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.
This argument is really moot. We all know that FTTH is the future. If you have the money to do it, it’s a no brainer. The reality for carriers who are not Verizon/AT&T’s size is how do you balance meeting current profitability expectations with the tremendous CAPEX hit that FTTH provides. The question is not whether to do FTTH or not, the question is HOW to do it without bankrupting yourself over the short to mid term.
I wonder what FiOS’ impact will eventually be on IPTV. Since Verizon doesn’t use IPTV, should they continue to have success against the cable industry, will others try to emulate their success. Embarq has yet to announce a video strategy – maybe they too will decide that they don’t need IPTV. I hear all the “experts’ say everything is going IPTV, but you have to wonder if the biggest and most successful telco video operator out there doesn’t use it.
Video seems to be the ultimate driver of FTTH. If you are not committed to do video in the near term, what does FTTH really give you. You can compete with DSL, and if your loop lengths are short enough, you can add video as well. Not sure I agree with this rush to FTTH. It’s an individual decision, and it doesn’t apply everywhere. Our DSL product meets the competition head on.