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Rick
Premium,MVM
join:2001-02-06
Waterbury, CT

The problem facing verizon is this..

While I've certainly given them kudos for stepping up to the ftth plate..financially..they've got to make this work.

It is SO expensive to rollout and, coupled with the loss of landline customers, if they didn't have wireless to prop up their numbers, they'd be in a world of hurt.

It's going to be very tough to continue to count on wireless because that market is getting all but saturated these days and, if they're going to cannibalize their dsl customer base to grow fios, that's not going to be very much help to them.

The real risk here is that ultimately, if they don't grow their profits enough..they're not going to be able to price fios competitively. Right now, they're giving the deals to try to lure cable customers away, but if those deals vanish, it's really going to turn into another story like Rambus versus DDR was..meaning perhaps technologically fios was superior to a fiber cable network..but it winds up not mattering in the market place because cable..particularly with a docsis 3.0 upgrade..was good enough.

It's also interesting to note that AT&T had a very strong quarter with Uverse subscriber growth...on par in fact with fios's. Some could certainly interpret that as being AT&T had the right idea all along with their lower cost approach.
Time will tell whether that was a fluke or not..and may simply have been they now have such a large area where uverse is built out..that a jump in numbers was inevitable.
Given the fiber to the vrad approach..it's also much easier for AT&T to "pass homes" with uverse than it is for fios to say the same.

Anyways..should be interesting to see how it all plays out.
We haven't seen the cable co's hand yet..and how docsis 3.0 will impact all of this. If they don't do something about the price..I don't think it will do much. Not much interest IMHO for 150.00 residential hsi connections.

If however..they took it down to something close to where things are now pricewise..and simply made the new standard 50Mb speeds across cable networks..I honestly think both verizon and AT&T's entire businesses could be at risk.

A triple play at those speeds..at todays prices would be devastating for the telco industry.
--
The Coyote captured the RR! Roadrunner Rick is now Comcastic!


Big Pete

@qwest.net
Even if they are cannibalizing their own DSL subs, the maintenance cost savings on the network is huge. Verizon can't get rid of the copper fast enough (ie Fairpoint deal). If FiOS wasn't paying itself off, then they would have stopped building FiOS a long time ago. Right now, its still full speed ahead. Also, from what I understand, the 2nd quarter usually has the lowest take rate of the year. With NYC FiOS numbers being added this next quarter I think they will be back to 250K adds a quarter or more for the next 2 or 3 quarters.


Dolgan
Premium
join:2005-10-01
Sun Prairie, WI
Reviews:
·Charter

1 edit
quote:
If FiOS wasn't paying itself off, then they would have stopped building FiOS a long time ago.
FIOS is still not showing any profits, and is being paid for by the other divisions within Verizon. FIOS is not projected to start bringing in profit{ROI} untill sometime in 2010.


Big Pete

@qwest.net
quote:
FIOS is still not showing any profits, and is being paid for by the other divisions within Verizon. FIOS is not projected to start bringing in profit{ROI} untill sometime in 2010.
Yeah, its called a capital investment, and more than likely its being paid for with increased debt, not from other divisions. The fact that they started building FiOS in like 2003 and its already going to start showing profits in 2010... on a $23B investment? That's pretty damn good... Verizon continues to proclaim that they are ahead of all their projections with FiOS, including ARPU and penetration rate. Once they start making a profit on the fiber, the margins are a hell of a lot higher too, considering lower maintenance costs.


Millenniumle

join:2007-11-11
Fredonia, NY
reply to Rick
The Rambus analogy is an interesting perspective. Outside of VoD, today's internet content seems to move ok over a $20 1Mbps line. Existing and proposed caps would seem to wipe any concern for living up to the need for VoD over HSI.

What I understand of FIOS leads me to believe it is the most capable of handling large amounts of VoD users, but it would seem even FIOS wont be able to look away if alternative VoD suppliers cut into their own FIOSTV; meaning I don't think they could avoid caps. Shoot, even Time Warner could potentially offer up VoD over competitor's HSI lines.


Dolgan
Premium
join:2005-10-01
Sun Prairie, WI
Reviews:
·Charter

1 edit
reply to Big Pete
It is being paid for by budget cuts from every other divison of Verizon Telecomm, in addition to assuming a higher debt load. The budget cuts are to keep the stock price artificially high--during this time of expenditure the stock price should have remained stagnant/fell as the expenditure eats into actual profits. The 2010 was projected at a time when the economy was not faltering as well, so it may take longer to see the actual ROI.

Lower maintainence costs for FIOS are pure speculation at this this point. The only thing that is known is that fiber will not corrode like copper lines exposed to moisture. Lets see what happens when the fiber cable cases start cracking and moisture, dust, and etc get into the cables. It will also be interseting to see the repair times/cost when the Tampa/St Pete area gets hit by a hurricane and multiple aerials need to be replaced. Same can be said for mudslides, fires, earthquakes in the CA cities that FIOS is deployed in. You will have the same amount of Cable/drop cuts to deal with as we currently have on copper lines as well. We will have to see what happens over the next several years to see if the lower maintainence costs are a reality or just a fart in the wind.


Big Pete

@qwest.net
quote:
We will have to see what happens over the next several years to see if the lower maintainence costs are a reality or just a fart in the wind.
My guess is they have a pretty good idea of what it will take to maintain the fiber as their backhaul networks have been fiber for quite some time. Furthermore, look at how quickly they are losing subscribers on the copper side of the business... without FiOS, where the hell would Verizon be right now? Like they always say... You gotta spend money to make money... They've proven that theory on the wireless side and now that is translating to the wireline side with the introduction of FiOS. AT&T and Qwest should be ashamed of their wireline networks...


Dolgan
Premium
join:2005-10-01
Sun Prairie, WI
Reviews:
·Charter
I agree that FTP is the way to go. You can not compare maintainence of Backhaul Cables to the Main Cables that run from the CO to F1 cables, to F2 cables, and then to drops. Backhauls are run thru remote areas and/or along our highway system--that protects them from "Joe 6-pack" who digs in his yard w/o locating lines and cuts the F1 feeding his neighborhood. The system of cables that run to the endusers have many more access points than backhauls, which leads to more potential problems. Moreover, the main/feeder cables run thru more congested areas and are more susceptible to damage from traffic accidents, contractor/construction cuts, and etc. Verizon may believe they will have the same low maintainence as backhauls, but as stated earlier it is not proven as of yet.

disc

join:2005-12-31
Raleigh, NC
reply to Dolgan
said by Dolgan:

Lower maintainence costs for FIOS are pure speculation at this this point. The only thing that is known is that fiber will not corrode like copper lines exposed to moisture.
They should get OPex savings on the equipment where they've eliminated electronics too, like the splitter equipment.


a333
A hot cup of integrals please

join:2007-06-12
Rego Park, NY
Reviews:
·T-Mobile US
reply to Rick
Much as they want to fight competition from Verizon, cable MSO's must be careful about the speeds they offer, even over DOCSIS 3.0. Lower the price enough, and your network will be swamped with users who all start complaining about speeds going south during peak hours. With all the demand for better HD and more channels, I doubt Comcast will focus on making 50 Mbits the 'standard' but will definitely keep it on the table for the elite users. This, in turn, will force Verizon to tone down the price of their 50/20 tier available in select market ATM, and also will foster faster GPON deployment. Competition is sooo nice; gives you, the customer, that warm, fuzzy feeling.............

disc

join:2005-12-31
Raleigh, NC
reply to Dolgan
said by Dolgan:

FIOS is not projected to start bringing in profit{ROI} untill sometime in 2010.
By ROI, do you mean EBITDA positive? They were forecasting EBITDA positive by 4Q08.

Or do you mean break even. That will be when the accumulated EBITDA (after taxes) pays off on the CAPex. Given that they're just reaching EBITDA positive end of this year, 2010 will be pretty aggressive for break even.


Dolgan
Premium
join:2005-10-01
Sun Prairie, WI
Reviews:
·Charter
We have been told that FIOS will generate positive cashflow sometime in 2010. That was based upon an expectation of a take rate of 33%+{that at least 1/3 of of people in FIOS capable areas actually subscribe to the service--unsure how it breaks down with the amount of services taken --ie FIOS triple play vs internet/phone vs internet only --which would affect total Return on Investment}. I agree it is an optimistic outlook with the current take rates and the great unknown of how soon the economy will recover from its current malaise/recession. The executives will keep spinning as much positive vibe as possible to keep the shareholders happy, but only the test of time will show what the outcome will be.

disc

join:2005-12-31
Raleigh, NC
said by Dolgan:

We have been told that FIOS will generate positive cashflow sometime in 2010.
Positive cash flow by 2010 probably makes sense. All they need to do is keep their CAPex down so that it is exceeded by EBITDA (less taxes).

Once they start making positive cash flow, then they can start "paying off" the early years when they were negative cash flow, and when they reach that, that's when they can declare payback. That'll be a fair period past 2010. The rest after that is ROI.