Verizon Bets Big on FiOS

By Beverly Maniago

TMCnet Contributing Editor

 

Verizon (News - Alert), America’s second largest telephone provider, is investing an impressive $23 billion on fiber optic services (FiOS) to bring even faster Internet connections to 18 million homes across United States by 2010. The company is replacing its copper lines with fiber optics.

 

Verizon recently has been investing huge amounts of money to further enhance the services it provides. In January, for example, the company started work on a FiOS television network in order to better compete with cable companies.

 

Another example is Verizon’s plan to invest $2 billion on upgrades to its phone networks, migrating from traditional wireline to Internet Protocol (IP) technology.

 

Verizon’s CEO, Ivan Seidenberg, said in a statement that he believes the FiOS investment will serve the company well. But, some analysts are skeptical whether or not the ambitious project will pay off. Some of this concern is due to the fact that, although Verizon’s shares increased in value by 20 percent during 2006, direct competitors like AT&T (News - Alert) seems to be generating more revenue.

 

Investors, too, have concerns that Verizon’s FiOS rollout might not result in bottom line growth. One such naysayer is Michael Rollins, a Citigroup telecom analyst, who indicates his belief that the FiOS project will definitely hurt Verizon’s earnings per share.

 

“We view this as a multiyear issue,” Rollins said in a statement. “The market needs to be braced for a longer period of dilution and higher-than-expected costs from this FiOS build.”