spidey07, it's true that cable companies are currently focused on their backbones and peering. That's their hottest problem right now. They killed off @Home, who had a decent backbone and good peering, and thought that it would be easy to build replacement backbones/peering in house. Well, that didn't work out so well.
Where I am - an Adelphia market - they can't keep the cable modems working reliably. If something breaks, it's a big ol' mess to get fixed. My parents live in a Cox market. Same story. Decent when it works. Slows down during prime time (contrary to cable company claims, they never split nodes aggressively enough anymore, so they oversubscribe too much and during prime time many markets slow down).
DSL has similar problems. Both cable and DSL, at a very fundamental level, are kluges. We're taking copper networks that were meant to solve one problem and making them solve another. And maybe it works most of the time, but there's no way you're getting into five-nines territory with those technologies.
That is reaon #1 why I think VZ's competitors should be scared of fiber to the home. It's a ground up rebuild of the network, intended to carry these services. Not a retrofit onto a plant not really designed for it. (Yes, the fiber side of HFC is designed for multi-service operation. But it's still feeding into some crappy and possibly ancient copper-based distribution amps and coax)
FIOS is BPON, which has a very simple upgrade path to GPON. GPON gives you 155Mb/s to each individual subscriber. Verizon could deploy that tail-circuit technology now - the gear exists. To my knowledge, neither DSL nor data over cable have fieldable, exists-right-now equipment that could deliver that kind of bandwidth to each individual subscriber over the infrastructure that exists today. I'm not sure that there exists any equipment even in lab/design phases that could deliver that kind of bandwidth to each individual subscriber over the infrastructure that exists today.
Cable-modem services are severely hampered in the upstream direction and will not be able to grow upload speeds nearly as fast as download speeds. This is due to physics and information theory. There's a wall, they haven't hit it yet, but they can and will, and FTTH doesn't have that particular wall.
That's reason #2 why I think VZ's competitors should be scared of fiber to the home. If VZ were to make it a race, and had the backbone to back it up, I don't think it's technologically possible for cable or DSL to keep up. There is a very real risk that VZ *will* make it a race, just because they can. (and maybe not back it up with the backbone, though )
The numbers I've seen say that, with current costs and take rates, VZ's FIOS ROI is positive after a few years. Assuming that continues to be the case, now they've got a shiny new fiber network, brought to 2005 levels, and a rickety old patchwork copper network, and there are plenty of areas using 100 year old wires. As customers in a market move from the old network to the new, what do you think happens to VZ's maintenance and service expenses? My guess is that the number of trouble calls goes down a lot, and especially the number of truck rolls goes down a lot. If that's the case, there will be major staff reductions. Meaning major cost savings to VZ. And you better believe the VZ's management is on that page, reduce cost-incurring risks, reduce staff to service those risks, save money. Step 3: Profit! Or they can lower costs and keep the same margins - while taking it to their competitors on price. They have a lot more flexibility on the financial side if they execute correctly on this one.
In parallel, VZ just bought a backbone and a bunch of solid peering. This will almost definitely increase their peering quality (a problem for all the residential-oriented ISPs) and do so on the long-term cheap (admittedly, one heck of a capex). Again, VZ can lower their costs.
That's reason #3 why I think VZ's competitors should be scared of fiber to the home. VZ has the potential to save themselves a lot of money with FIOS/FTTH on the tail circuits and the MCI acquisition on the backbone/peering side. This gives them much greater competitive flexibility on price - they can start a price war and gain market share, or they can keep the profits and look better to Wall Street than their competitors.
Now, lest you think I'm a complete fan, let me offer one big reason why VZ's competitors should not be scared of their fiber to the home. Imagine it in your best Lilly Tomlin voice: They are still, at the end of the day, The Phone Company. VZ's quite adept at having every possible advantage given to them and still screwing things up hugely.
kevnich2, I too have seen numbers of about $2k-$3k per home passed. Yes, that's a lot of money. But that's what capital is for. You have to spend money to make money. If they can spend that kind of money now, totally one-up their compeititors and gain a lot more market share, while lowering their own labor and equipment costs from the old copper plant, in the long run it's a brilliant business move.
It really comes down to three things:
#1. What do their competitors do? If Comcast next year decides to do FTTH also, then VZ's advantages could vanish. Barring that, for now, VZ's competitors can do many things to try to compete, and those things might be more or less successful. Even if the cable companies are completely foolish, they'll get some customes, just because some people totally hate VZ.
#2. What's the long-term average revenue per FIOS customer / can they increase their average? If 25% of the homes passed end up spending $150-$200/month with VZ for PSTN+Internet+TV+premium TV channels, VZ is doing well. If they have a 75% take rate but those people are only buying the $35/month Internet service, VZ's ROI just pushed way out.
#3. Does VZ successfuly realize cost savings due to this capex? Reducing staff isn't easy or cheap. FIOS may end up having different problems requiring truck rolls. VZ may just be business-stupid. If they can implement cost savings equal to $100-$200/year per home passed on average, that helps their ROI. But they could fail to do so. Or even increase their costs if they're really foolish.
Now, all business armchair quarterbacking aside, in my market, I have four connectivity choices:
#1. FIOS. 15/2 for $40/mo, 30/5 for $60/mo, if memory serves. (I'm getting 15/2 business for $100/mo).
#2. Adelphia cable modem, which is slow and VERY unreliable here (several neighbors have converted to FIOS, and every one has done so because of reliability problems that Adelpha simply can't fix). $55/mo. I don't know the exact speeds, but about 3Mb/s down and 128kb/s up.
#3. Local wireless ISP. 256kb/s for $70/mo. Nice guys.
#4. DSL.NET SDSL 512kb/s for $200/mo. Not a nice company. Customer service as bad as VZ, worse reliability, higher cost.
Now, in my market, FIOS is the far and away superior choice. Once the Adelphia sale is complete, we become a Comcast market, and it remains to be seen what happens - even if Comcast made it a top priority to fix things here, it will take time. And then where will they be? Not quite able to offer what FIOS can today. Show me a cable company with 5Mb/s per subscriber upload - I'm not aware of any.