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Verizon (s vz) is maturing its current Digital Voice product — available in 11 states and the District of Columbia — with a total Voice over Internet Protocol solution. The service transitions away from the analog switches used previously, leverages Verizon’s existing and future investment in fiber optics, and reduces costs while improving the quality of service.
From an infrastructure standpoint, the offering makes complete sense; maintaining old copper lines doesn’t come cheap. In 2007, an estimated $5.7 billion was spent by phone companies on servicing the copper pipes — that works out to $52 per line. Of course, laying fiber to the home is expensive too — approximately $650 per Verizon household, according to an October 2009 CSMG study. But once the initial investment is made, there’s far less upkeep for fiber than for copper lines. And since Verizon can use that same line for television, Internet connections and other service offerings like video on demand, the multi-use aspects help recoup costs faster.
Even with today’s cord-cutting trend — nearly one in four U.S. homes opt for wireless service in lieu of a landline — it could take a full generation before nearly all of us are wireless in the U.S. So Verizon hopes to offset the stinging losses of landlines by attracting new and existing FiOS customers with digital voice service that never interacts with the public Internet — allowing Verizon to manage voice quality. There’s little doubt that wireless is the future. Until that future arrives however, Verizon seems happy to piggyback digital voice revenues atop its fiber optic network just in case the FCC does mandate a national, all-IP network.
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