Verizon gambles on optical fiber

MASSAPEQUA PARK, N.Y. – Lisa Donohue squats on the floor with her 2-year-old son Calum in front of their high-definition TV, watching a children’s cartoon.

“What kind of animal is Franklin?” she asks him. Calum is a little under the weather, and his eyes droop a bit, but they stay fixed on the turtle on the screen.

Calum probably doesn’t know, but the image of Franklin’s bright green skin is brought to him not by cable, satellite or broadcast, but by pulses of light that go straight to his home here on suburban Long Island from a telephone-company building miles away, via optical fiber.

Optical fiber – strands of glass 15 times thinner than a human hair – have been used by telecommunications companies over long-haul routes since the 1980s.

Now, Verizon Communications Inc., is making a big and expensive bet on replacing the network of copper wires that has provided phone service since the 19th century with fiber, giving it the capability to carry TV and super-fast Internet service in the bargain.

Investors have been skeptical of the plans, sending Verizon’s stock down by about 20 percent since the rollout started last year, and other phone companies have not made the same gamble. Donohue, however, is happy with the service Verizon calls FiOS.

The family pays about $220 a month for TV, phone, high-speed Internet service and two cell phones, which she says is cheaper than what they were paying before, when they had cable.

“It comes as one bill, which is nice because I don’t have to remember to pay four times,” Donohue says.

Factors like that have made Verizon’s FiOS TV a success in the few areas where it’s available, judging by Verizon’s data. It has said that 6.5 percent of households in Massapequa Park signed up for TV in the first three months after its launch on Jan. 24. That figure is disputed by Cablevision Systems Corp., the incumbent cable company, which said it had a net loss of less than 2 percent in the area.

“This is a once-in-a-lifetime project,” said Paul Lacouture, Verizon’s vice president of engineering and technology.

Chief among fiber’s advantages is its almost unlimited capacity to carry information, which Verizon only nibbles at with its current system: It lights fiber to the home with just three laser beams, though the fiber can carry many more.

The single beam that carries video (the others carry data and telephone calls to and from the home) has more capacity than an entire coaxial cable of the kind used by cable companies.

In practical terms, that means better image quality, because the digital TV channels don’t need to be degraded to save bandwidth.

“If you’re watching a program, you see the faces elongate, smear out” on digital cable, says Alex Fazi, who as owner of a videography studio in nearby Wantagh has a keen eye for video quality. He said he’ll sign up for fiber TV as soon as it’s available in his area.

In a similar way, fiber provides almost limitless Internet connection speeds. With current technology, Verizon could provide download speeds of 644 megabits per second, a bigger step up from DSL at 1.5 mbps than DSL is a step up from dial-up.

But for now, the maximum speed Verizon sells is 30 mbps for small businesses, or 20 mbps for homes.

“Right now there are not a lot of applications online that demand 100 megabits,” Lacouture said. That’s true, but probably in large part due to the lack of home connections at that speed – a chicken and egg situation.

Verizon’s average cost of pulling fiber down a street was $1,400 per home at the beginning of last year. The target cost this year is $890 per home, reflecting improvements in materials and techniques. If it reaches its target of laying fiber by another 3 million homes by the end of the year, that’s a cost of $2.7 billion – about half of Verizon’s annual earnings.