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4G/3G/WiFi

Comcast/Verizon Combo Steers Clear of FiOS

Verizon Wireless and Comcast Corp. (Nasdaq: CMCSA, CMCSK) have extended their wireless/cable service bundles to six more markets as they look to poach customers with incentives laced with broadband upgrades and bigger Long Term Evolution (LTE) data plans.

But the pair continues to steer away from FiOS markets in the early going. Three of the new cable/wireless bundle markets (Atlanta, Chicago and Kansas City, Mo.) are in AT&T Inc. (NYSE: T) territory, while the other three (Colorado, Minneapolis/St. Paul, Minn.; and Salt Lake City, Utah) are in areas where Comcast grapples with CenturyLink Inc. (NYSE: CTL).

Comcast and Verizon are again using prepaid Visa cards (valued between $50 and $300) to attract new customers. But they're looking to sweeten the pot by adding a "double your data package" component that lets customers upgrade to Comcast's Blast! cable modem tier (up to 30Mbit/s downstream) free for 12 months and to double Verizon Wireless's LTE data plan, which, for example, would let a customer on the $30/2GB plan expand the monthly data cap to 4GB. (See Verizon Doubles Up on LTE.)

With the new launches, Comcast and Verizon Wireless now offer cable/wireless bundles in nine markets, following earlier debuts in Portland, Ore.; San Francisco; and Seattle. Time Warner Cable Inc. (NYSE: TWC), another Verizon Wireless partner, has launched similar bundles in five markets (Raleigh, N.C.; Kansas City, Kan.; and Columbus, Cincinnati and Toledo, Ohio) that are all in AT&T U-verse markets. Bright House Networks and Cox Communications Inc. , the other two Verizon Wireless MSO partners, have yet to introduce their bundles.

Why this matters
The launches are coming into view as the feds review Verizon Wireless's proposed purchase of cable's Advanced Wireless Services (AWS) spectrum. Verizon Wireless has also proposed to auction off some of its 700MHz spectrum if the AWS/cable deal gets approved.

Despite avoiding FiOS markets early on, Verizon Wireless and its cable partners also insist that they will compete vigorously for video and broadband subscribers. Comcast competes with FiOS in areas such as Philadelphia, Pittsburgh, Washington and Boston.

For more

— Jeff Baumgartner, Site Editor, Light Reading Cable

paolo.franzoi 12/5/2012 | 5:34:29 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

 


Just to modify your response a bit sailboat, you sort of touched on something that I have seen since the optical crash in the early 00s that companies have really not reacted to well in their R&D planning.


"I sure would not want to be a PON equipment sales person in the USA these days!"


Given that I worked for AFC/Tellabs, I can tell you from my sources that selling AFC (really Vinci) ONTs to Verizon is not a horrible thing.  What this means is that you MUST win the inital RFPs because there will not be more for that technology.  In the old days there were replacement RFPs for existing products.  That just has not happened in the access space for over 15 years (I think the last big replacement RFP came from Bell Atlantic and because of the GTE deal went nowhere).  Now they are all about NEW architectures to replace/supplement/change existing ones.  


People still invest as if there will be replacement RFPs.  If I go back to Tellabs, that is what I told them about WiChorus.  My conclusion was that they would be too late to win EPC RFPs using that platform.  Nobody wanted to hear it.  


What I am surprised by and amazed by given the breadth of the staff here at LR is that the change in the way products are selected and planned has not really hit them as a point of note.  And this has led many companies to over-invest in product lines that have already lost.  


The thing I read here is that people believe that new applications will spring forth if access bandwidth magically appears.  This is done in the same breath where carriers are capping the bandwidth use for the bandwidth that ALREADY exists because the Access Network is FLOODING the network with traffic.  People read the news and choose their storyline because they personally can not get 100Mb/s or fiber or whatever.  But heck even here in the dinky North Bay, I have a 20 Mb/s connection on Comcast at my house.  Do I really need more?  No - I would love to have more upstream but even that is more of a convenience than a barrier.


I have said for over 5 years the bandwidth problem generally is NOT an access issue.  Are there places where it is?  Sure are.  But for most folks (in the US at least), you have the choice of at least 1 high speed option and more likely 2.  Some have 3 or more.  Would I like the price to decline?  Yes, but seriously now we are quibbling.  


seven


 

paolo.franzoi 12/5/2012 | 5:34:30 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

sailboat,


There plan under Ivan was to do the urban and suburban areas with FiOS to stem line loss and keep the residential business as a cash cow.  They were planning to sell off their rural properties and have been doing this over time.  All of that was known back in 2003 when the BPON RFP came out.


So, really I don't see any changes at all.  I can tell you that the PON OLTs are not working very hard to handle the offered traffic.  I have yet to see the point of upping the rates again.  The reason to go from BPON to GPON was to try to get a price reduction.  Nobody would think that is going to happen if they stepped to 10G PON of any flavor.


So, I think FiOS has done what it was supposed to do which is stabalize the wireliness Access Business.  They will use this as a cash cow to provide investment support for business services and further wireless offerings.  This has been the plan for about 10 years and it has not been a secret.  


Will they offer new things with FiOS?  Probably.  We were doing conversion of long tail content to IP based SDV when I exited Tellabs (well the OLT development to support anyway).  But this will all be incremental.  I expect no new big buildout and no new big RFP. (Same by the way from AT&T only replace FiOS with U-verse and they want to keep their rural properties with legacy DSL).


seven


 

^Eagle^ 12/5/2012 | 5:34:30 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

So, bottom line is there is no lack of capacity in the current FIOS architecture and no customer drive for an upgraded faster version.  Customers have enough bandwidth on FIOS and are not really clamoring for more.


And the VZ plan to use it to reduce costs, lower churn, and create a cash cow in the urban / suburban metro areas where they can more easily support FIOS with fewer resources is working.


 Use said cash cow to generate free cash flow to invest in other areas.  Also working.


Ride that cash flow for a long time, but cap out any real new significant investment in big upgrades for an equally long time.  Do small incremental things to improve various parts as you mentioned but essentially spend no more money on it.  Just take profits.


I sure would not want to be a PON equipment sales person in the USA these days!


As you said, the OLTs are not struggling to carry the traffic currently being generated.  so there is no real demand driver for upgrades.  


Despite the crys from many on message boards like one this for a massive new investment in access, it is clear there is not really a bandwidth crunch in wireline access where the investments have been made in FIOS, UVerse, or Comcast's high speed.  Until there really is some need, I agree, we will not see much investment in this area going forward for ATT and VZ.


There is still a need for faster and better access in many places, and there is still the question of afforability for many.  But no real demand drivers for any new investment in already built out areas for FIOS and U-Verse and Comcast high speed.


(note: I do not like the rural users being stuck with relatively slow, if they can get it, DSL.  And in many areas, DSL is still not really available.... so for rural users, they are not being well served in many ways.  None of these big plays are addressing rural or small community access.  likewise for LTE buildout's).


Sigh, I live in one of the areas Comcast is NOT upgrading.  Get good fast data pipe, but horrible, really horrible tv quality.  they have no plans to upgrade the head ends in my region for a long time, if ever.  So OTT is OK here, but not the standard nor HD TV from Comcast.  No Fios, no Uverse.  Barely working ATT dsl.    


sailboat 

paolo.franzoi 12/5/2012 | 5:34:33 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

sailboat,


One thing you may not know is that Vz was able to create FiOS technician out of the 4 copper OSP tech positions.  Created great workforce flexibility.  Don't forget this as part of the business case.


seven


 

^Eagle^ 12/5/2012 | 5:34:33 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

Brook,


Yeah, I knew that.  The FIOS project allowed VZ to reduce technicians and also move a lot of revenue from the regulated side to the "non-regulated" side (separate company of course).


So there is definitely that part of the business model equation.  Considering VZ has stopped investing in FIOS, and appears to not be interested in rolling it out to other areas nor interested in advanced upgrades to the existing FIOS plant or architecture (don't ses VZ pushing much on advanced PON technologies these days.  Maybe they are, but from the outside, it is not visible if they are); one wonders what VZ's long term commitment to high speed wireline access is.  For now, yeah, FIOS is doing OK for them.  But this is under the metrics of minimal new investment into either expansion or upgrading.


I think some of this of course might be, as others have posted, because the senior management now running VZ largely came from wireless.  


But I do wonder what their long term plans are for FIOS.  You know as well as I do, that under the normal telco timing for next generations of platforms and services, we should be beginning to hear noise from VZ regards new ideas, new RFI's, new RFP's, etc.    FIOS, as you well know, while still the best access network in north america, was essentially designed nearly a decade ago with some tweaks in the later stages of roll out and construction.  The system while still best in USA, is starting to get a bit aged and we are hearing no noise about next generation plans for FIOS.


So, what do you think VZ's long term plan for FIOS is?


I know you are not directly in the PON business any more.  But would be curious to hear your thoughts.  What will VZ do with FIOS.  Keep it and milk it for revenue but put no funds into it for some time?  sell it off?  Upgrade it and invest in it and expand territory coverage?  


sailboat

^Eagle^ 12/5/2012 | 5:34:37 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

What if for a phase 2 of this long term plan of Verizon's, they sell FIOS to Comcast?


VZ has long tried in various ways to rid itself of subscriber access in various markets.  I wonder if you really pull apart FIOS numbers, if FIOS has made VZ much money?  if Comcast owned FIOS, almost immediately operating costs go down as Comcast has long contracts with content providers and could manage or miminimaze duplicate content contracts.  I think this could be the case anyway.


So far with VZ, they have mostly sold access plants in "non core" geographies.  But who knows.  With VZ making much of their money off of wireless stranger things have happened.


I have zero insider knowledge that this might happen.  Merely speculating.  OF course my guess is that this would never happen until AFTER VZ convinces the Feds to allow it to do the spectrum deals it is trying to do.  Get the AWS spectrum.  Get the cash from selling off 700mhz.  Only after all that is done, then sell off FIOS.  Cannot sell off FIOS, as this is their "competitive" access play, until they secure all the spectrum in their various deals.


Interesting to think about.


sailboat

steve q 12/5/2012 | 5:34:40 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

Hi i will have to say that is true if verizon wireless is hopping for a biger bit into the high speed data network they will have more problem Fios is the only true speed out ther with a fiber cable going into each home. The cost of the going data plan that verizon wireless has will stop most customer and they end up going to the cable company and that a lose for the stock holder for verizon. The only way verizon can win is still push the fios service out to those that need a better name brand company not the number game of what the Wireless is hopping for. The bad side of it all is that if the deal with the airwave go though the cable company may just tell verizon what to do next and then the customer will just move to a different playing feild.

Duh! 12/5/2012 | 5:34:40 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

You're not the first to notice that.  One gets the sense that McAdam and company think they see better ROI (or RONA or whatever their preferred metric is) on LTE than on FiOS.  There is also reason to suspect that they believe they have cherry picked the easiest communities to serve in-territory, and the rest either have significantly higher construction cost or less cooperative municipal governments.


But all of the reported metrics for FiOS point to a great business case... ARPU in particular, take rate (in communities served for more than a year), new adds, churn, brand perception, you name it.   They've got one of the best brands in the country, high customer satisfaction, bragging rights for broadband speed.  I can't imagine a rational business reason not to build on that.


One gets the sense that McAdam would be happy to sell off or spin out the wireline properties, the legacy customer base, and especially the union workforce.


And, yes, I had a lot of admiration for Ivan Seidenberg, Doreen Tobin, and (especially) Mark Wegleitner.  It took a lot of cajones to sell FiOS to the analysts and absorb the fallout.    Plus the Seidenberg era operations and HR execs managed to keep the peace with the unions.


 

MMQoS 12/5/2012 | 5:34:43 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

Ever since Ivan stepped down and the Vz Wireless team took over management of the company, FiOS has seemed to take a back seat to Wireless (LTE) development.  This seems strange to me even given the background of the new management.  While Wireless is very profitable, only 51% of those profits go to Vz Comm with the shared ownership with Vodaphone.  FiOS on the other hand remains quite profitable even with OTT video, gets top votes from consumer surveys and the cost per sub keeps dropping.  Why are they capping further development when they can reap 100% of the profits?  Is this a Regulatory position they are pursing?


I can understand the need to dance with the devil in order to acquire more spectrum from the MSO's but as a Vz Comm stockholder I am wondering why they are not more agressive in pushing FiOS into new territories, even competing with ATT.  I'm in ATT territory (Palo Alto) and I've tried uVerse but rejected it based on poor video quality but Comcast is only marginally better and definitely worse for repair service so I'm not interested in the combo deal.  We have a Verizon Comm fiber metro ring node a block from my home, neighbors who know FiOS and would subscribe but any indications of FiOS service?  Not a chance.              

Jeff Baumgartner 12/5/2012 | 5:34:45 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

It definetely is. They can claim that the companies are different all they want to keep the regulatory stuff in check, but I suspect the average consumer won't know the difference and/or will be confused by this when these bundles do reach FiOS-ville. JB


 


 


 


 

msilbey 12/5/2012 | 5:34:46 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

Strikes me as a difficult branding proposition. Verizon may be quite clear that it has two separate companies, but the name is still Verizon for both organizations, even if it's Verizon Wireless for one. Maybe they'll focus solely on the FiOS branding. Otherwise it's not just going to be a conflict of interest, it's going to be damn confusing. 

Jeff Baumgartner 12/5/2012 | 5:34:46 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

Verizon Wireless and its cable partners have been quick to argue that Verizon Comm. is a different company, insisting that they'll continue to see FiOS and cable battle it out for TV and broadband subs.  But, you're right, you'd have to be blind not to see that there's at least some conflict both sides have to weigh out here.


But so far they haven't backed up that talk with a cable/VZ Wireless bundle in FiOS territory. Perhaps there's a good (convenient?) operational reason why they have avoided FiOS territories in the initial markets and I suspect it's just a matter of time before we see them try this in a FiOS territory. However, it is quite  curious that they've sidestepped the uncomfortable situation that you outline.


But when they do bring this sort of bundle to a FiOS territory it will be interesting to see how it's marketed versus how it's marketed (and how heavily it's marketed) in non-FiOS markets. JB




 
msilbey 12/5/2012 | 5:34:46 PM
re: Comcast/Verizon Combo Steers Clear of FiOS

I have a hard time understanding how Verizon can compete against itself and go up against FiOS markets with cable. I'm sure it's great for VZ to go after U-verse markets, but how do they possibly communicate in FiOS areas which Verizon service consumers should be buying? "No, it's this Verizon! Not that one!" 

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