28 September 2005

BusinessWeek on Verizon's fiber buildout

Viewing this requires a subscription for now (probably it will be free next week). In it, Olga Karif examines Verizon's offering over the fiber that they are pulling to the home in selected cities. She argues that the payback on this investment is at least ten years out (more if a significant price ware ensues). The article also discusses the various regulatory approvals from states and municipalities that it must win to offer this service. To me, this shows that the US has a ways to go yet to smoothe the path for investment and entry into telecommunications.
  • How would the draft telecommunications bill (or alternative ideas, such as those proposed by the PFF) help?
  • Should Verizon have more flexibility (and less friction) to carry out this business plan?

3 comments:

mohamed said...

It seems to me that whereas the cable companies can offer phone services, phone companies are not allowed to offer TV. Phone companies have to go through approvals procedures at every level from municipalities to state.
My suggestion is that rather than Verizon having to seek a franchise approval from 250 cities, it would be much easier to have a national ruling from the FCC which is general. I don’t understand much about the boundaries between state and federal but it just seems to me there is a need to ease the regulation process.

It seems to me due to impediments in the legislation it will become a challenge to the Telco’s to satisfy investors and also be able to offer consumers a wider array of services to compete with the cable companies.

Verizon and other Telco’s are driven by the urgency to react to losses in revenue due to decreased sales mainly because of the cable companies (one of the culprits in causing a decrease in revenue). Whether Verizon and other Telco’s should be given flexibility and less friction, I would argue yes as long as the cable companies are allowed to foray in to the phone company’s market.

Does anyone know about the status of cable companies in Europe and whether they have the same legislations as the US?

Anonymous said...

To provide new services the logical next step is to go for fiber optics, for any telecommunication company at this stage. Major cities in many countries are already interconnected. But here in US, getting approval from each state and county would certainly hinder growth.

Martin Weiss said...

Every country has separate legislation, though there is a good deal of commonality throughout the European Union. As far as I know, local franchising is predominantly a US phenomenon. The rationale is that municipalities bear costs due to the existence of a network for which they should be reimbursed.

Franchises were originally government grants to private organizations for exclusive rights. Franchisees were to carry out a governmental function on their behalf. Usually, some measure of price regulation went along with it.

Franchises for telecommunications systems have a long history, though they were seldom exclusive. In the 1990s, franchise reauthorizations for cable TV were used by some municipalities as a mechanism for achieving certain public goals, such as penetration, technology upgrades, and "open access".