Verizon’s plan for FiOS TV is to keep working on penetration rates. A year ago, the company added 169,000 new customers. In the previous quarter – Q4, the company added 92,000. For the first quarter, analysts expected growth in the neighborhood of 135,000 additions. Verizon didn’t reach half of that, adding 57,000 TV customers in Q1.
Stuff happens, but sometimes it’s a question of what the stuff is. CFO Fran Shammo explained it thusly: “we had probably one of the worst winters on record here and people did not want us in their houses to install FiOS.”
If he had just stopped at mentioning the weather. But seriously? When you’re snowed in, what do you do? What a lot of people do is hunker down and watch more TV.
When you’re snowed in, that’s when you’re thinking about TV the most. If there’s one time when you think, maybe now is the time to get a better TV package, it would be when you’re watching a lot of it.
But then you think: “well, maybe now isn’t the best time. The installers might track snow in the house.”
Do you really think that way? Does anybody?
At least he had the sense to follow immediately with: “the competitive pressure from cable did increased in the first quarter.”
But when your strategy is gaining penetration, and you’re penetration growth rate keeps slowing, and slowing? Later, Shammo noted that Verizon waited out the weather, and customer installs started picking up at the end of the quarter.
So…, maybe Verizon backed off because of the weather? And cable didn’t? Okay, whatever.
So if the penetration strategy is running out of steam, and it’s not just the weather, is the company going to expand its FiOS footprint?
Probably not. Shammo said that within its FiOS footprint, it is still in the process of removing copper in favor of fiber (another 78,000 homes were upgraded in the quarter). He said Verizon has 1 million or fewer FiOS homes left connected by last-mile copper.
As for non-FiOS homes? Don’t expect FiOS. Verizon is betting that wireless connectivity will be adequate broadband access for everyone else.
“Outside of the FiOS footprint, obviously, really we are taking two measures there,” Shammo told analysts (quotes are from the transcript provided by SeekingAlpha). “One is the wireless portfolio and replacing some of that that old voice legacy copper voice with our LTE voice product that Wireless has been selling across the nation for almost two years now called Home Phone Connect. Within Wireline, they have a very similar product called VoiceLink which in essence is the same thing.
“Now, there will be certain areas, maybe another year or so, where we may look to extend the fiber a bit and include some small businesses which we compete extremely well in within the FiOS footprint and they are very profitable customers,” Shammo said.
The company recently bought Intel’s TV operation, along with a CDN company (Edgecast), signaling an intent to start providing an over-the-top service that would no doubt extend beyond its traditional wireline footprint. When asked about timing on an introduction, Shammo was evasive.
As for the numbers, FiOS now represents about 74 percent of Verizon’s consumer revenue, with growth driven by broadband. The company attracted another 98,000 new broadband accounts, bringing the company’s total to 6.2 million.
About 51 percent of the company’s FiOS internet customers subscribe to one of the company’s Quantum tiers, with speeds ranging from 50 Mbps to 500 Mbps, the company reported.
Verizon's FiOS TV penetration strategy seems to be running out of steam at the 35 percent mark, but subscriber adds were down in Q1 mostly because people don't want installers in their homes when it's snowing. Meanwhile, FiOS broadband is growing okay. The FiOS footprint is what it is, but what about Verizon over the top?