02 October 2007

Returns from Verizon's FiOS investment

The telecommunications industry is one that is characterized by large up front investments with uncertain future revenue streams. Verizon's FiOS project, is a classic example of such investment. I have blogged about this before (see this and this).  As this article points out, the early returns are encouraging for Verizon.

This article also points out the relationship between long term strategic investment, investor relations and competition.  Prior to this investment, Verizon had twisted pair loops that prevented them from offering "triple play" services. 

But this has not been without controversy, especially given the current regulatory climate in the US.  The short story is that Verizon is not required to offer these services on an unbundled basis.  Observers have reported that Verizon is killing the copper loops replaced by FiOS, preventing people from reverting to copper later, and also eliminating their requirement to offer unbundled loop elements to broadband competitors (see this, for example).  So Verizon is forestalling competition with both their own (older) technology and with potential competitors who might use this infrastructure. 

Do you think that this behavior should be regulated?  Some have argued that the public "owns" the infrastructure because they have paid for it through regulated rates for many years.  Do you agree with this?  If so, is Verizon right to remove the older infrastructure?

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