Last Home Passed - FiOS puts on the Brakes
Christopher Carter
In case anyone missed it, Verizon announced a few weeks back that they will soon halt the rollout of their FiOS network and will focus on the installation of only those customers whose homes have been passed by the initial rollout. Por que? Verizon will have passed almost 20 million homes when they cease further deployment. The cost to pass a home is estimated to be $750. It costs another roughly $500 to acquire a subscriber of each home passed. Thus the total acquisition cost per sub is close to $1,250. Not cheap. If Verizon passes 20 million homes and signs up 50% of those homes passed FiOS will end up as one of the top 5 cable program providers in the USA. Not bad. But why stop now?
Easy. It costs much less to subsidize a smartphone and to convert their 91 million mobile phone users to smartphone users, who have a higher average monthly bill than traditional mobile phone users. And, with the mobile phone becoming a true convergence device, able to not only connect but entertain a user, there is more revenue and profit in converting wireless subs to smartphones, and battling for more if the rumors of a CDMA iPhone are true, than digging up streets and expanding the FiOS network. Plus, the government seems intent on subsizing the buildout of fiber optic networks in rural areas, so why not let them [the Government] pay for the deployment while focusing on a more lucrative market.
I saw a similar strategy implemented first hand by the former Bell Atlantic in the mid 1990s. The battle du jour between the cable companies and the telcos was the ability for each to offer phone and video services to their customers. When the phone companies realized the capital cost to upgrade their networks was greater than the ROI of jumping into the long distance business, thanks again to a change in government policy, they abandoned their video investments, or at least tabled them, and pursued the more lucrative and less capital intensive long distance business. This led to a cavalcade of mergers and acquisitions in the telco industry creating the bohemoths who now operate in the USA.
FiOS is also battling local municipalities over franchise rights and terms. This is ongoing in my own community which has a rural population outside of the core downtown area. It costs a lot of money to run fiber down each and every one of those long driveways in the "back country". Not something Verizon is keen on doing at this time. Who needs this headache when a better "investment" awaits.
While many consumers were looking forward to having an alternative to their existing cable service, perhaps at a much better rate, if your home has not been passed yet chances are it will not. And for those of us whose homes have been passed let's hope a connection is made before Verizon packs up it fiber and focuses its attention on the iPhone.