Is FiOS Crushing Verizon?

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Is FiOS Crushing Verizon?

Is Verizon getting crushed by their FiOS project?

A source says that the labor force internally has shifted around so that the FiOS department is a separate stand-alone department without access from other departments. In other words, FiOS is a silo. That's not that unusual in big corporations, especially telcos.

"Verizon Communications signed up 168,000 net new FiOS TV subscribers in the first quarter as its TV service continued to lose growth momentum", according to The Hollywood Reporter. This means FiOS TV has hit 3 million subs. VZ has 3.6M FiOS subs. Compare that to 92M cell customers. Penetration is 25% of homes passed. VZ was expecting closer to 50%. Having experienced their FiOS TV - all that popping - and VZ billing (fees will give it bill creep), I can see why getting to half could be a challenge. Also, internally VZ is selling DSL too, even in FiOS lit areas.

The recent port blocking on the FiOS network even affected the their own voice customers who are now VoIP. Was it ineptitude or something malicious? Either way it hurts their marketing and retention efforts.

Content costs money.

Content is expensive. And with more than 565 all-digital channels including up to 140 HD channels and 18,000 monthly video-on-demand titles means a lot of money being spent on content every money - spread out over just 3M customers. Add in TV studios to create a News show to compete with local cable news like BayNews9 on Bright House Networks in Tampa Bay. Not to mention the cost to build the FTTH project, to install each customer, the CPE, and debt interest payments. (When looking at homes, many foreclosured properties had VZ FiOS equipment still sitting there - there's money lost.)

VZ also has a metrics problem. How do you show DSL growth and FiOS growth when they compete against each other? And VZ just shuttered their FiOS wholesale program (i.e., allowing ISP's to resell FiOS Internet at Layer 3).

A few people here in Tampa are speculating that FiOS will be spun off by itself. VZ stopped building out FiOS and are having problems selling FiOS. I just don't see that happening. Having to admit how much debt belongs to Vodafone/VZW and how much is assigned to FiOS would be scary. It would affect stock price short-term and long-term. It would affect debt interest and the ability to borrow money. Plus without the FiOS project, as AT&T is kind of learning with U-Verse, top tier MSO with DOCSIS 3.0 and wireless can kick your ass.

What do you think? Do you think that Verizon will spin-off FiOS?

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