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Verizon: Forget About FiOS, We’re Moving to a Broadband Wireless World

Who needs FiOS when you can get 5G wireless service with a data plan?

Who needs FiOS when you can get 5G wireless service with a data plan?

Fran Shammo has a message for Verizon customers and investors: fiber optic broadband is so… yesterday. Your millennial kids aren’t interested in gigabit speed, unlimited use Internet in the home. They want to watch most of their content on a smartphone and spend more on usage-capped wireless plans.

Shammo is Verizon’s money man – the chief financial officer and prognosticator of the great Internet future.

Like his boss, CEO Lowell McAdam, Frammo has his feet firmly planted in the direction of Verizon Wireless, the phone company’s top moneymaker. If one ever wondered why Verizon Communications has let FiOS expansion wither on the vine, Mr. McAdam and Mr. Shammo would be the two to speak with.

This week, Shammo doubled down on his pro-wireless rhetoric while attending the Bank of America Merrill Lynch 2016 Media, Communications & Entertainment Conference — one of many regular gathering spots for Wall Street analysts and investors. He left little doubt about the direction Verizon was headed in.

Shammo

Shammo

“As we look at the world if you will, and we look at our ecosystem, […] the world is moving to a broadband wireless world,” Shammo told the audience. “Now, I am really – when I say world, I am really talking the U.S., right. So, but I do think the world is moving to a wireless world.”

In Shammo’s view, the vast majority of people want to consume content, including entertainment, over a 4G LTE (or future 5G) wireless network on a portable device tied to a data plan. Shammo predicted wireless usage will surpass DSL, cable broadband, and even FiOS consumption in 3-5 years. If he’s right, that means a mountain of money for Verizon and its investors, as consumers will easily have to spend over $100 a month just on a data plan sufficient to cope with Shammo’s predicted usage curve. In fact, your future Verizon Wireless bill will likely rival what you pay for cable television, broadband, and phone service together.

Millennials don’t want fiber, they want wireless data plans

Shammo argued millennials are driving the transition to wireless, claiming they already watch most of their entertainment over smartphones and tablets, not home broadband or linear TV. His view is the rest of us are soon to follow. Shammo claims those under 30 are turning down cable television and disconnecting their home broadband service because they prefer wireless. Others wonder if it is more a matter of being able to afford both. A 2013 survey by Pew data found 84% of households making more than $54,000 have broadband. That number drops to 54% when annual household incomes are lower than $30,000 per year. But those income-challenged millennials don’t always forego Internet access — some rely on their wireless smartphone to access online content instead.

A microcell

A microcell

Verizon Wireless may be banking on the same kind of “hard choice” many made about their landline service. Pay for a landline and a mobile phone, or just keep mobile and disconnect the home phone to save money. Usage growth curves may soon force a choice about increasing your data plan or keeping broadband service at home. Shammo is betting most need Verizon Wireless more.

Verizon FiOS is really about network densification of our 4G LTE network

Shammo continued to frame its FiOS network as “east coast-centric” and almost a piece of nostalgia. The recent decision to expand FiOS in Boston is not based on a renewed belief in the future of fiber, Shammo admitted, it is being done primarily to lay the infrastructure needed to densify Verizon’s existing LTE wireless network in metro Boston to better manage increased wireless usage. Shammo’s spending priorities couldn’t be clearer.

“Obviously, we said, we would build up Boston now, because it makes sense from a LTE perspective,” Shammo said. “We can spend $300 million over the next three years to make that more palatable to expand FIOS. So we will continue to expand that broadband connection via fiber where it makes financial sense for us.”

verizon 5gIn other words, it is much easier to justify capital expenses of $300 million on network expansion to Wall Street if you explain it’s primarily for the high-profit wireless side of the business, not to give customers an alternative to Time Warner Cable or Comcast. FiOS powers cell sites as well as much smaller microcells and short-distance antennas designed to manage usage in high traffic neighborhoods.

Shammo also believes Verizon must not just be a ‘dumb wireless’ connection. Controlling and distributing content is also critically important, and Shammo is still a big believer in Verizon’s ho-hum GO90 platform, which compared to Hulu and Netflix couldn’t draw flies.

Even Verizon CEO McAdam admitted a few weeks ago at another Wall Street conference GO90 was “a little bit overhyped.” Most of GO90’s content library is mostly short video clips targeted at millennials with short attention spans. The downside of making that your target audience is the rumor many who sampled the service early on have already forgotten about it and moved on.

Forget about congested home and on-the-go Wi-Fi and expensive fiber optics. Verizon will sell you 5G wireless (with a data plan) for everywhere.

Shammo believes the future isn’t good for Wi-Fi in the home and on-the-go. As data demands increase, he believes Wi-Fi will become slow and overcongested.

“There is a quality of service with our network that you can’t get with others,” Shammo said. “I mean, most people in this room would realize that when Wi-Fi gets clogged, quality of service goes significantly down. It’s an unmanaged network. You can’t manage that.”

Instead, Verizon will eventually deploy 5G wireless instead of FiOS in many areas without fiber optic service today. Frammo said 5G would cost Verizon a lot less than fiber, “because there is no labor to dig up your front lawn, lay in fiber, or be able to fix something.”

Shammo doesn’t believe 5G wireless will replace 4G LTE wireless, however.

“LTE will be here for a very long time and be the predominant voice, text, data platform for mobile,” Shammo said.

So instead of unlimited fiber optic broadband, Verizon plans to sell home broadband customers something closer to Wi-Fi, except with a data allowance. It’s a return to fixed wireless service.

Verizon Wireless' existing fixed wireless service is heavily usage capped and no cheap.

Verizon Wireless’ existing fixed wireless service is heavily usage capped and not cheap.

Just a few short years ago, Verizon was looking to fixed wireless as a replacement for rural DSL and landline service. Now Shammo sees the economics as favorable to push a similar service on all of its customers, except those already fitted for FiOS. That changes the dynamics on usage as well, because Verizon Wireless ditched unlimited service several years ago except for a dwindling number of customer grandfathered in on its old unlimited plan.

Current 4G LTE fixed wireless customers can expect 5-12Mbps speeds with data plan options of $60 for 10GB, $90 for 20GB, or $120 for 30GB. The 5G service would be substantially faster than Verizon’s current fixed LTE wireless service, but the company’s philosophy favoring data caps for wireless services makes it likely customers will pay much higher prices for service, higher than Verizon charges for FiOS itself.

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Damian Kumor
Damian Kumor
7 years ago

With the rates that salaries are decreasing and Verizon charges for data there’s no way anyone can afford this vision that he’s talking about.

Derpson
Derpson
7 years ago

No one is dumb enough to pay more for a wireless LTE hot spot in their home. The Verizon guy is partially right, I consume a lot of media on my mobile device… but I do it over WIFI.. because 1. Data caps are dumb, 2. My home internet is faster than LTE, = HD content. 3. I have crappy, unreliable 4G service where I live. The only people this is good for are the people in rural areas where the only other options are dial up and satellite. That isnt a large market compared to the landline market for… Read more »

dgfchfgh
dgfchfgh
7 years ago

The only way wireless can even be considered for home broadband is if it has no Data Cap and no Throttling. Im currently in a spot where I can only get Verizon 4GLTE service and if I couldnt get a UDP I would be F**ked since my Usage is easily in the Multi Terabytes (Being a Content creator a single upload can easily take 40-50GBs). Hoping to move soon to escape verizon hell.

Len G
Len G
7 years ago
Reply to  dgfchfgh

Thank you! You saved me from typing that same statement. I cannot disagree with the entirety of this article any more than I do. It actually makes me angry. I’ve been in IT for many, many years now, but I have kept myself from using or even buying a smartphone. I know the younger guys may giggle at that, but I never take my work home, not anymore. Smartphones are fantastic for those who like them, I just don’t happen to be one of them. The computer work I do requires processing power far beyond any smartphone, and I don’t… Read more »

Joe V
Joe V
7 years ago

This well-researched article sums up perfectly what is going on. http://www.huffingtonpost.com/bruce-kushnick/att-and-verizons-wireline_b_10315554.html http://www.huffingtonpost.com/bruce-kushnick/the-wireline—wireless-b_b_10253268.html “Verizon claimed in its 2015 annual report that it is a “digital-first mobile future” company while AT&T’s 2015 annual report proclaims that it is “mobilizing your world”. But both companies also have control over the wireline, state-based utility networks and this has helped them become the largest wireless companies – and to cross-subsidize their wireless business, as well as all of the other affiliate lines of business, including the ‘Broadband Data Services’ that businesses as well as competitors rely on. The wires, fiber or copper, are part of… Read more »

Paul Houle
Paul Houle
7 years ago

At the $10 a GB that Verizon charges for 4G, nobody can afford to watch video. For instance, if one movie is 1 GB, that is $10 of data charges to watch one movie. That’s almost as expensive as seeing the movie in a movie theatre. A Netflix subscription is $10 a month for as many movies as you want to watch! The people who made the movie get NOTHING from that $10. The scary thing is that there really are people who will get $1000 phone bills and pay them like it isn’t any thing. If you look at… Read more »

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