Parks Associates Blog

Wednesday, January 17, 2007

Verizon FiOS Update

Verizon's Big Splash at CES
Boy, one couldn't miss Verizon's presence at the Consumer Electronics Show (CES) last week! With the demos set up and executives on hand in the Press Room, the media and analysts had the telco's bundled services and value-added services strategies laid out right in front of them. On the FiOS TV side, Verizon announced some enhancements during last week's show. Bob Ingalls, Verizon Telecom's Executive Vice President and Chief Marketing Officer, indicated that improvements were being made to the interactive media guide (January 7, 2007 press release - "Verizon Unveils Next Generation of FiOS that Redefines Home Entertainment Experience for Customers").

We were pre-briefed on the interactive media guide enhancements prior to the show, and the improvements are noticable. Verizon has done a good job of employing a variety of user search techniques, including "triple-tap" and QWERTY functionality. They've also pulled specific applications out from the Menu button (such as DVR content). Instead of having to first go to Menu and then Recorded TV, the user will see their recorded programming through the DVR tab. The speed and performance of the guide and the searches was quite impressive as displayed at the show. Verizon also indicates that 10% of its Verizon FiOS TV customers are subscribing to the Home Media DVR service, which provides whole-home DVR applications and interactivity with the PC(s) by allowing content to be pulled from home computers.

"Television 2.0" - What Does it Mean to the Digital Lifestyle?
Verizon's moves are emblamatic of the direction of "Television 2.0," as we've written about the impact that telco competition will bring to multi-channel television offerings. Key to the new direction of television and bundled services are these developments:
- Greater emphasis on home networking, including not only whole-home DVR applications, but the inclusion of advanced residential gateway platforms that help to manage voice, video, and data traffic from the access network and inside of the home; and
- Operators beginning to embrace "over-the-top" features and functionality, including bridging the set-top box to the PC and bringing in such services as Flikr and YouTube into the television provider's "walled garden." It was interesting to talk to Scientific-Atlanta (Cisco) at the show and see how they are using the Java and Linux tools of OpenCable to bring in this type of functionality. It's going to be an important direction that television operators take, as they begin to incorporate the "Wild West" of Internet content into their service offerings. We think that consumers will like this approach to delivering a more diverse array of content and choice while at the same time keeping the services managed and the quality of the experience as optimized as possible.

Opportunities for Vendors
Clearly, this "Television 2.0" era in which we're operating can mean some significant opportunities for vendors and solutions providers in the following areas:
  • Network management (traffic routing, QoS, packet inspection, network delivery enhancements, etc.);
  • Transcoding and transrating, not only for the "over-the-top" services, but also for quality control of commercial content that may be encoded in a variety of media codecs;
  • Home networking (as the requirements of the service provider grow more diverse, so will their needs for more flexible home network solutions, including hybrids of wired and wireless solutions);
  • Search and user interface enhancements; and
  • Solutions that allow for "Inside/Out" and enhacements to mobile and portable content and communications experiences.
Verizon's Q3 2006 FiOS TV Update
Given Verizon's big splash at CES, we thought it would be helpful to give the latest public information about the status of Verizon's FiOS TV rollouts.

During Verizon’s Q3, 2006 earnings call (October 30, 2006), Doreen Tobin, the company’s Executive Vice President and Chief Financial Officer, noted that Verizon had 522,000 FiOS data customers and 118,000 FiOS video customers. Below are some key details:

Total Homes Passed by FiOS Service:
Total homes passed by FiOS service stood at 5.3 million as of the end of September; Verizon was expecting to reach its target of six million homes passed by the end of the year.

FiOS Data Services (High-speed Internet):
  • Penetration of FiOS data customers (the high-speed Internet service) was 14% (522,000 subscribers from 3.8 million homes passed);
  • Net adds of FiOS data customers in Q3 was 147,000, compared to 111,000 in Q2 2006 (32% growth); and
  • On track to have 725,000 customers by year-end 2006.

Fios TV Services

  • Penetration of FiOS TV customers was 10% (118,000 subscribers from 1.2 million homes passed);
  • Net adds of the FiOS TV customers was 63,000 in Q3, compared to 35,000 in Q2 2006 (80% growth);
  • Churn from FiOS TV subscribers is averaging less than 1.5% per month; and
  • On track to have 175,000 FiOS TV customers by year-end 2006.

Costs to Connect a Home:

Verizon reports two costs:

  • To pass a home (This is to simply enable a home to receive FiOS service, in other words, to “pass a home”): Verizon reports that the average cost was $845 per home at the end of September, down from $1,400 when they began the infrastructure upgrades; and
  • To connect a home (when a home actually subscribes to a FiOS service): Verizon reports that the connect cost at the end of September was $900, a 25% decrease from the beginning of the year. It expected the connect cost to drop to $880 by the end of the year.

Total Costs:

In September 2006, Verizon had reported that it was spending $18 billion through 2010 to deploy the FiOS services.

1 Comments:

Anonymous Anonymous said...

Verizon sends us a letter stating they are going fully digital in June and to call to get the free adapters for tv's that do not have their box. So I called in June and it is now September 20th and after too many calls to count we still do not have our adapters. Optimum is looking really good at this time. Verizon has a better product but their customer service is making it a horrible company to deal with and without good customer service they may as well close their doors!!

11:04 AM  

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