Blog Post

At Verizon, DSL slows but FiOS Internet booms

Verizon (s VZ) might be busy talking about spectrum, LTE and wireless broadband, but for the company the big and welcome surprise is coming from its fiber optic broadband service, especially as its DSL business starts to decay. In its first quarter of 2012 (ended March 31) earnings report today, the company said that it added 104,000 net broadband connections.

Here are the relevant bits from their press release.

  • Verizon added 193,000 net new FiOS Internet connections and 180,000 net new FiOS Video connections in first-quarter 2012. Verizon had a total of 5.0 million FiOS Internet and 4.4 million FiOS Video connections at the end of the quarter.
  • FiOS penetration (subscribers as a percentage of potential subscribers) continued to increase. FiOS Internet penetration was 36.4 percent at the end of first-quarter 2012, compared with 33.1 percent at the end of first-quarter 2011. In the same periods, FiOS Video penetration was 32.3 percent, compared with 29.1 percent.

To give it some perspective, in the fourth quarter of 2011 (ending December 31, 2011), Verizon added 201,000 FiOS Internet and 194,000 FiOS Video net additions, with increased sales penetration for both products; net increase of 98,000 broadband connections from 3Q 2011. Verizon ended 2011 with 4.8 million FiOS Internet and 4.2 million FiOS Video connections.

Broadband connections totaled 8.8 million at the end of first-quarter 2012, a 3.3 percent year-over-year increase. The net increase of 104,000 broadband connections from fourth-quarter 2011 was the highest quarterly net-add total since second-quarter 2009.

At the end of 2011, Verizon had 8.7 million at year-end 2011. If you compare that with company’s latest broadband total, you can clearly see that the DSL business is continuing to decay at Verizon. No surprise since Verizon is intentionally (and slowly) killing DSL and cheap broadband.

Wall Street Analysts Take:

Christopher King, analyst with brokerage Steifel Nicolaus wrote in a note to his clients: “Broadband net additions were surprisingly strong at +104,000 versus our estimate of +63,000. The strength was driven by solid FiOS internet adds (+193,000) and lower-than-expected DSL losses (-89,000). While both FiOS video and internet net adds remain solid, y-o-y net adds were down 6.3% and 6.8%, respectively. We expect that this trend will most likely continue as the company has essentially finished the rollout of its FiOS network.”

John Hodulik analyst with UBS Securities adds: Revenue decline worsens, margins as expected: Wireline rev fell 2.0% yoy (UBSe -1.6%) vs. a 1.5% decline in 4Q. Enterprise rev rose 0.9% yoy, in-line with the recent trend, while wholesale revenue declines accelerated to 8.9% (UBSe -8.3%) from -7.6% in 4Q. EBITDA fell 6.2% to $2.2B, equating to margins of 22.6% (UBSe 22.5%), down 100 bps yoy and 120 bps seq.  [yoy=year-over-year. bps=basis points. UBSe=UBS Estimates.]

4 Responses to “At Verizon, DSL slows but FiOS Internet booms”

  1. donsmith21

    It’s telling that their 2011 annual report does not even contain the words “DSL” or “Digital Subscriber Line”. Y12Q4 report also says in wireline “63 percent of consumer revenues generated by FiOS”. The 2011 Annual Report says they have 24.1M “voice connections” compared to the 5M total FiOS users; so 20.7% of the customer are producing 63% of the revenue. (Someone check my math, but it’s no wonder they are focused on expanding FiOS.

    @keninca Maybe you should just keep calling and complaining. Maybe they’ll upgrade you to keep you quiet. (

  2. keninca

    And yet VZ has stopped expanding their FiOS footprint, while refusing to upgrade DSL in areas where FiOS is not offered. My office is about 4000 ft from their CO, and the best they can offer is 5 Mbps. They refuse to invest even $100 per line to double or triple this limit, and they don’t seem interested in deploying FiOS here, either.

    • majortom1981

      About 3 years ago we were looking to get an upgraded connection for my office (a public library). we already have a fiber line directly to Verizons CO. All they had to do was the equipment at either end and they only offered us 3 bonded t1’s. Even though we already had the fiber to their CO in place.

      Verizon is lazy.