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| Verizon cuts 2010 FiOS by 2M homes |
| Written by Dave Burstein |
| Thursday, 22 April 2010 11:50 |
 Verizon recently confirmed they will add 3M FiOS homes in 2010 but have now cut that to 1M for budget reasons. They implicitly also confirmed they are cutting back future FiOS builds as well by 2-4M homes from the original plans of 80+% of homes passed. Verizon to get a New York City and other franchises have promised 100% local deployment, so unless they breach the franchise agreements they will reach 18-19M in a few years. This is consistent with my report that Verizon is cutting expenses to increase cash flow before Ivan Seidenberg's retirement. Ivan says a deal to sell to Vodafone is highly unlikely; I have no way of determining whether he is just playing hard to catch. Ivan personally would likely be ahead by $tens of millions if he sells, a powerful incentive. This is purely speculation; Ivan doesn't open his heart to me. FiOS remains the best large network in the Western world, so denying it to 10M homes is a major political issue. Baltimore, with a large minority population, is not getting fiber while Maryland suburbs are. Baltimore is literally demonstrating in the street about that. The pattern is repeated, with inner cities and poorer rural areas getting inferior service. Verizon says they are not red-lining based on income but that's the practical effect of their plans. I've asked for, but haven't been given, the demographics of FiOS vs. non-FiOS territories. Unless they release that data, I'm going with Congressman Waxman's analysis they are providing inferior service - literally a tenth the speed - to the poor.
I've also sent a request for comments to the five FCC commissioners and the head of NTIA. D.C. claims they are making progress on broadband, but with this 2M cutback by Verizon following the 4M cutback by AT&T that's hard to accept. Most in D.C. are also ignoring the frequent and massive rate increases dating back to 2007 that are the leading cause of the slow uptake of broadband.
From Verizon's transcript:
John Killian - Verizon - CFO
Obviously, I said in the prepared remarks we are very satisfied with where we are from a FiOS perspective. We are very focused on growing penetration. Our build plans; we're still on the path to build ultimately to about 18 million premises within our franchise territories. This year, we're going to pass about 1 million premises in 2010, give or take 100,000-200,000 on either side. Part of that is an intentional strategy this year to focus down on a lot of the inventory we have, a very strong focus around the MDU population within our franchise territory. We don't believe we've had enough focus there, and it's a great opportunity and a very cost-effective way to drive new subscribers in new retention. Now, from an RCM perspective, you are right. We've had very good growth in FiOS RCM, more focused on the video side. We have had some price increases there, which are natural, in terms of the video side. We've also seen improvements in some of our video on demand kind of services that are also contributing to that. So we are very pleased with FiOS. The profitability continues to improve. We've been operating income-positive the last couple of quarters. The cost metrics that we believed we would see ultimately with FiOS has positioned us very well, and we think we've got a great foundation here on the Wireline side for the future, that we will have somewhere in the range of, post the Frontier spinout, 70% to 80%, in that range, of footprint covered with fiber. And that's going to position us very well for the future. We've also got focus on making sure we've got capital discipline within the Wireline business. We have suffered a little bit from the economy and some of the cyclical change. So there is focus on making sure we are investing at the right level in that business. Simon Flannery - Morgan Stanley - Analyst So just to be clear, are you going to be finished with the FiOS build at the end of this year, or might some of it now, if you are going to do 1 million a year instead of 2 million or 3 million, you are going to be a little bit more, still, in '11 and '12? John Killian - Verizon - CFO Good question, Simon. We'll have a little more to do into 2011 and maybe even to 2012. We're just stretching it out a little bit longer. We felt that was appropriate, given where the economy was, given some of the attention we've got around the Frontier spinout. Don't read this at all to be we are not satisfied with FiOS; we are very satisfied with FiOS, and we'll continue to evaluate that going forward. |