Inspire April08 Fios Reprint

article reprint — TELLABS INSPIRE apRil 2008

You’re FiOSed! From exclusive Trump high-rises to affordable Bronx apartment complexes, Verizon’s service adds to a property’s appeal. By Joan Engebretson

Robert Eddy was delighted when Verizon’s FiOS service brought highspeed data, telephone and advanced video service to Stonehenge Apartments, the 92-unit complex in St. James, N.Y., where he lives and serves as superintendent. “The television picture is so much better and cleaner,” Eddy said. In addition to delivering higher quality, FiOS also has proven more reliable. With previous service providers, Eddy notes that the picture used to freeze. But those problems are a thing of the past. “We also have more channels,” Eddy said. “The other service had 90 channels total. Now we have more than 200, plus music channels.” Eddy is just as happy with the telephone and Internet service he gets with FiOS, a brand that plays off of its fiber-optic foundation. “The Internet service is great. You don’t have to worry about it slowing down or getting kicked off.”

Word of Mouth People like Eddy who live in Multiple Dwelling Units (MDU) are an important market for Verizon. Twenty-five percent of households in the company’s local service area live in MDUs. Once a building owner or condo association strikes a deal with Verizon, the service tends to catch on quickly, even if it’s not the only voice, video or data service available on the property. “If people love it, as we’re finding they do, they’re telling their neighbors, and this word-of-mouth recommendation tends to spread faster in cluster communities,” said Eric Cevis, vice president of Verizon Enhanced Communities, the business unit dedicated to serving MDUs and other planned residential communities. A recent survey of FiOS subscribers showed that 80 percent would recommend the service to others and that 60 percent have already done so. At the same time, FiOS is becoming a key amenity for MDUs, with the service acting as a significant market differentiator. “FiOS is an effective amenity owners and property managers can leverage to improve vacancy and occupancy rates and to lower churn,” Cevis said. “We’ve found people are less likely to go somewhere that doesn’t have the service.”

According to independent research done by Praxis Research Partners, half of consumers surveyed said they’d be more likely to choose an MDU with Verizon FiOS service, other factors being equal. (Praxis Research Partners, “FiOS Assessment in the MDU and SFU Markets, 2007.”) When a condo association or home-owner group is involved, FiOS can increase the value of an individual home. A recent study by research firm Render, Vanderslice & Associates found that homeowners estimate that the value of their house increases by more than 1 percent when they are served by fiber optics all the way to the home.

Trumping the Competition FiOS has already captured the attention of Donald Trump, whose Trump Organization has signed on for FiOS at its posh Trump World Tower at United Nations Plaza and Trump Park Avenue properties. But the service is not just for higher-income customers. FiOS is also finding its way into properties such as Eastchester Heights, a 1,416unit Bronx, N.Y., apartment complex offering affordable housing in one of the world’s most expensive real estate markets.

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article reprint — you’re fiosed!

“We’re doing a lot of work in life stage segmentation modeling,” Eric Cevis, VP of Verizon Enhanced Communities

Residents of communities such as Eastchester Heights can be excellent customers for FiOS, Cevis said. “What we’re finding is that triple-play technologies represent entertainment value in affordable communities. The usage rates are probably even greater at some affordable units as this becomes their primary entertainment service.” AMLI Management Co., a Chicago-based company that owns 70 rental properties with 24,000 units throughout the United States, has introduced FiOS at a property in Texas. Bob Faitz, who is in charge of ancillary services for AMLI, would like to make the service available on a wider basis. “Residents, depending on demographics and age, are asking, ‘Whose high-speed data service do you offer, and what speeds do you offer?’” Faitz said. “FiOS is a very good product that offers more bells and whistles and recognizes the needs of consumers.” Cable television and communications service providers traditionally have offered building owners an up-front fee and often a percentage of revenues in exchange for the ability to offer service at a property. Verizon offers similar incentives. “We either do a revenue share or a residual based on penetration in the building, as well as a one-time payment based on how many marketing rights we’re allowed in the building,” Cevis said.

Wide Demographic Appeal Verizon’s marketing efforts run the gamut, from cards promoting FiOS hung on residents’ doors to complimentary barbecues where residents can experience FiOS and then sign up for service.

Verizon carefully targets its FiOS promotions. “We’re doing a lot of work in life stage segmentation modeling,” Cevis said. “Some MDUs are rather homogenous, and when that’s true, we leverage the nuances of what’s appropriate for that group.” Even MDUs that skew toward an over-55 demographic are good candidates for FiOS, Cevis said. For example, grandparents are interested in seeing videos of grandchildren who live in other parts of the country — an application optimized by FiOS Internet, offering connection speeds of up to 50 Mbps in some markets. At 50 Mbps, downloading a 1.2 GB (gigabyte), or 90-minute, standard-definition movie takes approximately 3.2 minutes. In the future, Verizon will be in a position to provide specialized applications, such as services involving telemedicine or monitoring, over its all fiber-optic network, for instance to help ensure that senior citizens take their medication on a regular basis. “We’re working to develop specific applications for each life stage. FiOS Internet has the bandwidth and the Verizon network has the reliability to deliver these services,” Cevis said. Perhaps the greatest testament to the power of FiOS for MDUs is the change that Cevis has noted in the dynamics of the MDU FiOS sale. “The buzz is out there and property owners see FiOS as a competitive differentiator,” Cevis said. “In the past some had a ‘wait-and-see’ attitude. But now they’re realizing that if they don’t jump on the bandwagon, they’ll be left behind.”

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article reprint — you’re fiosed!

Inside Verizon’s MDU Play When building owners make a deal to bring Verizon’s fiber-based FiOS service to a property, they can opt to allow Verizon to offer FiOS to individual residences rather than just to a single demarcation point. Verizon recommends that option because it makes the service more future-proof. As a result, Verizon often has to retrofit existing MDU properties. In those cases, the company takes care to make sure the finished installation blends in well with the existing decor. “We offer several options to camouflage the necessary wiring,” said Eric Cevis, vice president of Verizon Enhanced communities, the business unit dedicated to serving MDUs and other planned residential communities. “For example, there are several moldings we can use in paintable plastic or real wood, including a crown molding style.”

Verizon uses a range of equipment from Tellabs to deliver FiOS service to MDUs. “We started with a wall-mounted unit that Verizon would mount in a common room, and from there Verizon would run voice, video and data to individual living units,” said Richard Miller, Tellabs account vice president for Verizon. “But some properties didn’t have enough wall space, so we provided a rack-mount unit that could accept multiple fibers. We were also called upon to make the units smaller. Verizon wanted as many tools as they could have to meet the needs of MDU owners.” That strategy has paid off, Cevis said. “The reason we’ve been able to scale to large numbers is because Tellabs has given us flexibility. They’ve been a tremendous partner.”

Acronym MDU Multiple-Dwelling Unit SFU Single-Family Unit ONT Optical Networking Terminal

MDU ONT relay rack

North America

Asia Pacific

Tellabs One Tellabs Center 1415 West Diehl Road Naperville, IL 60563 U.S.A. +1 630 798 8800 Fax: +1 630 798 2000

Tellabs 3 Anson Road #14–01 Springleaf Tower Singapore 079909 Republic of Singapore +65 6215 6411 Fax: +65 6215 6422

Europe, Middle East & Africa

Latin America & Caribbean

Tellabs Abbey Place 24–28 Easton Street High Wycombe, Bucks HP11 1NT United Kingdom +44 870 238 4700 Fax: +44 870 238 4851

Tellabs 1401 N.W. 136th Avenue Suite 202 Sunrise, FL 33323 U.S.A. +1 954 839 2800 Fax: +1 954 839 2828

Statements herein may contain projections or other forward-looking statements regarding future events, products, features, technology and resulting commercial or technological benefits and advantages. These statements are for discussion purposes only, are subject to change and are not to be construed as instructions, product specifications, guarantees or warranties. Actual results may differ materially. The following trademarks and service marks are owned by Tellabs Operations, Inc., or its affiliates in the United States and/or other countries: TELLABS®, TELLABS and T symbol®, and T symbol®. Any other company or product names may be trademarks of their respective companies. © 2008 Tellabs. All rights reserved. 74.1941E Rev. A 3/2008