Verizon invests in a bigger pipe

Janet Babin Dec 18, 2006

KAI RYSSDAL: The distance that separates China and the United States might soon feel a bit shorter. Verizon and some partners are planning a new undersea fiber optic cable. From the Marketplace Innovations Desk at North Carolina Public Radio, Janet Babin has more.

JANET BABIN: Verizon and its five Asian partners say they’ll spend $500 million to build the new cable. Once in place, the company says it will carry voice and data transmissions at a much faster rate — equal to about 62 million concurrent phone calls between the US and China.

Now, only about a million calls can take place simultaneously. That can make Internet communications between U.S. companies and their Chinese operations too slow.Scott Cleland is with Precursor, a telecom consulting company:

SCOTT CLELAND: With the 2008 Olympics coming in Beijing, and the 2010 World Expo in Shanghi, China is a huge growth market in every dimension, and there will need to be more bandwidth to China. Period.

But some analysts fear the Verizon expansion could create a glut of unused cable. That’s what happened in the U.S. during the dot-com boom.

Telecom Attorney Robert Rini with Rini Coran says Verizon will have no trouble attracting corporate customers. But Beijing could keep Chinese households out of Verizon’s reach:

ROBERT RINI: Foreign investment is highly regulated and controlled, so the ability to forecast demand, particularly on the consumer side, which is highly regulated in China, is what makes this a risky venture.

Verizon will have to jump over a bunch of regulatory hurdles before the first ship drops an inch of cable to the ocean floor. But the company says construction will begin in three months.

In Durham, North Carolina, I’m Janet Babin for Marketplace.

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