Light Reading

FiOS Expansion Is Finito

Mari Silbey
12/10/2013
50%
50%
Repost This

Google may be on a big fiber-to-the-home kick these days, but Verizon Communications is still calling it quits on fiber builds. Eight years after breaking ground on its first FiOS deployment in the Dallas/Fort Worth suburbs, Verizon CEO Lowell McAdam said on Monday that further market expansion for the wireline business isn't likely.

"We've got a great footprint that we can concentrate on," said McAdam, speaking at a Wall Street analyst conference in New York. "I think there are opportunities to partner out-of-market with the companies that are there versus us going in and deploying FiOS."

Verizon Communications Inc. (NYSE: VZ) has been focused on FiOS market penetration rather than expansion for years. But an analyst at the UBS 41st Annual Global Media and Communications Conference questioned whether further activity by Google (Nasdaq: GOOG), and AT&T Inc. (NYSE: T)'s plans to deploy FTTH in Austin, Texas might have changed the company's agenda. McAdam made it clear that he believes there are better places for Verizon to invest its money.

"As I said, it's moving more and more to the broadband side than it is to the TV side," he said. "So I have not seen a case that would make any sense for us to go and open up new markets."

McAdam also said Verizon would continue to push market penetration rates for its twin FiOS TV and FiOS Internet products, which closed out the third quarter at 35% and 39%, respectively. "I don't think 50% is a ceiling for FiOS penetration at all," he said. Verizon now has 5.2 million FiOS TV and 5.9 FiOS Internet subscribers. (See: FiOS Still on Fire.)

On the same day that McAdam spoke at the UBS conference, Verizon also announced its purchase of the content delivery network company, EdgeCast Networks Inc. . (See: Verizon Scoops Up CDN Provider.)

The EdgeCast acquisition has huge implications for Verizon's ability to deliver Internet-based content, and it strengthens the company's case for expanding video services to subscribers across the entire US. In other words, Verizon is making moves to ensure that it won't be limited to the FiOS footprint for video delivery in the future. While the expansion days for FiOS may be over, Verizon's overall infrastructure for video delivery continues to grow.

— Mari Silbey, special to Light Reading Cable

(29)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 3   >   >>
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
1/8/2014 | 4:18:36 PM
Re: Copper redlining
Margins are definitely wagging the business dog right now in many organizations. It's the result of too many people wanting to prove how smart they are.
qco900
50%
50%
qco900,
User Rank: Light Beer
1/8/2014 | 4:08:15 PM
Re: Copper redlining
It's even more convoluted than that at the local level.... There are areas where Verizon has paid the franchise fee, completed all the ducting and even installed some of the trunk fibers, but will not sell the Fios service to customers (75013 comes to mind).

The policy decision has been made at the senior levels based on the overall financial performance of the fiber-to-the-home business, therefore no more expansion will occur whether or not it makes any sense at the local level. No-one at Verizon became successful by going against policy decisions!

Going forward, all the arrows point to Verizon continuing to exit the local wire/fiber delivery business and focusing on content/services and wireless delivery. Note also that selling the wire delivery pieces helps pay for the high cost of aquiring back the vodafone piece of the wireless entity, which is an essential part of the future strategy.
Bruce Kushnick
50%
50%
Bruce Kushnick,
User Rank: Light Beer
12/15/2013 | 4:03:36 AM
Re: fios
>Wireline segment  3Q operating margins were 1.6% versus 33.8% for wireless. EBITDA margins were 22.7% and 51.1%.   They didn't break out FiOS (which probably has much better margins) >from everything else in wireline, including an anemic enterprise business and a dying POTS business.  From that perspective, you can see the basis for their investment decisions.

I got a different take--

You might want to read this report...

http://newnetworks.com/VerizonNYAffiliatereport.pdf

When you dump lots of your wireless expenses into wireline, it's easy to goose your wireless profits... which was the issue in our new analysis in New York --Verizon is paying1/2 or 1/3 of what AT&T are paying for access and large chunks of the construction budget are also being paid by the wireline division.

And remember, the access revenues profits are, what 80% last time the numbers were available -- or higher. Moreover, they keep claiming FiOS is in a different bucket as compared to POTs -- in NJ they've already stated in the response to a show cause order that it was part of their Opportunity New Jersey requirements -- and it's listed as title II, common carriage... because it can be dumped into the utility expenses and then they raise POTS rates, and all ancillary services.

or see our testimony about New jersey's requirement to have 100% of the state upgraded with 45 Mbps

http://newnetworks.com/PreparedTestimonyOCT1.pdf

However, they are throwing away their wired business where-ever they can, so without audits it's impossible to break out these numbers-- for example, FiOS TV is offered by Verizon the utility incumbent, like Verizon New York but it's set top box is in another affiliate, Verizon online and who knows where the actual programming revenue is...

This movement of the assets -- ie, privatizing FiOS and claiming it's a separate network -- gets even more distorted when you examine AT&T's U-Verse, which is all over the POTS wires.

these movements have been going on for at least since the FCC decided to not require any more data in 2007.

If the affiliates actually paid what competitors were paying, Verizon wireless wouldn't be any where near as profitable
albreznick
50%
50%
albreznick,
User Rank: Blogger
12/13/2013 | 5:47:14 PM
Re: fios
Sounds about right. Would be fascinating to see those numbers that they keep behind locked doors. 
Duh!
50%
50%
Duh!,
User Rank: Light Sabre
12/12/2013 | 5:27:46 PM
Re: fios
The 10Q doesn't provide sufficient quantitative guidance for calculating ROI of just the FiOS portion of wireline (nor would I expect it to).  There is a figure for FiOS revenue, but not cost of sales, and SG&A attributable to FiOS, so no way to calculate operating earnings.  And beyond the $23B committed 10 years ago, we don't know how much they've invested, or the current value of those assets.   Nor would such a figure take into account cost reductions and other benefits from squeezing out copper.

If I recall, they announced in late 2008 or early 2009 that FiOS had gone ROI positive, and shortly thereafter that it was cash flow positive.  That was with lower penetration and lower ARPU (but perhaps lower ARPU margin due to content cost).  So draw your own conclusions.  Your SWAG would be as good as mine.

You saw some pretty strong hints from McAdam that FiOS is still a good investment, but not as good as wireless.  I would assume that those numbers are closely held inside information. 

 



 
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
12/12/2013 | 4:11:20 PM
Re: fios
Alan,

Duh! already posted ROI numbers in this thread.  He did so by reminding us that they report these numbers each quarter.  Nobody here needs to guess.

seven

 
albreznick
50%
50%
albreznick,
User Rank: Blogger
12/12/2013 | 3:41:32 PM
Re: fios
So how do you think FiOS compares on this scale with the other Verizon initiatives? is their rate of return up there? 
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
12/12/2013 | 12:55:00 PM
Re: fios
Companies look at relative rate of return. Should I put more in Enterprise, Wireless, or FiOS? They can not fund all possible initiatives. They fund the ones that match their investment criteria. seven
fiosjoe
50%
50%
fiosjoe,
User Rank: Light Beer
12/12/2013 | 12:24:14 PM
fios
I hope vz continues to build out fios. Its a great product that people want. If you build it, they will come... Why give away potential revenue to other ISP's?? Vz doesnt make cents ,they make $$.
albreznick
50%
50%
albreznick,
User Rank: Blogger
12/11/2013 | 5:59:31 PM
Re: fiber, CDNs
that's good question, David. Unfortunately, I don't have a good answer for it. Do you really think they want out of residential wireline altogether? Don't they make good money on FiOS?
Page 1 / 3   >   >>
Flash Poll
LRTV Documentaries
Cable Eyes Big Technology Shifts

4|16|14   |   03:02   |   (4) comments


US cable engineers are facing a lot of heavy lifting in the coming years, notes Light Reading Cable/Video Practice Leader Alan Breznick.
LRTV Custom TV
Maximizing Customer Experience & Assuring Service Delivery in an IP World

4|15|14   |   4:57   |   (0) comments


Steven Shalita, VP of Marketing, NetScout Systems, Inc., discusses the challenges cable/MSO operators face in assuring the delivery of new IP-based services. Key points include the value of proactively managing performance, and using rich analytics and operational intelligence to better understand service and usage trends, make smarter business decisions and ...
LRTV Documentaries
Bye-Bye DVD: Consumers Embrace Digital Video

4|10|14   |   04:17   |   (7) comments


Veteran video analyst Colin Dixon, founder and principal analyst of nScreenMedia, says research shows 56% are using digital video already.
LRTV Documentaries
Video: TW Cable Puts Multicast Gateways to the Test

4|8|14   |   04:13   |   (1) comment


Tom Gonder, a chief architect at Time Warner Cable, explains how its trial of multicast gateways is impacting IP-based video plans.
LRTV Custom TV
Managing & Monetizing Big Data in Operator Environments

4|7|14   |     |   (1) comment


At Mobile World Congress, Gigamon's Director of Service Provider Solutions, Andy Huckridge, and Heavy Reading Analyst Sarah Wallace discuss the 'big data' issues facing carriers and operators today.
LRTV Huawei Video Resource Center
Data Center Energy – Build Your Data Center in a Modular Way

4|7|14   |   2:13   |   (0) comments


Dr. Fang Liangzhou, VP Network Energy Product Line, shared his thoughts about the challenges for data centers during CeBIT 2014.
LRTV Huawei Video Resource Center
Agile Network Solution – An Overview of Huawei's Agile Network Solution

4|7|14   |   2:31   |   (0) comments


Ajay Gupta, Director of Product Marketing, Networking Product Line, gives an overview of the Agile Network Solutions during CeBIT 2014.
LRTV Huawei Video Resource Center
Huawei’s eLTE Voice Trunking, Video and Data Applied for Railways

4|7|14   |   1:38   |   (0) comments


Gottfried Winter is the Sales Director at Funkwerk, a German specialist in GSM-r terminals and a long-time partner of Huawei. At CeBIT 2014, Winter talks to Light Reading about this partnership and the integration of enhanced voice trunking, video and data functions.
LRTV Huawei Video Resource Center
LeaseWeb Speaks Highly of Huawei's Datacenter Products

4|7|14   |   1:37   |   (0) comments


Rene Olde Olthof, Operations Director LeaseWeb, talks about the next data center transformation during CeBIT 2014.
LRTV Documentaries
Comcast: Reshaping the Cable Network Architecture

4|3|14   |   07:11   |   (8) comments


Shamim Akhtar, Comcast's architect and senior director of network strategy, explains why the cable company is moving to a more distributed network architecture.
LRTV Custom TV
VMware CEO Pat Gelsinger at Mobile World Congress

4|1|14   |   3:41   |   (0) comments


VMware CEO Pat Gelsinger speaks to Heavy Reading about the value of virtualization spanning from the data center to service provider networks to mobile devices.
LRTV Huawei Video Resource Center
Analysts' Impressions of Huawei SoftCOM at ONS 2014

4|1|14   |   1:11   |   (0) comments


After visiting the Huawei booth at ONS, Lee Doyle of Doyle Research gives his appraisal of Huawei's SoftCOM solution.
Hot Topics
BlackBerry Invests in Healthcare IT Startup
Sarah Reedy, Senior Editor, 4/15/2014
Volvo: AT&T HSPA+ Can Drive My Car
Sarah Reedy, Senior Editor, 4/16/2014
T-Mobile Petitions Operators to Kill Overages
Sarah Reedy, Senior Editor, 4/14/2014
Cisco & VMware Are Apple & Google of SDN
Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/14/2014
Mobile Apps Susceptible to Heartbleed, Too
Sarah Reedy, Senior Editor, 4/14/2014
Like Us on Facebook
Twitter Feed