Verizon, AT&T, Google Partake of Broadband Speed Race

The race to provide ultrafast broadband is on.

In May, Cleveland will become a test bed for a service, spearheaded by Case Western Reserve University, that lets residents of more than 100 homes download data at about 1 gigabit per second. In February, Google (GOOG) said it plans an ultra-high-speed broadband network covering as many as 500,000 users. "The purpose of this project is to experiment and learn," Google said in a blog introducing the idea. "Network providers are making real progress to expand and improve high-speed Internet access, but there's still more to be done." The U.S. government's National Broadband Plan, released on Mar. 16, also urges that speedier broadband be more extensively deployed.

The plans by Google and Case Western may add to pressure on the largest broadband providers such as Verizon Communications (VZ), AT&T (T), and Comcast (CMCSA) to accelerate their own deployments and could create a windfall for the makers of networking equipment, analysts say. "Pre-Google announcement, it would have been five years" before such speeds became common, says John Mazur, a principal analyst at Ovum, a telecom market researcher. "Post-Google announcement, it could be sooner."

A download speed of 1 gigabit per second (Gbps) is 20 times faster than top speeds Verizon offers consumers and more than 256 times faster than the speeds available to the average broadband subscriber. Broadband providers are trying to meet a surge in demand for video and other services delivered over networks, sometimes wirelessly. Global data traffic may increase fivefold by 2013, according to Cisco.

Government Goals

The National Broadband Plan proposes that the Defense Dept. make 1 Gbps connections available on select military bases. It also wants American schools, hospitals, and government buildings to have access to such connections by 2020. The plan outlines measures designed to create more broadband providers through auctions of airwaves needed to provide wireless Internet services. "You radically change the price by creating competition," says John Muleta, co-founder of M2Z Networks, which plans its own nationwide wireless broadband network. Muleta formerly was head of the FCC's wireless telecommunications bureau. The government is also spending $7.2 billion in stimulus funds to expand broadband access to underserved areas.

Verizon says it's up to the task of matching Google's speeds. "We are not currently seeing any limits to how we can support [what] the market needs in terms of speeds," says Vincent O'Byrne, a technology director at Verizon. The carrier could upgrade its fiber-optic network to provide Google-like speeds in some places in as little as six months, Ovum's Mazur estimates. Verizon's O'Byrne didn't say how long it might take to deliver 1 Gbps across its entire fiber-optic network, which is available in more than a dozen states from New York to California.

While Google may be adding to pressure on carriers to crank up speeds, analysts say it's a lot easier to provide service to 500,000 people than to the tens of millions of people served collectively by AT&T, Comcast, and Verizon. AT&T declined to make a representative available. Comcast didn't respond to a request for comment. Pieter Poll, chief technology officer at Qwest (Q), a phone company serving parts of the western U.S., says consumers don't yet demand such high speeds. Google's project "is interesting directionally," he says. "But you really need to be there when the mainstream needs [them]."

Network Equipment Demand

The move to faster speeds is spurring demand for telecommunications equipment from makers such as Cisco Systems (CSCO), which on Mar. 9 unveiled a new router that's designed to direct massive amounts of data traffic such as video and e-mails along networks. "[Carriers] are being a lot more aggressive with their planning," says Doug Webster, a marketing executive at Cisco, who wouldn't name specific customers. "Infrastructure expected to last three years may need to be upgraded [for higher speed] in a year, [or] a year and a half." Another equipment maker, Genexis, which like Cisco provided some gear for the Cleveland project, is starting to talk with North American carriers, says Genexis co-founder Gerlas van den Hoven. "We see [1 gigabit] coming," he says. This fall, the company, which until now had focused on Europe, plans to attend American trade shows for the first time.

Telecom component suppliers, which tend to be the first to feel surges in network investment, also stand to benefit. In the quarter that ended Jan. 31, sales at Finisar (FNSR), the world's largest supplier of optical components for telecom equipment, reached a record $167 million, up 32% from a year earlier. To fill a rising number of orders, the company increased its staff by 21% to 5,200. "The pace of demand has accelerated in the last nine months," says Jerry Rawls, chairman of Finisar. "It's a breathtaking pace right now."

To meet skyrocketing broadband demands, Verizon in December carried out tests of connections of 10 Gbps for customers in Taunton, Mass. In March, AT&T tested network speeds of 100 Gbps on a 560-mile stretch between Louisiana and Florida. In the U.K., service provider Virgin Media (VMED) is testing connections of 200 megabits per second (Mbps) in Coventry, the ninth-largest city in England, charging customers about $43 a month, roughly the same amount as slower services in the U.S. Speed "is an opportunity to differentiate ourselves radically in a very competitive market," says Jon James, broadband director for Virgin.

The speed of commercial rollouts may hinge on demand for such applications as telemedicine, which require such high-speed connections. In Cleveland, users will be able to conduct high-definition video consultations about managing their weight with doctors at nearby University Hospitals and to watch open-heart surgery being performed at the Cleveland Clinic for a biology class in real time. "We are trying to glean insights into how ultrafast broadband can change people's lives for the better," says Lev Gonick, vice-president for information technology services at Case Western.