Verizon bets big on fiber optics

By Peter Svensson

updated 3:59 p.m. ET June 9, 2006

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.

"With cable, the picture would stop. Or we'd have those digital things going," she says, gesturing to mimic the picture breaking up.

"We could get satellite, but our only tree in the garden is in the southwest corner, so we'd have to chop our only tree down" to get a clear line of sight to the satellite, she says.

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.

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