Verizon Sees Positive Uptake for FiOS Rollout

Verizon Communications outlined progress in its rollout of fiber-based FiOS services, saying the historic upgrade to its access network is ahead of plan and already delivering better than expected results.

“We are on track with our FiOS plans, and we are focused on continued execution to build on the momentum we have gained in the marketplace,” said Virginia Ruesterholz, president of Verizon Telecom, in a presentation to investors and the media.

Some key points of the announcement:

The fiber rollout plan is to pass 18 million premises by the end of 2010, or more than 50 percent of the approximately 33 million households in the company’s 28-state wireline service area. The FiOS network build-out is on target to pass a total of 6 million premises by year-end 2006, with an additional 3 million a year planned through 2010.
FiOS is expected to generate positive operating income beginning in 2009, based in part on growing revenues from FiOS services combined with declining operational costs due to fiber network efficiencies. In addition, the company’s total fiber investment is expected to be EBITDA-positive in 2008.
Verizon expects to invest $18.0 billion in net capital from 2004 through 2010. The total is net of approximately $4.9 billion that Verizon estimates would otherwise be required to maintain traditional copper-wire technologies over the same period.

Verizon expects to realize savings of approximately $1 billion in annual, ongoing operating expenses by 2010 as a result of the efficiencies gained from fiber network facilities.
Last month, average capital expenditures to pass a home were $873, less than the previously announced year-end 2006 goal of $890. The new year-end target is $850.
The cost to connect a home has been higher than expected. Last month, these expenditures averaged approximately $933, higher than the previously announced year-end 2006 goal of $715. The new year-end target is $880.
By 2010, these expenditures are expected to average $700 to pass a home and $650 to connect a home.
By the end of the third quarter 2006, Verizon expects to have more than 500,000 FiOS Internet customers, compared with 375,000 FiOS Internet customers at the end of the second quarter 2006.
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. This would represent a market penetration of approximately 15 percent, toward a 2010 goal of 35 percent to 40 percent — or from 6 million to 7 million FiOS Internet customers.
Monthly churn rates, a measure of customer turnover, have been below 1.5 percent, indicating customer loyalty that exceeds the company’s initial expectations.
By the end of the third quarter 2006, Verizon expects to have more than 100,000 FiOS TV customers, and the company estimates that about two-thirds of FiOS TV customers have discontinued their cable TV service.
Verizon has set a target of 175,000 FiOS TV customers by year-end 2006, making the service available to 1.8 million households. This would be a market penetration rate of approximately 10 percent.
Verizon currently has obtained franchises to offer FiOS TV to more than 1 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.
Nearly 80 percent of FiOS TV customers have purchased three services — voice, data and video — from Verizon.
Monthly churn rates for FiOS TV have mirrored those of FiOS Internet, or less than 1.5 percent.
In 2007, FiOS TV will add its own TV portal, home shopping and interactive broadcasting, gaming, and on-demand and multimedia enhancements.