Verizon's McAdam: We set a high bar for further FiOS expansions

Verizon Communications (NYSE: VZ) is holding fast to its thesis that while it is on track to complete the buildout of FiOS to about 21 million premises, it will need a compelling reason to expand into new markets.

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Speaking during the Goldman Sachs 23rd Annual Communacopia Conference, Verizon's CEO and Chairman Lowell McAdam said that it is not dismissing the idea of possible expansions, but they would have to provide a compelling return on investment.

"Expansion into other areas I wouldn't rule out, but it would have a very high bar," McAdam said. "If you look at some of the things that Google is doing around fiber, I think that's opened up a new model for us."

McAdam added that broadband data is more profitable than its linear TV service, so offering more fiber-based broadband services is a possibility.  

"Going in and offering broadband is another alternative for us, but the bar will be fairly high on that," he said. "If I see an opportunity to generate shareholder value, I wouldn't rule it out."

Today, the focus near-term FiOS opportunity is centered around extending its fiber into new apartment buildings and condominiums in major metro markets such as New York City and Newark, N.J.

Just this week, the service provider extended FiOS into the 60 Park Place building in Newark, N.J., for example. Verizon said that the 21-story office tower is the first large commercial building that will have access to the fiber network.

"Right now, our deployment and our growth areas of FiOS are to go into urban areas and extend the short stubs of fiber off of the main tracks to get into things like condos," McAdam said. "We've been very successful with that and when we go in we're very quickly now getting 50 percent and up of penetration into those buildings."

Simultaneously, the service provider continues to move forward with its copper-to-fiber migration plan.

In August, the service provider said that it has about 1 million homes left to convert to fiber before it wraps up its entire three-year conversion plan.

While Verizon may be reticent to expand into new areas, the service provider is keen to enabling consumers to take advantage of more over the top (OTT) video offerings.

One response to the growing appetite for OTT content came in August when it launched symmetric speeds for all of its FiOS speed tiers. The move was part of a broader campaign aimed to exploit the fact that cable's existing DOCSIS 3.0 technology has limited upstream capabilities.

"If the model went to a 20-channel customized package and do that over the top over a FiOS broadband service, that's terrific," McAdam said. "The exciting thing about FiOS now is that we are not only raising the bar on speeds, but we're giving the symmetrical speeds so you get the same speed up as you do down."

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