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September 27, 2006

Verizon Sees FiOS IPTV Business in the Black by 2009

Robert Liu, TMCnet Executive Editor


Verizon (News - Alert) Communications is on target to meet the launch expectations for its much-publicized FiOS IPTV (News - Alert) service, which will be in the black by 2009 due in part to the increasing economies of scale of its fiber network investment, company officials said on Wednesday.
 
On a teleconference briefing with financial analysts and the media, Verizon officials said its fiber investment, which will total $18 billion by 2010, will turn cash-flow positive by 2008. As a result of the declining operational costs of the fiber network, the FiOS business will realize positive operating income beginning in 2009.
 
“We believe that FiOS will give us a competitive advantage,” Doreen Toben, Verizon executive vice president and chief financial officer, said on the conference call.
 
Of course, the upbeat forecast is also based in part on revenues growth projections as well as operating efficiencies. The FiOS business has already surpassed 100,000 subscribers and is on target to reach 6 million households within the Verizon footprint by the end of the year, according to Virginia Ruesterholz, president of Verizon Telecom.
 
“We've nailed it,” Ruesterholz declared.
 
Ruesterholz explained that Verizon Telecom has organized the FiOS sales and marketing structure into nine local regions throughout the fiber network footprint. With FiOS recently celebrating its one-year anniversary of service, Verizon has secured 161 local market franchises in order to match the network growth with regulatory compliance.
 
“This isn't holding us back in the deployment of video,” she said.
 
Ruesterholz said churn (customer turnover) is less than 1.5 percent. Among its customers, 79 percent of the TV customers are taking the Triple Play (News - Alert) package and 99 percent are choosing at least one other service, representing a Double Play, she said.
 
Verizon also reported in a press release that expects to have more than 500,000 FiOS Internet customers by the end of the third quarter 2006, compared with 375,000 FiOS Internet customers at the end of the second quarter 2006. Approximately 70 percent of FiOS Internet subscribers are new Verizon broadband customers. Verizon has set a target of 725,000 FiOS Internet customers by year-end 2006, with the service available for sale to 5 million premises.
 
Verizon has set a target of 175,000 FiOS TV customers by year-end 2006, making the service available to 1.8 million households. Verizon's goal is for FiOS TV to have a market penetration rate that ranges from 20 percent to 25 percent by 2010, or from 3 million to 4 million FiOS TV customers, based on its estimate that approximately 15 million households will be video-ready by then.
 
IPTV Summit
For service providers, will video services finally bring about the elusive Holy Grail that is increased average revenue per user (APRU)? What forms of delivery can end-users expect? And what preparations do users agents need to make? To find out, make your best effort to attend the sessions of the IPTV Workshop at INTERNET TELEPHONY Conference & Expo, WEST, which runs October 10-13, 2006, in San Diego.
 
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Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.

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