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SBC to invest $4 billion in fiber upgrade

In preparation for offering video service, SBC will spend $4 billion to upgrade its network infrastructure from copper to fiber optics.

SBC Communications on Thursday said it plans to spend $4 billion to upgrade parts of its copper wire network with faster fiber-optic lines.

With a program called Project Lightspeed, the Baby Bell phone giant plans to invest in stretching more fiber-optic lines to neighborhoods, also called "nodes," and begin offering Internet-based video service. Details on the investment come weeks after SBC announced that it would spend $1.7 billion for equipment maker Alcatel to provide technology for its fiber infrastructure.

SBC added that it will begin constructing its fiber network in the first quarter of 2005 with the hope of offering fiber-based services to 18 million households by the end of 2007. SBC will start selling video service over the Internet by the fourth quarter of 2005.

Fiber-optic lines can handle more bandwidth than the copper wire lines that currently populate SBC's network. Unlike Baby Bell cousin Verizon Communications, SBC will not connect fiber lines directly into households but rather upgrade its "last mile" copper network into homes with VDSL technology, an SBC spokeswoman said.

Using VDSL will allow SBC to offer up to 25mbps of bandwidth into homes, plenty enough to support high-speed Internet, voice and video.

Faced with competition from cable companies such as Comcast, Time Warner Cable and Cox Communications, the Bells are turning into the United States' new video providers.

Being first to market, high-speed cable Internet services now have a commanding lead over DSL in U.S. broadband homes. Existing cable companies have seen success in selling broadband and voice calls to their video customers. Since DSL relies on a voice landline, the Bells suffered at the expense of cable's data and voice gains.

In response, the Bells are fighting back against cable's "triple play," offering their own bundles, which can combine local and long-distance calling, cellular plans, DSL and video provided by satellite TV partnerships.

Cable companies are responding to this bundling trend as well. Cable giants are in discussions about how to offer cellular phone service to their customers in hopes of matching the Bells' one advantage, according to one source familiar with the talks.

In the meantime, the Bells will continue to push video to their customers. Verizon plans to begin selling cable TV-like service in select markets beginning next year. The company said it will spend $800 million to make fiber available to 1 million homes by the end of the year and to 3 million homes by the end of 2005.