FiOS Picks Up Pace Again

In a surprising spurt, Verizon's FiOS network added more broadband and video subscribers in the fourth quarter than it did a year ago, ending 2014 with a bang.

Verizon Communications Inc. (NYSE: VZ) reported Thursday morning that its all-fiber platform racked up substantially more TV and Internet subscribers in the fall quarter than it did a year earlier, despite seemingly bumping up against the limit of its FTTP network buildout in its 13-state region. That reverses FiOS' recent pattern of smaller year-over-year gains each quarter, indicating that Verizon is continuing to make healthy inroads against such prime cable rivals as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC) and Cablevision Systems Corp. (NYSE: CVC) in the Northeast. (See FiOS: New Subs Down, Upload Speeds Up.)

Specifically, Verizon said FiOS picked up 116,000 video subscribers in the fourth quarter, up 26% from 92,000 a year earlier. As a result, the telco now has more than 5.6 million pay-TV subscribers, more than all US cable operators except Comcast and TWC.

Likewise, on the broadband side, Verizon said FiOS netted 145,000 new broadband subscribers, up 16% from 126,000 the year before. Thanks to this latest gain, Verizon now has more than 6.6 million FiOS Internet subscribers and over 9.2 million overall broadband subscribers, more than nearly all US MSOs once again.

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With their all-fiber network now passing more than 19.3 million small homes and businesses, Verizon executives continue to insist that they still have some room to grow even though they have no plans to extend FiOS to other regions or states. They note that the uptake rate of their two prime products is still on the rise, with FiOS Video's penetration rate now at 35.8% of homes marketed and FiOS Internet's penetration rate now at 41.1% of homes marketed, both new highs.

"We're looking to drive further FiOS penetration," said Verizon EVP & CFO Fran Shammo. Speaking on the company's earnings call, he said the telco will maintain its focus on offering higher-quality broadband and video products than its chief cable rivals.

In its latest initiative on that front, the company unveiled a powerful new wireless router for FiOS Internet subscribers with higher-speed tiers in November. Known as the FiOS Quantum Gateway Router, it boasts WiFi home networking speeds of up to 800 Mbit/s. With 59% of FiOS Internet customers now subscribing to the FiOS Quantum tier, which offers downstream speeds of 50 Mbit/s to 500 Mbit/s, Shammo said Verizon will start marketing the new gateway aggressively to subs "shortly." (See Verizon Drops Its Quantum Router, Hints at IoT.)

Unlike his counterparts at AT&T Inc. (NYSE: T), CenturyLink Inc. (NYSE: CTL) and some of the top MSOs, Shammo did not reveal any plans to roll out Gigabit service in its FiOS or other regions this year. But it's hard to imagine that Verizon will resist the Gigabit urge as other broadband providers announce their network and speed upgrade plans.

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