Verizon Uses UPS To Sell FIOS


Apparently, Verizon is very aggressively marketing its FTTH/FIOS service to consumers by sending them second day air UPS letters. This whole FTTH and FIOS TV is cash money when el-cheapo Bells are spending the big moolah! However, there might be another angle to it. By end of 2006, VZ will have fiber in nearly 200 towns in New Jersey alone, which means some serious capital investments. (That clearly is not going down too well with the Wall Street, especially those in the ‘dividend’ and ‘quality-bond’ realm.)

Merrill Lynch crunched some numbers recently and pointed out that Verizon trades at a significant discount to AT&T’s3.3x EBITDA for Verizon versus 4.5x for AT&T on 2006E – because the market is taking a dim view of VZ’s wireline operations. This is a reflection of a very pessimistic view of VZ’s FIOS efforts, the research firm writes.

The basic difference is that Verizon is deploying an available technological solution, with an uncertain business case. AT&T is banking on technology development to support a more attractive business case argument. [Merrill Lynch]

At the end of 3Q 2005, Verizon had about 100,000 FIOS high speed customers, and the numbers must have received some serious boost during the 4Q 2005. The big metro deployments in cities like NY, Boston and Philadelphia (especially in high rise buildings) could help boost the number of Internet subscribers. But on the video side, it is slow going. The company seems to have video franchise deals with about 50 odd-munis, and is trying to get states to change the rules. New Jersey is particularly irksome and that “statewide franchise legislation” is becoming a political hairball.

Which brings me back to the UPS and aggressive marketing tactics…. Verizon really needs to show that it is on target to deliver the 20% adoption metric it has been talking up with the investors.



Um…they are at 100k after 6 months. This is NOT nation wide, only a few small towns. Comcast is dead my friend…gone. Verizon isnt seen as the evil empire like Comcast is. It will kill them.

fios tech

our fios speeds have only jus begun,5/2,and15/2 ffor residential and 30/5 for buisness are just the beginning for fios,here in the washington dc area talks have already begun of making 10/2 our slowest speed ,understand fiber is being installed to the home not the curb or the neighborhood.there is no limit ,the only thing you have to do for our network is change the pon cards in the central office,fiber is passive optical network the only power is at the co and the house,last year numbers 1 millions fios subscribers outlook for 2006 is 2million subs.verizon wireless, long distance ,dsl ,are off setting the cost of fios .the only place in the world the has worked is japan,verizon will be number two .

Jesse Kopelman

Malcolm, I think you are generalizing too much based on your own experiences. Many cable customers are on a hybrid fiber coax plant that is easily as reliable as a PON (like FIOS). Also, the problems you describe could just as easily be from a low quality modem or even a modem that is just in need of a firmware upgrade. Of course, your problems could be from a bad physical plant, but that is a problem with your local provider, not the technology in general.


Re: Operating costs

The operating costs savings are a fallacy. Verizon is only planning to wire 60% of its footprint, and even in wired areas — to keep Wall Street from jumping off a cliff — Verizon is only running fiber to a home on a “success basis.” That is, no ONT and extra labor unless you buy something extra. That means that even WITHIN the FiOS footprint a large majority of the customers — maybe more than 90% — will still be on copper getting phone and/or DSL. To add to the costs, Verizon is meeting DSL demand by purchasing line cards at a frenetic pace, increasing its invested capital in copper plant even as it fibs to Wall Street about “reduced” maintenance. It will never happen.


Verizon’s FIOS deployment using FTTP will provide superior financial returns over 10 years compared to what ATT & BLS are doing. Over 60% of the benefit of FTTP is the significant reduction of operating costs, by eliminating dispatch requirements and supporting customer self provisioning. Many analysts have been looking at the wrong end of the telescope on fiber deployment, mainly on how much video and internet revenue can be generated. Such revenue will never be enough to financially justify deployment of broadband access platforms.


I’ve had fios internet since April 2005. I had ported my number from verizon to vonage and had this setup for a year. I recently ported back to verizon for various reasons. I also had FiOS TV install on Thursday 1/19. All is well so far. What I would like to stress is that reliability of fiber to the cable medium has been superior. We had Comcast service before we went to FiOS internet. We usually had to crawl underneath the desk about once or twice a week to pull the power plug on the cable modem for a reset because of some issue. Or spend time on the phone on hold with Comcast, just to have them tell us to do a power recycle. There have been no service interruptions that have cost me any down time so far since April 2005.

Yes, Verizon has taken a bold and scary step. But if reliability is a key factor in your internet (I work from home and vpn to the office), fiber is the way to go.


Verizon has never released FiOS data or video numbers, and I would be shocked – SHOCKED — if they had 100,000 customers nationwide. The truth is that Verizon has little to offer right now, and while FiOS is fast, as a practical matter it doesn’t give anyone anything they don’t already have from cable. Verizon’s well know practice of adding install fees, disconnect fees, taxes and surcharges will plague them as they try to compete with the prevalent bundles.

Verizon’s reluctance to release FiOS numbers is telling. Observations here suggest that no one is taking drops from the plant that’s been installed for close to a year. If Verizon came clean, Wall Street would clean its clock.


20% for fios video is way overly optimistic. One reason being price. Fios is priced above competitive efforts because of the phone (POTS) and video is no bargain (at this point, btw did I mention NY has cablevision OOL at 15/2 and triple play at $100 per month?). So, those would have to be 20% of subscribers that get a used carsalesman job for fios video or really hate their cableco and get churn and burn subscribers which may not be loyal (for video anyways) For my part, directv still has my business and fios isn’t versatile or cheap enough to pay them more of my money, yet.

Om Malik

anon, thanks for reminding me about the acronyms. will make sure that next time it doesn’t happen. also will try and update the post with descriptions etc.

Robert J. Berger

This again supports my assertion that basic infrastructure (the physical plant like fiber, conduit, utility poles) that reach the first/last mile, can not be built by standard shareholder based companies.

It is too expensive and there is never a real ROI for the investment that is in the scale/timeline that a shareholder based company can afford.

Even if they attempt to lock their content to their transport. Their shareholders (Wall Street) and debt holders won’t wait as long as it would take to maybe someday make a Return on Investment.

After being in the ISP business for over 13 years, I’ve concluded that the physical plant is a Natural Monopoly. That doesn’t mean its the old AT&T. I mean that literally layer 1 only should be a regulated monoploy or Municipal service. The services on top of it (including lighting the fiber) should be totall open access and addressable by commercial and non-commercial entities on a per end user basis.

This is trivial from a technical point of view (Municipal open access meet points where fiber physical plant is made access able to any number of entities at cost + basis that is amortized over 10 – 30 years)


I have FiOS internet for 3 months – 15 Mbps/2. I love it. It’s the same price as cable – goodbye Comcast. I was barely getting the touted 6 Mbps from them. With FiOS, I did a speed test and got over my 15!

I also have video service – Moto boxes with a lot of the interfaces disabled (can’t take a DVD off the DVR). I also got a letter. It was not necessary, I jumped and ditched Comcast television as well.

Ron Mahabir

I actually have been a FIOS subscriber for nearly one year, and Verizon still sent me a UPS letter marketing their service. Good luck, Verizon…

Jon Gales

I have been a FiOS user for a while now and it’s great. So fast (was downloading some video today at 1.5 megabytes a second) and the same price as a cable modem. Can’t wait until the video service is here, for something around $30/month there is supposed to be a great lineup that includes ~20 HD channels. Nice!

FYI Dayrll, FTTH = Fiber To The Home. Sometimes it is called FTTP which is Fiber To the Premises.

Stephen Pierzchala

I subscribed in late 2004 and it has been working great since then. I have the phone and high-speed component as the TV is not available in MA yet.

Frankly, I hate the way that the Megababy Bells are behaving, but I really feel that Comcast (my local cable provider) has begun to feel the crunch.

I have speculated that Comcast and many of its competitors will either disappear or be swallowed by the Megababy Bells; seems more and more likely, at least until a true national wi-fi provider appears in the US.



I don’t understand all the acronyms. I know I could go look them up, but I just want to point out that most people probably won’t be motivated enough to do that, so they won’t continue reading. You, as a senior writer for Business 2.0, should be consciously thinking about this as you write :-) For me, as a very intelligent but not-familiar-with-this-jargon reader, I’m just put off. Thanks!

Daryll Strauss

FIOS is available here in the Los Angeles beach cities. I’m looking forward to switching to it eventually. They haven’t been overly agressive marketting it which sort of surprises me. I knew about it because I was paying attention to my city council meetings and eventually saw the installer putting the fiber on the pole near my house.

The problem is that I really don’t want Verizon as my ISP. A few ISPs have announced they are going to resell it, but so far (6 months) that hasn’t happened. Verizon is dragging their feet on it.

Other cities where FIOS has deployed have allowed resellers, so I expect that it is either a local issue or a change in strategy. (Hopefully not the later!) Also in other cities where the market is more competitive they have offerred higher bandwidth for lower costs. I’m hoping that happens here eventually as well.

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