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

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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.

Kharif is a reporter for Bloomberg BusinessWeek in Portland, Ore.

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