game. Consumers want to pick up a discounted triple-play package of phone, Internet and TV services from one source.
