Verizon's McAdam: FiOS drives up consumer wireline margins

Verizon (NYSE: VZ) may have made the final curtain call on FiOS expansion in Greenfield markets, but it is the telco's wireline revenue growth engine in areas where it currently provides the fiber-based service, CEO and Chairman Lowell McAdam told investors on Tuesday.

Lowell McAdam, Verizon


"We're seeing the margin begin to expand in the consumer and mass business (CMB) segment and our FiOS penetration is very good and we have seen top line revenue per subscriber continue to grow," said McAdam during the Citi Internet Media & Telecommunications Conference.

While it is not expanding the footprint of FiOS into new markets, penetration in existing markets such as New York City and Texas is helping to drive up the telco's wireline margins.

The two markets where Verizon is seeing continual uptick in FiOS service adoption are New York City and Texas.

"New York is our biggest growth market from a FiOS perspective and it's all the little tails that go out of the main fiber feeds into the multi-tenant buildings and we get 30-35 percent penetration there," McAdam said.

Verizon is seeing similar results in Texas where it has reached 50 percent penetration for FiOS broadband data and just under 50 percent for TV.

Verizon's FiOS play is not just about consumers, however. The telco also sees potential to use FiOS to win back small businesses that have churned to a cable provider or a CLEC, particularly in in markets like New York City where it has already built out a large amount of fiber network infrastructure.

"This is another example why New York City is the fastest growing market for us because we can do these shorter fiber extensions and get into these small businesses," McAdam said. "We were 100 percent market share in small business during the monopoly days and we lost a lot of share there, so FiOS gives us the tool."

Two other key growth areas in the small to medium business (SMB) market are cloud and security services. Unlike larger businesses, most SMBs lack the in-house IT resources to handle functions like software and network upgrades, which make outsourcing services to a third party like Verizon a good fit.

"The second thing that gives us the tool is security and cloud services because even these small businesses are under attack as well, and being able to offer them some of these cloud and security services along with the network have allowed us to fight back on the small business side," McAdam said.

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