Verizon's NYC FiOS drive becomes bigger threat to TWC, others
Verizon (NYSE: VZ) may not be pursuing new FiOS markets, but its ongoing deployment of fiber to multi-dwelling units in New York City is enabling it to more effectively keep cable competitors, particularly Time Warner Cable (NYSE: TWC), at bay.
Lowell McAdam, CEO and chairman of Verizon, said during the recent Citi Internet Media & Telecommunications Conference that it was getting 30-35 percent penetration in the city's MDUs.
This trend has gotten the attention of Jefferies, which wrote in a recent research note that the city "accounts for ~27% of FiOS video subs and 30-40% of net adds."
The research firm added that "this clearly pressures Time Warner Cable, though we expect the MDU focus to alleviate some competitive pressures for Cablevision, particularly in the less-urban Long Island Market."
What makes NYC a potentially lucrative opportunity for Verizon FiOS data and video is that it has a current base of 7.2 video subscribers that make over $61,000 a year.
Jefferies said that "for wireline operators it also has one of the highest concentrations of multi dwelling units (MDUs), allowing for substantial return on deployed capital."
Besides residential subscribers, the MDU drive can also be used to win back SMB customers that may have churned in recent years to a cable operator or a local CLEC.
Expanding its fiber footprint into more MDUs comes at a time when it continues to migrate more of what it calls chronic copper customers to fiber. While Verizon won't release its Q4 2013 earnings until Jan. 21, in the third quarter, the service provider said it migrated almost 250,000 homes to fiber and that it was on track to exceed its target of 300,000 migrations in 2013.
Outside of NYC, the telco is not sitting pat. In December it announced it was seeking a cable franchise for its FiOS TV service in the Long Island town of Glen Cove, N.Y., where it would battle cable incumbent Cablevision (NYSE: CVC).
- see this report (.pdf)
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