Verizon's stalled FiOS expansion will drive consumers to cable

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Sean Buckley, FierceTelecomIf you reside in a part of Verizon's (NYSE: VZ) territory where it does not yet offer FiOS service, you will never get it. You'll have better luck with your local cable operator.

Lowell McAdam, Verizon's CEO and chairman, reiterated the FiOS curtain call during the UBS 41st Annual Global Media and Communications Conference, saying that it will continue to focus on expanding service availability in existing markets.

To its credit, Verizon's FiOS broadband Internet subscriber base has continued to ramp up every quarter. In Q3 2013, the service provider added 173,000 new FiOS broadband subscribers. 

It is also seeing more of these customers take its higher Quantum 300 Mbps and even 500 Mbps speed tiers. This is coming from existing customers that are going up in speed and copper customers the telco converted from fiber.

Despite the outcry from cities such as Boston and Buffalo, N.Y., the idea of closing the curtain on FiOS expansion is hardly new. The sad reality is that that they are not doing much, if anything, to upgrade their copper network.

Today, consumers outside of the FiOS footprint users have the option of purchasing speeds that range from 1 Mbps to 15 Mbps.

Getting the top 15 Mbps speed, however, is not a given. The availability of 15 Mbps speeds are driven by how far a consumer is from the nearest central office (CO) or remote terminal (RT). 

Alternatively, cable operators today can deliver between 50 and 100 Mbps and higher over their existing DOCSIS-based HFC infrastructure.

One consumer that has noted the lack of Verizon's broadband options is Teresa Mastrangelo, the principal analyst for broadbandtrends.com. She actually subscribed to cable-based broadband four years before the telco even rolled out DSL. 

"As a Verizon customer in a non-FiOS market--it is noticeable that the level of service has declined and we continue to only have 3 Mbps DSL available to us," she said in an e-mail to FierceTelecom. "For our market and many others--they offer no alternative but to go with a cable operator if you are looking for better broadband. I still have my landline with Verizon, but Cox continues to heavily market to me and I am almost at the point of switching."

So what will Verizon do with their copper customers?

There have not been any rumors lately about a possible sale of its wireline assets. However, McAdam's new statements on FiOS expansion could potentially ignite new rumors that it could sell to another telco so it could focus its attention on growing its wireless and business service segments.

Over the past six years, Verizon sold large swaths of unwanted Tier 2 and Tier 3 assets to FairPoint Communications (Nasdaq: FRP), Frontier Communications (Nasdaq: FTR), and Hawaiian Telcom (Nasdaq: HCOM). FairPoint and Hawaiian Telcom initially struggled to integrate the Verizon properties and were forced into bankruptcy protection, while Frontier had to revamp network facilities that were largely abandoned.   

In the near-term, the more likely story is that Verizon will continue to drive existing copper customers into the arms of cable.--Sean