Verizon's (NYSE: VZ) ongoing plan to migrate customers from its aging copper-based voice and DSL products to fiber-based FiOS will gain momentum in 2013 as it looks to reduce network maintenance costs on problematic copper lines.
Speaking on Monday at the Deutsche Bank 21st Annual Media, Internet & Telecom Conference, Fran Shammo, CFO and EVP of Verizon, said the company is focused on playing up the broadband side of FiOS and the speeds that consumers can get with a Fiber to the Home (FTTH) connection.
"[Y]ou think about our copper to fiber migration, which we started last year where we did 200,000 homes, and this year we'll do 300,000 homes," he said.
The copper to fiber migration was accelerated in 2012 when Hurricane Sandy damaged a major portion of Verizon's copper-based facilities, particularly in New York City and in parts of New Jersey.
While Verizon will provide a similar rate and speed for any customer who migrates from copper to fiber, consumers have the option to upgrade to a higher speed when they are ready.
"As we move people from copper to fiber, we price them at the same rate, but then we give them the choice to upgrade that speed from 15 Mbps to 25 or 50 Mbps," Shammo said. "What we are seeing is that people are willing to pay for that additional speed so we can monetize that fiber network more."
On the consumer side of Verizon's wireline business, FiOS has continued to perform well. FiOS will be responsible for almost 70 percent of consumer revenue, and it has reduced losses of traditional landline phone customers to 3 to 4 percent.
At the end of Q4 2012, Verizon had a total of 5.4 million FiOS Internet and 4.7 million FiOS video connections, representing year-over-year increases of 12.6 percent and 13.3 percent respectively. FiOS customer ARPU was more than $150 in the quarter as consumers took higher speeds and bundled TV and voice services with FiOS broadband data services.
"We are starting to monetize the FiOS networks more through speed of the Internet and our content costs are growing around 3 to 4 percent while our competitors are at the 10 percent range," Shammo said. "There are a lot of things working in the FiOS favor, and FiOS on the consumer side will increase margin and increase profit."
However, Shammo said gains in FiOS will be offset by its new Redbox venture and its Digital Media Services, both of which will start generating a small amount of revenue this year.
In addition to the consumer markets, Shammo said the company is "looking at the FiOS backbone to deliver enterprise solutions," but he did not provide any details about what those plans are.
For more:
- listen to the webcast (reg. req.)
Special report: Wireline telecom earnings in the fourth quarter of 2012
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