Verizon Report Re-Awakens Copper Retirement Questions

Verizon Communications Inc. (VZ) may be reviving the copper retirement debate, whether it means to do so or not.

According to a new report, Verizon is “cutting the copper cord” as its wireline expenses continue to make up a disproportionate account of its costs. Moving to fiber not only fits Verizon’s business model – think about the FiOS services lineup – but also saves the carrier some money as it reaps bigger data sales, consultancy Information Gatekeepers Inc. said in its latest study. “By focusing on wireless/fiber, Verizon can move away from a major part of its costs, while enhancing the sources of 75 percent of its revenues,” IGI analysts noted in the report.

At the same time, Verizon’s decisions thrust the copper retirement controversy back into the spotlight.

A little more than two years ago, the Bells were on course to retire more copper loops than ever. They appeared to be trying to beat the clock in case the FCC implemented a review process, something CLEC rivals had been pushing hard to achieve. Those retirements have slowed somewhat in the intervening years – not ended, just slowed. The Kevin Martin–led FCC never did enact a review process and its successor, the Julius Genachowski-headed agency, has spent 2009 concentrating on the digital TV transition, the broadband stimulus and the net neutrality debate. Who knows when copper retirement will compete for commissioners’ attentions?

However, if predictions made not long ago have any merit, the FCC may want to start scrutinizing the copper issue soon – or CLECs may be forced to re-examine the services they offer. That’s because by some estimates copper last-mile loops may be gone in just a few years.

“I don’t think the copper plant will last past 2012," wrote Tom Evslin in a 2007 blog. Evslin co-founded ISP AT&T Worldnet and VoIP wholesaler ITXC. "The problem is the cost of maintaining and operating it when it has very few subscribers. Obviously [it’s] a huge problem for AT&T and Verizon. And an important social issue as well.”

Likewise, in a 2008 client memo, Bernstein analyst Craig Moffett predicted phone networks based on copper wire, “an obsolete technology,” will become extinct.

But is that really the case? For its part, Verizon says the connections it’s replacing keep the copper intact from the remote terminal to the building served. For example, in its latest copper retirement notices – which apply to the central offices in three of its Pennsylvania locations; in Alexandria, Va.; and in Charleston, W. Va. – Verizon notes the following:

“After the planned network changes are implemented, loops comprised entirely of copper between the above-referenced Verizon central offices and customer premises (i.e., including both feeder and distribution) will not be available to premises served by the respective Verizon remote terminals. Copper (metallic) sub-loop facilities between the above-referenced Verizon remote terminals and customer premises in the affected area will remain in place (the availability of such sub-loop facilities, of course, will continue to be subject to various factors such as the availability of space for remote terminal colocation, etc.).”

A Verizon representative said CLECs will continue to have last-mile access because the connection from the remote terminal to the building will still be copper. The entire loop will be comprised of copper and fiber as Verizon upgrades and extends its DSL reach, the spokesperson said.

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