FiOS Still on Fire

Verizon FiOS must have missed the memo about the saturated US pay TV and broadband markets.

Despite the declining, and even negative, growth rates in the two markets, Verizon Communications Inc. (NYSE: VZ) reported Thursday that FiOs added more big chunks of TV, Internet, and VoIP subscribers in the third quarter ended Sept. 30, making further inroads against cable operators in the residential space. Verizon also claimed that its fiber-to-the-premises (FTTP) network is starting to gain market share against cable providers in the increasingly competitive small-to-midsized-business (SMB) market.

Specifically, Verizon reported that FiOS picked up 135,000 video subscribers in the summer quarter, up 13 percent from 119,000 a year earlier. Over the first three quarters of the year, Verizon has netted 444,000 FiOS Video customers, up 6 percent from 419,000 in 2012. As a result, the telco now has nearly 5.2 million pay TV subscribers, more than all US cable operators except Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC).

Similarly, on the broadband side, Verizon said FiOS added 173,000 new broadband subscribers, up 27 percent from 136,000 a year earlier. Verizon has gained 522,000 FiOS Internet customers over the first nine months of the year, up 13 percent from 463,000 last year. Thanks to these gains, Verizon now has more than 5.9 million FiOS Internet subscribers, more than most US MSOs again.

With the all-fiber FiOS network now passing 18.3 million small homes and businesses, Verizon executives insist that they’re not resting on their laurels just yet. Noting that FiOS Video’s penetration rate is 35 percent of homes marketed, and FiOS Internet’s penetration rate is 39 percent of homes marketed, they argue that they still have plenty of room for growth.

“We are going after market share,” said Verizon CFO Fran Shammo, speaking on the quarterly earnings call with financial analysts. “The fact of the matter is we still have a long runway.”

In particular, Shammo said FiOS is still gaining momentum in the New York City market, where it competes head-to-head against Time Warner Cable and Cablevision Systems Corp. (NYSE: CVC), and in the Philadelphia and Washington markets, where it goes up against Comcast. “To my mind,” he said, those three key markets are still “underpenetrated.”

Seeking to make FiOS Video even more competitive against cable video packages, Verizon recently began offering free mobile access to nine live TV channels via the FiOS Mobile app, with plans to add more in the coming months. The app also enables FiOS customers to buy or rent up to 45,000 on-demand movie and TV show episodes from FlexView, Verizon’s multi-screen video service.

On the broadband front, Verizon boosted the maximum speeds for FiOS Internet to 500 Mbit/s downstream and 100 Mbit/s upstream in July, briefly making FiOS faster than any major North American cable operator’s broadband service. But Comcast promptly responded in August by upping its fastest broadband speeds to 505 Mbit/s downstream and 100 Mbit/s upstream. (See: FiOS 500 Leaves Cable in Dust and Comcast Zips Past Verizon.)

Verizon does not break down how many of its broadband customers subscribe to each FiOS Internet tier. But the company said 40 percent of its customer base now subscribes to at least 50 Mbit/s downstream speeds, up from 35 percent at the end of June.

Shammo said FiOS is also making headway against cable in the SMB market as Verizon shifts its focus to building more connections to shopping centers, business districts, and other commercial locations. But he conceded that Verizon is still losing ground to cable in areas outside FiOS’s footprint because of DSL’s limitations. “Outside of FiOS, it’s hard for me to compete with the speeds cable can offer through Docsis 3.0,” he said.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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derac7020 10/21/2013 | 10:05:54 AM
Re: Still leaves one wondering if there will ever be an expansion I was talking about the home router for FiOS.  It initially distributed the MoCA [RF] traffic [as well as the wireless and Internet] and then moved to IP Video [VoD] with the requisite channel blocking/access list/access control functions.   FiOS was a great concept and, I think, the best home delivery internet/video system deployed to date.   They faced some challenges in the big cities but I beleive they could have morphed to a hybrid fiber/coax model for high density applications.   The shiny object in the room was wireless though and that got the lions share of the attention.  Hard to argue with that.
GeoTel 10/21/2013 | 7:33:27 AM
Needed the Fiber The reason on-demand TV didn't become popular sooner was that most people didn't have the hardware to support it. With so many providers now offering fiber to the home, demand has taken off. It makes complete sense: Americans want everything at our fingertips including TV and movies.
RMBRO 10/20/2013 | 12:10:34 PM
Re: FioS expansion Sorry tmc, but your numbers are skewed. Verizons penetration rates are much higher than that for New York , and pay attention to Cablevisions quarterly reports, they are taking an absolute beating. Ive been to MDU hubs where Verizon has taken close to 80% of the subs from Cablevision.

I dont know how anyone can support Cablevision the way you do. The Dolans are lowlife MotherF'ers.
brookseven 10/19/2013 | 12:30:00 PM
Re: Still leaves one wondering if there will ever be an expansion  

Well derac...all I am trying to say is the Juniper Routers deployed at the edge of the FiOS network are not unique nor are they unique inside of Verizon.  Once they shifted away from ATM interfaces to the routers they went to a really simple replacement for BPON.  They map VLANs on the Ethernet Side to VCCs on the subscriber side.  I don't know what they do in GPON (I knew what they were going to do but they may have changed), but a pretty simple VLAN mapping would work there as well.

Once they are behind the edge router....its just internet traffic.  The BPONs (and I believe the GPONs due as well) perform rate limiting and DBA so there is not a lot of need for the router infrastructure to do very much to do other than shuffle packets.


Stillgridlocked 10/18/2013 | 6:52:00 PM
Hope for Expansion Breaking off the agreements with Cable co's and the possibility of a FIOS/landline spin off leave hope for expansion of FIOS.

They are two cities away from me right now.

In the long run the ONLY hope for the landline division is to sell off rural areas completely and expand FIOS everywhere else to get rid of the legacy copper network that is costly to maintain and not profitable.
derac7020 10/18/2013 | 5:52:21 PM
Re: Still leaves one wondering if there will ever be an expansion So you got the first BPON versions deployed.   Cool.   We would have a lot to talk about over a beer.    No, the routers aren't the same as the DSL routers.   I built and supplied both to VZ and the difference was substanstial but that's not important.   They have cut back a lot on wireline lab resource and support/field resources.   DSL worse than FiOS but the FiOS group was hit pretty hard.
brookseven 10/18/2013 | 5:34:28 PM
Re: Still leaves one wondering if there will ever be an expansion derac,

1 - The very first FiOS installations (and you can search for it here on LR) were in Keller, Tx.

2 - The Indiana deployment was basically the only place the old Motorola Product ever got.  

3 - I was commenting that the news of 2M unused ONTs is unreliable until it is formally reported by Verizon.  A forum post about something someone may have said once is basically rumor - not fact.

4 - The Router side of FiOS is really, really simple and is not greatly different than the DSL side of Verizon.  Plus there are all those guys in Verizon Business. The router bit of FiOS is run of the mill.

I worked for AFC during the initial BPON deployments so I am very familar with FiOS.


tmc8080 10/18/2013 | 4:00:00 PM
Re: FioS expansion Verizon might be making inroads in places where there is little competition, but not much good is happening with the NY Metro markets where they are only at 38% market share. Cablevision is offering 100 megabit service for the 50 megabit price when they did their upgrades. Should a lower price than $90 for that service beyond their $45 a month promotion, this could mean big problems for Verizon who will have to offer THEIR customers better or see churn.
derac7020 10/18/2013 | 1:05:57 PM
Re: Still leaves one wondering if there will ever be an expansion I wasn't aware a deployment in TX but I do remember a deployment in SoCAL now.  Thanks for reminding me.  Frontier also got the Indiana deployment for what that's worth.   It seems they were shipping <500K ONTs a year for a while now and maybe 6M-8M or so ONTs were deployed.   These aren't internet numbers.  I used to be a supplier.    So maybe I exaggerated a bit.   Its just that 2M is a lot of ONTs to be unused.   From my persepective there is little experise on the router side of the house at VZ.   In their environment its a pretty important piece of the service delivery puzzle.   
albreznick 10/18/2013 | 12:52:20 PM
Re: Still leaves one wondering if there will ever be an expansion Has there been that big of a brain drain out of Verizon? Surely somebody there still knows how FiOS works, no?
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