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Cable Technology Feature Article

January 09, 2009

Fiber to the Customer: Telcos See Benefits

By Gary Kim, Contributing Editor

Both Qwest Communications and Verizon Communications now report measurable changes in their businesses because of their fiber-to-customer programs.
In Verizon’s (News - Alert) case, new broadband revenues are occurring at a faster rate than Verizon had expected two years ago, and are more than offsetting revenue losses from voice line loss.
In Qwest’s (News - Alert) case, customer uptake also is more robust than Qwest might have expected, and now anchor its consumer business. The consumer segment now is built “primarily around high-speed as an anchor,” said Qwest CEO Ed Mueller (News - Alert). “High-speed access is our anchor now.”
High-speed adds have also have a halo effect, said Mueller.
“People are calling and asking when we will reach their neighborhoods,” he said.”
And though some researchers estimate cable companies now are getting 75 percent of new broadband access customers, Qwest is getting “at least 50 percent of new broadband adds,” said Mueller. And higher speeds seem to have a measurable impact.
“About two thirds of our customers buy service at 7 Mbps or more,” Mueller said.
And Qwest deliberately is being aggressive in its marketing policies.
 “Price is promotional right now and we think that is an advantage, because of churn benefits,” said Mueller. While noting that Qwest and all other providers will have to learn to be better at increasing the value the broadband connection represents, Mueller is in the camp that believes high-quality Internet-delivered video will be a major opportunity.
“Over time, there will be a significant number of people who are ambivalent about how they get their video, and a big chunk will come from the Internet,” he predicts. Mueller clearly sees a future where Internet-delivered video will come with quality of service support, in HDTV, and will feature more interactivity.
Researchers at Pike & Fischer still believe cable modem services will grab more of the new broadband customers in 2009 than digital subscriber line will. That may well happen. The new issue is that it is getting harder to characterize alternatives based on the details of the topology.
Strictly speaking, Qwest’s fiber-to-the-node architecture, like that used by AT&T (News - Alert), which still uses copper access to the actual end user site, is “DSL” access. But FTTN is functionally the same as cable modem architecture. Qwest’s acquisition numbers show that customers, who don’t generally care about access technology, are responding to FTTN capabilities.

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Gary Kim is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Michael Dinan