Verizon (NYSE: VZ) may have halted further builds of its FiOS network into new markets, but where it is converting problem copper-based customers to the fiber-based service it's finding that customers like purchasing speeds of 50 Mbps and higher.
Shammo (Source: Verizon)
As of the end of September, the service provider converted almost 250,000 homes to fiber, adding that it is on track to exceed its target of 300,000 migrations this year.
By the end of the year, Verizon forecasts that it will have less than 1 million remaining customers served by copper in FiOS markets.
"As we do these migrations of DSL and voice customers to FiOS we're migrating them to the broadband product and TV is lagging six to nine months behind that," said Fran Shammo, EVP and CFO for Verizon, during the Wells Fargo 2013 Tech, Media & Telecom Conference. "What we're also seeing is less people are taking the linear TV product and they really want the broadband speeds."
Shammo added that "if you look at the demographics people aged 30 and younger don't care if they have linear TV and are looking at getting their content through other means."
The desire for higher speeds was illustrated in the third quarter, where over 40 percent of its existing FiOS customers subscribed to a Quantum tier, which provides speeds of 50-500 Mbps.
Customers are using the in-home Wi-Fi network that connects to the FTTH (fiber to the home) network to access their various wireless devices such as tablets and smartphones. As they add more devices they need higher speeds to accommodate their usage.
"If you're running water with five people you're eventually going to slow down the hot water and it's going to run cold," Shammo said. "The same thing happens when you're running five wireless devices over your Wi-Fi network, and therefore customers are buying up in speeds to bring in more speed to their own home so their Wi-Fi usage gets more speed."
While FiOS was built to deliver both broadband and TV, Shammo realizes that more of its new and existing customers are increasingly accessing over the top (OTT) content.
"We invested in FiOS for broadband and TV, but we're smart enough to realize that the ecosystem will eventually change and people are bringing in content over the top," Shammo said. "We want to make sure we have the fastest and best broadband connection, which we believe we do because we're the only ones that have fiber to the home besides Google (Nasdaq: GOOG) in certain areas, but we know over the top is going to be more popular."
Verizon has also become an over the top player via its Verizon Digital Media Services, which was just launched to content providers, and its joint partnership with Redbox.
"We're playing in the over the top arena, we're prepared for it and we'll react the way we'll need to," Shammo said.
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