Is Verizon FiOS Putting the Hurt on Cable?

verizonlogoVerizon reported second-quarter results this morning, and saw revenue rise while profits fell. But those of us who care about the fate of broadband should note that the carrier is ramping up its fiber-to-the-home triple play — and likely stealing customers from cable providers. Verizon added 303,000 net new FiOS fiber-to-the-home Internet customers, to end the quarter with 3.1 million of them. That’s a 56 percent growth in subscribers from the previous year for the super-fast service. Verizon also added 300,000 net new FiOS TV customers, bringing its total to 2.5 million FiOS TV consumers by the end of the quarter — an 82 percent boost from the year prior.

FiOS, which is the driving force behind several cable operators’ planned DOCSIS 3.0 upgrades that will boost broadband speeds to 50Mbps or even 100Mbps, is putting pressure on the cable industry. FiOS Internet sales penetration (sales as a percentage of potential customers) increased to 28.1 percent, compared with 23.5 percent during the same period a year ago, while FiOS TV sales penetration increased to 24.6 percent, compared with 19.7 percent from the year before. FiOS TV service was available for sale to 10.3 million premises by the end of the quarter.

Some of that penetration growth appears to be coming at the expense of cable providers, although it’s hard to be sure because various cable operators don’t have footprints that directly compete with Verizon’s. However, Comcast which competes with Verizon in 12 percent of its footprint, has seen its video subscriber penetration fall to 47.5 percent in the first quarter of the year (it won’t report second-quarter results until Aug. 6) from 49.5 percent in the first quarter of 2008. On the broadband side, it’s faring better — having boosted its penetration to 30.2 percent for the first quarter of this year, up from 28.4 percent for the same period in 2008. That may be in part because of cable’s faster speeds when compared with regular DSL from telcos.

Cablevision, which competes with Verizon in 30 percent of its footprint and has been aggressive about countering FiOS speeds, has seen a 1.5 percent drop in penetration for video subscribers, according to its first-quarter 2009 results. (Cablevision reports second-quarter numbers on July 30.) As those cable providers start reporting their numbers, keep an eye on how penetration rates are faring. They may claim it’s a lousy economy, but FiOS may have something to do with it.

You're subscribed! If you like, you can update your settings


Comments have been disabled for this post