Verizon has struck a deal with Corning to purchase up to 37.2 million miles of optical fiber and related hardware over the next three years, with Verizon planning to use that fiber to boost capacity and lower latency in its wireless network.
"The agreement calls for Corning to provide and Verizon to purchase up to 20 million kilometers (12.4 million miles) of optical fiber each year from 2018 through 2020, with a minimum purchase commitment of $1.05 billion," Verizon said in its announcement of the purchase agreement today.
The fiber will be used for network improvements "designed to improve Verizon’s 4G LTE coverage, speed the deployment of 5G, and deliver high-speed broadband to homes and businesses of all sizes." But while Verizon mentioned both mobile and home Internet service, this doesn't mean there will be any unexpected expansions of FiOS, Verizon's fiber-to-the-home service.
Verizon is piloting what it calls 5G wireless home Internet with customers in 11 markets in the first half of 2017. Those markets are Ann Arbor, Atlanta, Bernardsville (NJ), Brockton (MA), Dallas, Denver, Houston, Miami, Sacramento, Seattle and Washington, DC.
Verizon says it can deliver gigabit broadband speeds over wireless by bringing fiber closer to homes without the expense of bringing fiber all the way into each building. The 5G wireless trial will also bring a Verizon home Internet service to some places outside the company's landline telephone network territory in the Northeast US.
Verizon's announcement said there's a shortfall in fiber supply in the industry but that the deal with Corning will ensure that it can meet construction schedules.
It’s cheaper not to bring fiber to each home
Verizon CEO Lowell McAdam appeared on CNBC today and was asked why Verizon doesn't just install fiber to each home.
"Why not just take the fiber all the way to the home like you had with FiOS?" asked CNBC's David Faber. "Does it save you a lot of money to have 5G for that last little bit to the home?"
"Yeah, absolutely," McAdam answered. The CEO continued, "when we deployed FiOS, we would run a strand into a neighborhood, a cable that had maybe six or eight strands [of fiber] in it. Now we're going to drop off six or eight strands to every streetlight in every neighborhood. That allows you to deliver a gigabit of throughput into the home and allows you to do things like intelligent transportation grids, intelligent electric grid management, water system management. You hear a lot about autonomous cars and things like that today. That does not work without 5G."
Upgrades to previous network generations 2G, 3G, and 4G were mostly about capacity and throughput, McAdam said. Capacity and throughput will still get big upgrades with 5G, but the new architecture will also deliver much lower latency.
"The network will go out and come back and respond in less than the time it takes to blink your eye," he said.
4G is still the current wireless generation, but the International Telecommunication Union has developed minimum specifications for the new network architecture.
Verizon has steadily shifted its focus from wired to wireless Internet over the past decade and disappointed customers and elected officials in multiple cities by not expanding FiOS service further. Verizon decided to stop bringing FiOS to new cities in 2010, and in January 2015, the company said it was "getting to the end of our committed build around FiOS."
Verizon thus surprised some observers when it announced a new FiOS build in Boston last year. Verizon has started FiOS installations in Boston and said that it "plans to offer FiOS across the city over the next six years," but even in Boston, the fiber build is largely designed to boost the company's wireless capabilities.
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