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In: Economics

Show your understanding of the economics and competitive forces of the telecom industry. Describe why Verizon...

Show your understanding of the economics and competitive forces of the telecom industry. Describe why Verizon chose to go with fiber. Do you think this was a wise decision, or not? Why? Summarize clearly in as little words as possible.

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Expert Solution

Verizon has spent over $23 billion on its FTTH infrastructure and its FiOS technology boasts 50 Mbps download speeds, while it has tested network upgrades that increase speeds by over 6 times that. Verizon has copper cable networks servicing millions of homes, but American DSL is uncompetitive and Verizon's residential landline business was becoming unprofitable as users switched to mobile phone numbers. To capitalize on the growing mobile phone services market, Verizon entered into a joint venture with UK’s Vodafone to setup Verizon Wireless. Since it is not a wholly-owned firm, it has to share its wireless unit profits with its partner. With FIOS, Verizon now offers pay television, competing with cable’s core product; it also offers some of the fastest home broadband services anywhere, and it gets to retain all of the revenue from this business. Students can refer to popular trade magazines to gain a deeper understanding of the matter and its implications for the U.S. telecommunications industry.


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