A review of Verizon's recent update for analysts and investors. You can download [1] the PowerPoint presentation and learn about "Driving Growth and increasing wallet share.
from: Broadband Reports [2]
Fee Fi Fo Fios
Verizon's plan to dominate broadband going swimmingly
Posted 2006-09-27
Written by Karl Bode
We've been watching the Verizon webcast aimed at updating analysts and investors on the progress of their Fios deployment. Originally this was supposed to be a series of three closed door meetings, but yesterday the company decided to make it one open-door event, indicating their growing confidence in the financials. It was only recently that Verizon felt happy enough with their Fios adoption numbers (some 350k customers), that they began splitting them from DSL subscribers in their quarterly reports.
Most of the stuff being announced at the meeting is not new; the company is largely aiming these updates at the nervous (and frequently myopic) investors on Wall Street, who are used to more immediate results. Verizon is apparently watching you; presentation slide (pdf) 29 contained quotes from postive Broadband Reports user reviews of the service.
We've certainly been hard on them for mis-steps in the past, but there's no doubt what they're doing now is the correct course of action to future-proof the company in the coming battles with cable operators. We're just hoping this next push will include more secondary markets (see our Fios deployment map).
According to Verizon, the company intends to pass (note this does not mean serve) 18 million homes with Fios by the end of 2010, or more than 50 percent of the approximately 33 million households in the company's 28-state wireline service area. Verizon says they are on target to pass a total of 6 million homes by the end of 2006, adding 3 million more per year through 2010.
As we've noted, Verizon has found ways to cut the installation costs of Fios, bringing the average capital expenditures to pass a home down to $873, and to connect a home down to $933. According to the company, they hope to bring these costs down to $700 and $650 respectively by 2010.
Verizon notes they have a very good churn (turnover) rate of around 1.5%, meaning only a minute few are leaving the service, despite the fact Verizon pulls all copper from a home after install (so any defectors are likely going to cable). However most cable customers (10% says Verizon) are directly jumping to Fios once it's available, so this is a battle Verizon is clearly winning.
One of the things not announced in today's meeting, confirmed to us by analyst Dave Burstein, is that the company is preparing to trial GPON fiber technology. According to Burstein, Verizon will have deployed between 7M and 9M lines of BPON (100Mbps/30Mbps, or 622/155 split up to 32 ways) before they gain enough confidence to switch to GPON (capable of 250Mbps/125Mbps).
"That’s considerably better than the low end DOCSIS 3.0 (160/120), and similar to the high end DOCSIS 3.0 (1 gig/100 meg, shared to probably hundreds of homes,)" notes Burstein.
During the meeting Verizon claimed that while Fios is costing more to deploy than AT&T's "Project Lightspeed," it works much better than AT&T's IPTV solution. Given Verizon's promising financials and positive customer reaction, will we see AT&T announce they've decided to go all fiber before year's end (something we've seen at least two analysts predict)?