Verizon to spend $22.9 billion on network upgrades

  • Associated Press
  • Wednesday, September 27, 2006 9:00pm
  • Business

NEW YORK – Verizon Communications Inc. put a price tag on its ambitious fiber-optic initiative for the first time, estimating Wednesday it will spend $22.9 billion to rewire more than half of its copper telephone network so it can sell cable TV and superfast Internet connections.

The estimate for the “FiOS” project appeared to be at the lower end of analyst projections. Verizon expects to offset the cost with $4.9 billion in savings from now until 2010 due to the reduced maintenance needed with a fiber network.

FiOS Internet service is currently available in parts of southeast Everett, Mill Creek and Bothell, with plans for expansion in other parts of Snohomish County. It also is available in parts of 15 other states. FiOS TV has been launched in parts of seven states, though not locally.

Verizon also issued more bullish subscriber forecasts, predicting the FiOS project will generate positive operating income beginning in 2009.

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Despite the improved outlook, Verizon’s share price fell $1.18, or 3.1 percent, to close at $36.78 on the New York Stock Exchange after setting a 52-week high on Tuesday. The stock is up 22 percent this year after sliding in 2005 amid worries that the hefty investment might not pay off.

With traditional cable TV companies now providing phone service to millions of their video subscribers, there’s little disagreement that phone companies need to fight back by overhauling their networks to deliver multimedia capabilities.

However, investors and experts debate whether it makes economic sense to replace the copper wires all the way to every home. In doing so, Verizon will have far more capacity for next-generation services at its disposal than any rival.

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