Copyright 2003 Globe Newspaper Company
The Boston Globe March 20, 2003, Thursday, THIRD EDITION
Seeking to capitalize on recent moves by federal regulators, Verizon Communications said yesterday it will expand high-speed Internet access this year to increase availability of digital subscriber lines from 60 percent to 80 percent of its market.
Separately, Verizon late yesterday got Federal Communications Commission approval to sell long-distance calling in Washington, D.C., Maryland, and Virginia, the last three areas in its local calling region where it had not yet received clearance. Verizon joins BellSouth as the second Baby Bell to sell long distance to its customers because of the 1996 federal telecom act. Verizon expects to be able to make a bigger push into selling lucrative multistate services to big firms after it launches services in the mid-Atlantic states as soon as next month.
Verizon’s commitment to expanding DSL service comes as cable giants such as Comcast and AOL Time Warner are running up a 2-to-1 lead over phone companies in broadband Internet subscriptions. Late last year, Verizon ranked fourth in broadband ‘Net customers, with 1.8 million – half as many as Comcast, and about 400,000 fewer than Time Warner or SBC Communications, according to company reports.
Verizon said it currently offers DSL to about 60 percent of the Massachusetts market. DSL adds high-tech electronics to standard phone lines to offer Internet connections at 768 kilobits per second and higher, more than 30 times faster than dial-up modems. To add service in new locations, Verizon would have to install new switching gear at local offices that don’t currently support DSL.
In a conference call with reporters, Verizon president Lawrence T. Babbio said last month’s decision by the FCC not to force Bell phone companies to share broadband Internet network upgrades with competitors was a big incentive to press ahead with DSL expansions.
The FCC has yet to release the actual terms of how it will rework the 1996 act’s requirement that Bells share parts of their networks, which Verizon and other companies complain forces them to subsidize competitors in many cases.
But, Babbio said, Verizon executives are confident they will not have to make available to competitors the new lines and network gear they would install to expand DSL.
“If the final order is as advertised, this new approach will improve the business conditions for companies like Verizon that want to deploy the technology,” Babbio said.
Verizon officials would not specify how much they will spend on the DSL expansion but indicated their overall level of capital spending may not change much.
Babbio said Verizon expects to add DSL gear in as many as 1,000 switching stations, also known as central offices, and 4,000 so-called remote terminals, typically roadside huts connected by fiber-optic lines to switching stations that power last-mile copper phone lines. Verizon had held back from installing DSL gear in the terminals, fearing that under the 1996 act it might have to make space for dozens of competitors in boxes scarcely larger than a clothes dryer.
Overall, by the end of this year, Verizon will increase the number of phone lines that can support DSL from 36 million to 46 million. Babbio also said the company expects to begin wider deployment of fiber-optic last-mile connections to small businesses and homes next year – something the Bells have been promising since the early 1990s but have yet to find economical.
FCC commissioner Kevin Martin, a Republican who bucked chairman Michael K. Powell to broker the broadband policy shift last month, praised the Verizon announcement, calling it “the type of commitment we hoped for.”
Matthew Davis, director of broadband access technologies for the Yankee Group research firm in Boston, said he thinks the clear threat from Comcast and other cable modem providers is the main factor pushing Verizon. “They have been losing customers to cable modems, there is no question about it,” Davis said.
But with overall availability of DSL and cable modems soaring, Davis said, “We’re definitely forecasting that we’re going to see some downward pricing pressure, whether they want it or not.”
Verizon recently began selling DSL for $35 a month – $15 off the standard price – when bundled with local, long distance, and wireless calling.
Davis said he expects many providers will be pushed to sell lower-capacity broadband services in the $30 to $35 range this year to keep adding new subscribers.
Babbio said Verizon thinks it needs to get 3 million DSL customers to make it “an efficient, profitable business,” which would require growing the current subscriber base by more than 60 percent.