High-speed Highrise
Verizon subsidiary moves into MDU
By Karen Brown
from the May 21, 2001 issue of Broadband Week
While much of the broadband focus these days is on single-family residential and business services, Verizon Avenue is busy beating a path to a third consumer door--the multiple dwelling unit market.
Now armed with territory inherited in its purchase last year of CLEC OnePoint Communications, the Verizon Inc. subsidiary is planning an aggressive rollout, dropping DSL access multiplexers directly into apartment buildings to offer pumped up broadband service.
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Verizon Avenue targets
new screen play
Some time this summer, a select number of Verizon Avenue customers will be getting the picture.
Video is on the horizon for the MDU service provider in the form of a video-on-demand service run from servers located next to the building DSLAMs. Verizon Avenue is now in negotiations with the major movie studios, and on a low-key basis plans to roll out a service to some properties in early June, according to company president Bill Wallace.
"I would call it a soft deployment ... we have already tested it technologically," he says. "We are so focused on getting data out that we are really, really focused on that right now. Once we get the DSLAMs in, we'll go back. We are just testing some price points and some market approaches for the video-on-demand."
When a video product does become available, Wallace emphasizes Verizon Avenue will be looking to partners to supply the titles, rather than trying to create an aggregation service of its own.
"We're going to be counting on other content providers to develop that market," he says. "It's going to come eventually. Everyone, AOL and others are all heading in that direction so we have no doubt that will be."
So far, the negotiations with the film studios have been progressing. "We're seeing a real strong willingness to partner with someone like us who is focused," Wallace says. "And we have allayed any concerns they have had about security."
-- K.B.
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It is no small market. Nationwide there are 20 million MDU households, and in Verizon's RBOC markets alone 20 percent of residents on average live in MDUs. In larger cities such as New York City--where Verizon Avenue recently launched--that percentage approaches 50 percent.
With Verizon markets and systems in Phoenix, Denver, Atlanta, Charlotte and Raleigh, N.C., picked up through the acquisition of OnePoint, Verizon Avenue now claims 750,000 units already under contract, according to president Bill Wallace. Plans are to increase that to1.2 million units by the end of the year and 2 million units by the end 2004. "That's a significant percentage of the apartment community out there," Wallace says. "We're moving fast toward that."
A key strategy in that rollout is installing DSLAMs at each of the buildings so that Verizon can deliver broadband services directly. While Wallace says he can't disclose how many units that entails, he notes it is "a significant capital project."
The advantage is these DSLAMs can offer high-speed Internet at up to 1.5 megabits per second to every building resident, along with local telephone service and long distance service where regulators allow Verizon to do so. The service also offers each building a community network portal, providing local content, resident bulletin boards and a maintenance request service.
Using leasing agents as de facto sales reps, Verizon Avenue offers two DSL bundled products: one at 256 kilobits per second (kbps) downstream for $34.99 monthly and 1.5 Mbps at $49.95 if the customer also buys voice service. It also provides the DSL services a la carte for an added $10 monthly.
"What we've found in the marketplace which we are happy to see is a high penetration rate at the higher speed. We have in excess, in the high 80 percentiles, of our clients take our higher speed at the 1.5 (Mbps)," says Monty Gaydon, Verizon Avenue's vice president of national accounts. "We can bundle these products and services together in packages that are very competitive."
And fairly lucrative, according to figures supplied by the Yankee Group. The analyst firm's consumer surveys show MDU customers are spending roughly $33 for long distance, $39 for cable and $30 for Internet service, totaling $102. That's a fairly attractive addition to the average $35 an RBOC such as Verizon gets from a local phone service customer, according to Imran Khan, a Yankee senior analyst.
While that has attracted a slew of competitive service providers last year and into the first quarter of this year, RBOCs such as Verizon have a competitive advantage, Khan says. In most areas they already are offering local phone service and literally have a connection to the customer.
"It's a matter of them building up on that relationship and adding on to a connection they already have," he says.
Another plus for Verizon Avenue is that the MDU market is following in the footsteps of the competitive DSL market, where early competitive entrants have fallen, clearing the way for the RBOCs. Khan notes the fate of Seattle-based ReFlex Communications, which filed Chapter 7 bankruptcy on March 28, and BroadbandNOW, Inc., an Irvine, Texas-based outfit that also offers multimedia applications, which announced earlier this year it was cutting 40 percent of its workforce.
"The specific MDU-focused providers are scrambling all over the place right now, trying to conserve resources," Khan says. "I think it is almost becoming impossible for some of them to go in and raise additional resources, and we have seen several of them falling out over the last few months because of the capital market conditions."
Gaining a footing outside of its RBOC franchise territory doesn't hurt, either.
"I look at it more as an opportunity to go beyond your traditional territory," he says. "The traditional markets--they are strong, and then with OnePoint they are able get into good markets."
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