Verizon released their 2008 first quarter earnings this week. Among the details, the report demonstrates that wireless and FiOS are driving growth, and traditional wireline is not. No huge revelations there. AT&T reported similar results, highlighting wireless and broadband as growth engines. Verizon is seeing decent results with FiOS (although probably not quickly enough for some investors), and the FTTH detractors noise is certainly less deafening. Key results include a $129/month ARPU rate for FiOS customers (more on that below), and:

• $23.8 billion in revenues, up 5.5%; $4.3 billion in operating income, up 14.1%
• 1.5 million net wireless customer additions; 67.2 million total customers; 65.2 million retail customers, up 11.5%
• 1.19% total wireless churn and 0.93% retail post-paid churn
• 13.2% increase in total wireless revenues; wireless data revenues up 48.9%
• 263,000 net new FiOS TV customers and 262,000 net new FiOS Internet customers, for a total of 1.2 million FiOS TV customers and 1.8 million FiOS Internet customers; 8.5 million total broadband customers, up 14.9%
• More than $1 billion in consumer and small-business broadband and video revenues
• 9.6% increase in consumer ARPU in legacy telecom markets

Early indications are that the FTTH strategy with FiOS is working. For example, FiOS customer ARPU was $129/month, compared with $61/month for legacy wireline customers. That metric indicates that FiOS customers are subscribing to more services, due in large part to FiOS’ ability to deliver more robust revenue generating services. Probably more importantly, Comcast reports on its last available quarterly report that total ARPU for their subscribers was $104/month. That difference in ARPU is one reason why some are suggesting that it’s just a matter of time before cable operators are compelled to go FTTH as well. Light Reading offers some insight into that debate, where some analysts argue that FTTH makes operational and competitive sense for cable companies. There is mounting evidence to support that with Verizon’s latest quarterly data.

On a side note, Verizon and New York city have agreed to terms for a citywide cable franchise agreement. Looks like they’ll be providing some headaches to Cablevision and Time Warner Cable. To be fair, Cablevision has stood up to Verizon’s competitive challenge in other territories, and has proven they are more than able to meet the challenge.

Verizon announced several upgrades to its FiOS Internet service, increasing downstream and upstream speeds. Verizon now offers symmetrical speeds of 15 Mbps or 20 Mbps (depending on location) to FiOS subscribers in 16 states. The symmetrical service is priced at $64.99/month. Additionally, Verizon is upping asymmetrical speeds in the same footprint of either up to 50 Mbps/20 Mbps or up to 30 Mbps/15 Mbps depending on the state where the service is sold. Pricing for these new asymmetrical services varies by market and ranges from $89.95 to $139.95 a month. Verizon claims that one of these new packages is now available to all FiOS Internet subscribers. Verizon’s intention is quite clear, illustrated by comments made by Michael Cai, director of broadband and gaming research for the market research firm Parks Associates, “The system-wide introduction of symmetric FiOS Internet broadband service is a bold strategic move that Verizon's cable competitors simply cannot match.” Broadband speed inflation continues.

Verizon is offering a free Sharp Aquos 19-inch LCD HDTV to new FiOS triple-play subscribers in 8 states. The free HDTV offer is set to expire on Dec. 15th. The offer actually began on October 15th, but was limited to the New York City metro market, which includes New York, New Jersey, and Connecticut. Verizon expanded availability of the offer to Massachusetts, Rhode Island, Maryland, Virginia, and Indiana.

Check out this Multichannel News post for more details.

Several reports have Cavalier, a Virginia based CLEC, applying for a cable franchise in Baltimore County, MD. Baltimore County is both a Comcast and Verizon FiOS served market. Adding the two DBS providers to the mix makes Cavalier a potential fifth video option. Cavalier intends to use leased copper pairs from Verizon, at least initially.

Should Cavalier enter this market, they would be bucking a trend. Very few CLECs have been known to enter such competitive markets as Baltimore with both cable and telecom behemoths already offering a triple play bundle. It’s usually the other way around – Verizon has entered several markets where a cable and smaller CLEC or cable overbuilder are already present. But Verizon has a market cap of $131 billion. Safe to say they have somewhat deeper pockets. Cavalier’s no stranger to competing with Verizon – they do so in many of their mid-Atlantic markets, including Richmond, VA where they also compete with Comcast and FiOS (Cavalier launched IPTV before the arrival of FiOS in Richmond). Maybe they’ve learned something – perhaps a weakness or two to exploit.

For more on their Baltimore plans, see this Baltimore Sun post.

Skepticism was high, particularly among Wall Street types, when Verizon first announced they would spend tens of billions of dollars to build their FTTH network of the future. Named FiOS, many analysts viewed the strategy as an unnecessary risk. But early returns appear to be stemming the negative views, at least for the time being. BusinessWeek notes in a recent article that the FiOS gamble appears to be paying off, and early skeptics may be tempering their criticism of Verizon and its CEO Ivan Seidenberg.

FiOS is now two years old and has approximately 500K subscribers. They claim to be adding 2K subscribers per day. As noted in the BusinessWeek article, Stephen Burke, Comcast's chief operating officer commented, “The telecom companies have had their fits and starts, but Verizon is real. Verizon is taking video customers from us." Cablevision is feeling Verizon’s impact as well, although they have been less public about it. It is too early to declare Verizon’s FiOS gamble a complete success. Verizon CEO Seidenberg has always maintained that this new competitive landscape is a marathon, not a sprint. Cable companies aren’t exactly running scared, and have their own triple play success story to tell. It will be years (perhaps decades) before the full story can be told as to whether the FiOS investment was the right call. AT&T’s U-verse strategy of FTTC utilizing copper pairs into the home has seen some success of its own as well. These two telecom behemoths are taking somewhat different paths to reach triple/quad play nirvana. The end result for the entire industry is a competitive battle over the next decade or so that will see numerous peaks and valleys for both strategies and the need for much more analysis before any validation of strategy can be achieved.

Verizon FiOS led all broadband ISPs in just about every customer satisfaction category, according to a recent Computerworld reader survey. “Verizon FiOS cleaned up for a very simple reason -- its customers are extremely happy about their connection speeds and reliability,” says Computerworld. Among cable broadband providers, Cox appears to have gotten the best rankings, consistently ranking behind FiOS, but ahead of other cable companies.

Verizon (and other telecom companies) could use the good survey news. Especially since the recent J.D. Power survey ranks cable companies ahead of telephone companies for telephone satisfaction. Perhaps the reason telecom companies didn’t do so well in their core business, is because they are so busy trying to build up their broadband and video businesses. Will FiOS TV lead traditional cable in video satisfaction?

Comcast CTO Tony Werner discussed their DOCSIS 3.0 plans with Multichannel News, and commented that it will be a natural evolution of cable modem technology. Werner didn’t offer any specific launch timelines, but did say the so called ‘wideband’ technology is very close to trials at Comcast. DOCSIS 3.0 is the next generation of cable modem which allows the bonding of 6 Mhz channels to create a single virtual broadband pipe of 100 Mbps or more. DOCSIS 3.0 is backwards compatible with earlier DOCSIS versions and also is IPv6 compliant.

Cable technology like DOCSIS 3.0 is raising the competitive bar and allowing cable MSOs to leverage their HFC architecture to compete with FTTH technologies like Verizon FiOS. DSL competitors who do not have very short loop lengths (2,500 feet or less) will find it next to impossible to match the type of broadband experience that DOCSIS 3.0 will provide.