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Verizon Introduces 2-Yr Price Guarantee, Free Upgrade to Quantum 50/25Mbps Broadband

Phillip Dampier February 10, 2014 Broadband Speed, Competition, Consumer News, Verizon, Video 4 Comments

fiosVerizon has introduced a two-year price guarantee offer and a free broadband speed upgrade for new customers signing up for FiOS Internet, TV and voice service before April 19.

It’s the latest marketing salvo fired against Verizon’s cable competitors with the hope customers will cut cable’s cord and switch to FiOS.

All new customers will receive a two-year price guarantee with a triple play package costing as little as $89.99 a month.  The offers also include a free upgrade to FiOS Quantum 50/25Mbps Internet; FiOS TV Prime HD with more than 215 channels (more than 55 in HD); and FiOS Digital Voice home phone service with unlimited nationwide calling. As a further incentive, customers who choose a two-year agreement also receive a $250 Visa prepaid card. New customers who order online receive an extra $10 per month savings. Those ordering service from Verizon’s website will have the $49.99 activation fee waived.

Such aggressive promotions are not new for Verizon or its cable competition. The best prices are often reserved for new customers.

Former Time Warner Cable CEO Glenn Britt reflected last fall on the competitive environment between cable and phone companies and noted loyal, long-term customers don’t typically benefit much from pricing competition.

fios triple play“The current form of competition in this entire sector is essentially focused on promotional pricing, which allows customers who jump from provider to provider to get the best deal,” said Britt.

In an effort to control customers hopping back and forth between the cable and phone company (known as ‘subscriber churn’ in the industry), Verizon’s marketing is now trying to convince customers they won’t have to shop around for a better deal over the next two years, but aren’t restricted by a contract with termination penalties either.

“We’re responding to feedback from prospective customers who told us they want to switch to FiOS for the faster speed, greater reliability and clearer images, but they struggle with the notion of signing up for a multiyear contract,” said Mike Ritter, chief marketing officer for the consumer and mass business unit of Verizon. “We’ve also heard from prospective customers that they want price assurance when they switch providers. Our offer gives new customers the peace of mind to know their base rate will not change for two years. With no contract, and a two-year price guarantee, new customers can switch to FiOS with confidence.”

Verizon also provides evidence that broadband speed does matter. At of the end of 2013, 46 percent of all Verizon FiOS customers upgraded to FiOS Quantum speeds ranging from 50/25 to 500/100Mbps. Verizon says video streaming, multiplayer gaming, and uploading photos to social media sites are all contributing to consumer demand for faster Internet speeds. FiOS broadband remains the company’s grand jewel with 6.1 million subscribers. Around 5.3 million customers are signed up for FiOS TV.

At the end of last year, Verizon had 6.1 million FiOS Internet subscribers and 5.3 million FiOS TV customers.

Verizon’s new FiOS promotions (for new customers only):

  • Online with no annual contract: $89.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years and a two-year price guarantee.
  • Online with a two-year agreement: $89.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years, two-year price guarantee and a $250 Visa prepaid card.
  • Offline order (purchased through any means other than online) with no annual contract: $99.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years, and a two-year price guarantee.
  • Offline order with a two-year agreement: $99.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years, two-year price guarantee and a $250 Visa prepaid card.

 [flv]http://www.phillipdampier.com/video/Verizon FiOS Internet 2-2014.mp4[/flv]

Verizon argues America needs fiber to the home service to meet the needs of the digital economy. “It’s time to take fiber optics to the last mile,” says the video. That’s fine news for 18 million households that can today buy fiber optic FiOS service, but Verizon indefinitely suspended further expansion of its fiber network in 2010. (3:30)

Is Verizon Purposely Slowing Down Netflix for FiOS Customers? Stop the Cap! Investigates

David Raphael ran into trouble using his Verizon Internet connection last month, discovering major slowdowns when accessing Amazon’s cloud-server ‘AWS,’ which in addition to serving his employer also feeds Netflix video content to customers.

“One evening I also noticed a slowdown while using our service from my house,” Raphael writes on his blog. “I realized that the one thing in common between me and [my employer] was that we both had FiOS internet service from Verizon. Since we host all of our infrastructure on Amazon’s AWS – I decided to do a little test – I grabbed a URL from AWS S3 and loaded it. 40kB/s.”

Internet slowdowns while accessing different websites is nothing new. Just ask anyone trying to watch YouTube in the early evening.

But what was different this time is that a Verizon representative seemed to openly admit the company is purposefully throttling certain web traffic, as this chat screen capture suggests:

verizon_fail
“Frankly, I was surprised he admitted to this,” Raphael writes. “I’ve since tested this almost every day for the last couple of weeks. During the day – the bandwidth is normal to AWS. However, after 4pm or so – things get slow. In my personal opinion, this is Verizon waging war against Netflix. Unfortunately, a lot of infrastructure is hosted on AWS. That means a lot of services are going to be impacted by this.”

That would certainly be the case as many large content distributors increasingly rely on cloud-based delivery services to reach subscribers over the shortest and fastest possible route. But broad-based interference with web traffic would also throw a major wrench in Verizon’s core marketing message for FiOS — its fiber-fast speed when compared against the cable competition. If subscribers notice their Netflix experience degraded to speeds that resemble dial-up, cable companies are going to get a lot of returning customers.

We reached out to Verizon for comment and it turns out the company has not declared war on Netflix after all.

“We treat all traffic equally, and that has not changed,” says Verizon spokesman Jarryd Gonzales. “Many factors can affect the speed a customer’s experiences for a specific site, including, that site’s servers, the way the traffic is routed over the Internet, and other considerations.  We are looking into this specific matter, but the company representative was mistaken. We we’re going to redouble our representative education efforts on this topic.”

Cable TV Cord Cutting: Myth or Reality?

Phillip Dampier February 4, 2014 Competition, Consumer News, Editorial & Site News 2 Comments

For years, cable operators have denied they have a problem.

But new evidence suggests Americans are cutting back on their cable television habit as prices continue to rise and alternatives become available.

One of the worst affected by cable cord cutters is Time Warner Cable, which has been consistently losing video customers month after month since 2009:

time-warner-cable-residential-customer-additions-000s-video-broadband_chartbuilder

Disputes with programmers and competition from satellite and telephone companies may not be enough to explain away the trend of subscriber losses. It also does not explain why Americans under 35 are increasingly unlikely to sign up for cable television at all.

Cable cord cutting -- fact or fiction?

Cable cord cutting — fact or fiction?

Nonsense, replies Bloomberg opinion columnist Matthew C. Klein:

It is tempting to think that the declining number of subscribers at the U.S.’s biggest cable-television companies is a symptom of the industry’s malaise as it slowly slides into obsolescence. Don’t buy it. The losses are accounted for in the gains by smaller and nimbler rivals.

[…] The customers who have been abandoning Comcast and Time Warner Cable in droves haven’t given up on paid TV content, however. Focusing on the travails of the biggest cable companies obscures the reality that, according to Bloomberg Industries, the total number of pay-TV subscribers is slightly higher now than it was at the end of 2008 and that there were probably more people paying for television subscriptions at the end of 2013 than at the end of 2012.

To the extent that individual company results tell us anything, it could be about where Americans are moving, or the relative quality of service offered by the various companies. In the 12 months ended Dec. 31, AT&T Inc. added 924,000 subscribers to its U-verse TV service, while Verizon Communications Inc. added 536,000 subscribers to its FiOS TV service. Since the end of 2008, the two companies best known for their wireless services have added about 8 million pay-TV subscribers — far more than Time Warner Cable and Comcast have lost.

Klein’s views mirror those of many cable industry executives who blame the economy for deteriorating cable television subscriber numbers. Many suggest multi-generational households are responsible — stay at home kids and older parents are sharing a single cable television subscription. Others claim discretionary income is squeezing some to downgrade, but not cancel, cable television service.

Klein’s accounting does not tell the entire story. Competition from telephone companies, especially AT&T’s U-verse, is not as pervasive against Time Warner Cable and Comcast as Klein suggests. In fact, Charter Communications is among the cable companies facing the biggest onslaught of competition from AT&T. U-verse has picked up many of its newest subscribers not because of a sudden urge to switch, but rather because the service has only just become available in several new markets as a result of AT&T’s expansion effort. Verizon FiOS is still slowly expanding within its current franchise areas as well. Neither Comcast or Time Warner Cable consider either service much of a serious competitive threat.

AT&T U-verse, the larger of the two telephone company services, has a TV penetration rate of just 21 percent of customer locations. FiOS, which serves a smaller customer base, has a 35 percent penetration rate for television. Cable remains dominant for now, even as it loses subscribers and market share.

Another way to measure cord cutting is to look at the subscriber numbers of major basic cable networks that are most likely to be a part of any channel lineup. ESPN, for example, lost around 1.5 million subscribers between September 2011 and September 2013. Most of that loss came from cord cutting or downgrades to tiers like “Broadcast Basic,” consisting mostly of local television stations. ESPN’s numbers include all pay television platforms — satellite, telco TV, and cable.

In spite of the subscriber losses, cable industry profits remain healthy. Revenue growth these days comes from broadband service and rate increases.

Time Warner Cable Plans to Triple Broadband Speeds (If They Survive a Hostile Takeover)

Time Warner Cable today announced major improvements in its service, including a tripling of broadband speeds and equipment upgrades that will first arrive in New York City and Los Angeles.

With the cable company facing a hostile takeover effort by Charter Communications with Comcast’s help, CEO Rob Marcus sought to appease shareholders that worry the cable company’s recent lackluster results originate from outdated technology, poor customer service, and broadband speeds that are well below the cable industry average.

Time Warner Cable will have to increase capital spending to pay for the upgrades, expected to cost $3.8 billion annually for the next three years.

nycla enhancements

CEO Rob Marcus calls the effort a “transformation of the Time Warner Cable customer experience.” The upgrade program is called TWC Maxx for now inside Time Warner Cable, but will have its own brand when it publicly launches later this year.

Here are some highlights:

Marcus

Marcus

TV Service

  • Network infrastructure upgrades to enhance reliability
  • New advanced set-top boxes
  • A six-tuner DVR
  • A cloud-based interface and navigation
  • An expanded on-demand library

Internet

  • Dramatic free speed boosts for all customers
  • A new Ultimate speed tier of 300/20Mbps

Unfortunately, customers outside of Los Angeles and New York will have to wait up to two years for the upgrades to reach their community.

twcmax

“With ‘TWC Maxx,’ we’re going to essentially reinvent the TWC experience market–by-market,” said Marcus. “We’ll triple Internet speeds for customers with our most popular tiers of service, add more community WiFi, dramatically improve the TV product and, perhaps most importantly, we’ll set a high bar in our industry for differentiated exceptional customer service. We’re focused on providing the features and benefits that matter most to our customers.”

The most noticeable improvement will be free broadband speed upgrades. Customers with Standard or above Internet service will also receive the latest generation cable modems including Advanced Wireless Gateways for customers with Turbo to Ultimate tier service. Marcus did not say whether the company is ending is monthly equipment fees for cable modems.

Here are the new speed tiers:

  • Everyday Low Price – Currently 2/1Mbps – New 3/1Mbps
  • Basic – Currently 3/1Mbps – New 10/1Mbps
  • Standard – Currently 15/1Mbps – New 50/5Mbps
  • Turbo – Currently 20/2Mbps – New 100/10Mbps
  • Extreme – Currently 30/5Mbps – New 200/20Mbps
  • Ultimate – Currently 50/5Mbps – New 300/20Mbps

nyla

New York and Los Angeles Upgrade Schedule

The first four network hubs scheduled for upgrade are those in West Hollywood and Costa Mesa, Calif. and portions of Woodside (Queens) and Staten Island, N.Y. The rest of both cities will be upgraded by the end of this year.

Los Angeles customers will also see analog cable television service discontinued in favor of digital later this year. New York City has already been converted to all-digital television. Customers in both cities will be able to schedule same-day appointments and one-hour service windows.

Who Gets Upgraded Next?

Analysts expect Time Warner Cable will upgrade cities where they face competition from U-verse and FiOS after completing NYC and LA.

Analysts expect Time Warner Cable will upgrade cities where they face competition from U-verse and FiOS after completing NYC and LA.

Analysts say Time Warner Cable’s upgrade plans are more aggressive than initially anticipated and many expect the company to move quickly, especially in competitive markets, to boost subscriber numbers and cut customer defections to help convince shareholders it is worthwhile to reject Charter’s hostile takeover bid.

The most likely markets to be targeted for upgrades after New York and Los Angeles are those facing stiff competition from Google Fiber and Verizon FiOS. Cities where AT&T U-verse delivers competition are likely to come next, and those cities where Time Warner Cable only faces competition from telephone company DSL service will likely be the last to be upgraded. However, long before that, Time Warner Cable could be sold off to other cable operators that will make these upgrade plans moot.

Marcus today reiterated his rejection of Charter’s latest $132.50 a share offer. Marcus said the cable company is only interested in an offer above $160 a share, and that at least $100 of that must be in cash, with the balance in Charter stock. Charter will have trouble delivering that amount of cash without the assistance of other cable operators.

Craig Moffett with MoffettNathanson Research isn’t sure Marcus’ plans are enough to keep TWC from being sold. He expects Charter to soon increase its offer above $140 with the help of Comcast, which is willing to pay cash for Time Warner Cable systems in New York, New England, and North Carolina after a deal with Charter is complete.

[flv]http://www.phillipdampier.com/video/Bloomberg Rob Marcus Interviewed 1-30-14.flv[/flv]

Robert Marcus, chief executive officer of Time Warner Cable Inc., talks about the cable company’s fourth-quarter earnings and its forthcoming upgrades, and Charter Communications Inc.’s $37.4 billion buyout bid. Time Warner Cable beat fourth-quarter profit estimates and forecast subscriber growth. Marcus speaks with Betty Liu on Bloomberg Television. (8:38)

Verizon’s Latest Financial Results Reaffirm Wireless Cash Cow is King, FiOS Expansion Still Dead

Verizon-logoVerizon FiOS expansion is still dead while cash cow Verizon Wireless will continue to get the bulk of Verizon’s attention this year, according to a top executive.

Verizon chief financial officer Fran Shammo delivered the latest quarterly financial results to Wall Street analysts Tuesday and had few specifics about how the Cadillac of wireless carriers will handle increasingly meddlesome competition from T-Mobile, which has torn up the comfortably profitable mobile industry’s business plan and threatened to launch an all-out price war.

Verizon Wireless remains a major earner for Verizon, delivering nearly $18 billion in revenue and $8.3 billion in adjusted profitability during the last quarter alone. Verizon is relying on the quality of its network to keep customers from bolting to less expensive competitors. This month, T-Mobile announced it was prepared to cover the early termination penalty of AT&T customers ready to switch. It’s only a matter of time before Verizon customers are treated to a similar offer and that worried investors enough to send Verizon’s share price downwards even though the company beat analyst’s earnings estimates.

Clues about Verizon’s game plan for 2014 became clearer as Shammo took questions and outlined the company’s strategy.

Wireless Will Get Most of Verizon’s Attention

cash cowAgain this year, Verizon Wireless will get the bulk of Verizon’s attention and financial resources. Verizon Wireless finished 2013 with $81 billion in wireless revenue — up $5.2 billion from 2012 — which represents two-thirds of Verizon’s total earnings. The wireless business has delivered a profit margin of 49% or higher for five of the last seven quarters.

Where do the increased earnings and profits come from?

“Service revenue growth continued to be driven by more customers and devices, increase of data usage, and smartphone penetration,” said Shammo. “Our Share Everything Plans are doing exactly what we expected — driving device adoption and stimulating higher usage — resulting in increases in both the number of devices and revenue per account.”

Shammo said little about the spectrum shortages Verizon claimed were responsible for an end to unlimited use data plans in favor of usage-capped, consumption-based billing. On the contrary, Shammo admitted Verizon expects to grow average revenue per account and profits on the back of usage billing as customers boost wireless data usage and have to upgrade to higher-priced plans in the future. Shammo also noted the company’s restrictions on early upgrades and charging upgrade/activation fees have delivered more revenue to Verizon and deterred customers from phone upgrades, which saves Verizon money.

Verizon Wireless customer bills rose an average of 7.1 percent during the fourth quarter to more than $157 per month.

“We have seen consistent growth in this metric,” said Shammo. “For the full year, average revenue per account was up nearly $10 or 6.9%.”

Some of that increase is attributable to Verizon’s higher cost Share Everything plans, which often cost customers more than the plans they abandon.

Share Everything = a higher Verizon Wireless bill for many customers.

Share Everything = a higher Verizon Wireless bill for many customers.

“In just 18 months more than 46% of our postpaid accounts are on these plans,” said Shammo. “In 2013 we effectively doubled the number of accounts on Share Everything from 8.1 million to 16.2 million.”

In the coming year, Verizon plans to spend up to $17 billion on network maintenance and expansion, but the bulk of it will be spent on the wireless side of the business. Verizon has again cut investment in its wired networks.

Shammo noted Verizon Wireless plans to repurpose some of its 3G spectrum to 4G LTE service this year, which cuts costs for Verizon while stimulating usage which will eventually force many customers into data plan upgrades.

“If you look at a 3G usage moving to a 4G, we know that — and we have seen it in our base — as soon as you get on the 4G with video consumption and the quality of video your usage goes up,” said Shammo.

Verizon FiOS Expansion is Still Dead

Verizon has no plans to expand its FiOS fiber network beyond the areas where the company previously signed franchise agreements several years ago. In fact, Shammo is already reallocating money that in years past targeted FiOS expansion, shifting it to Verizon Wireless.

Verizon's FiOS expansion is still dead. No plans for further expansion in 2014.

Verizon’s FiOS expansion is still dead. No plans for further expansion in 2014.

Shammo added Verizon will continue upgrading to fiber and decommission its copper network within existing FiOS areas, pushing customers with traditional landline service to basic FiOS phone service.

For those bypassed by FiOS, Shammo indicated it will be business as usual for Verizon, still selling DSL and phone service. But he hinted that within three years, Verizon might be open to selling off wireline customers in non-FiOS areas if a company approached Verizon with a lucrative deal. Verizon is under increased regulatory scrutiny in states like New York where there is concern Verizon is diverting resources away from deteriorating landline infrastructure in favor of its unregulated wireless network.

Shammo admitted Verizon stepped back from competing as hard as usual with cable competitors during the third quarter, believing consumers don’t want installers in their homes during the holiday season. As a result, the number of new FiOS customers was down from October-December. But with recent rate increases and voluntary upgrades, revenue remains up. With less than one million potential customers in the FiOS footprint still waiting for the fiber network to arrive, Shammo was comfortable stepping back from promotions temporarily.

Verizon FiOS has been highly successful for Verizon’s wireline division, now representing about 73% of Verizon’s consumer revenue. More than half of Verizon’s FiOS customers have upgraded to FiOS Quantum Internet speeds, starting at 50Mbps. With that kind of success, what holds Verizon back from further expanding FiOS? Verizon’s current CEO Lowell McAdam comes from a Verizon Wireless background and seems preoccupied with the wireless business. Wall Street is also firmly against Verizon increasing investment in fiber when diverting that spending to high-profit wireless can earn a much faster, more lucrative return.

Those lucky enough to have FiOS will continue to see upgrades in 2014. Chief among them is a new proprietary router that will assure Wi-Fi service in the home more closely matches the broadband speeds customers are buying, up to 100Mbps or more.

Verizon’s Intel OnCue Acquisition Doesn’t Mean Online Cable Competition is Coming

Despite a piece in GigaOM suggesting Verizon’s acquisition of Intel’s OnCue technology was all about competing head-to-head with Comcast, Shammo downplayed any expectation Verizon was about to declare war on  that cable company or anyone else:

Shammo

Shammo

As far as the OnCue acquisition, look, the focus here is really to accelerate the availability of the next-generation IP video service which we will integrate into the FiOS video service. And really what we are trying to do is differentiate this even more so with fiber to the home versus others with the TV offerings and reducing the deployment costs. And this really accelerates us from if we were trying to build IP TV versus buying the IP TV technology.

From an FiOS customer perspective, we expect the benefits that they will have more elegant search and discovery activity and cost stream ease of use. But also keep in mind, with the acquisition of Verizon Wireless and becoming 100% ownership of that we also plan to take that platform and integrate it more deeply with our Verizon Wireless 4G LTE network. So that really was the strategy behind this.

 Verizon Wireless Has Enough Spectrum for the Next 3-4 Years

Shammo told investors Verizon Wireless has plenty of wireless spectrum to meet customer needs for the next 3-4 years, but he did outline Verizon’s short-term plans on spectrum management:

As far as our portfolio, obviously we like the 700 megahertz for the coverage of the LTE that we did. AWS is our sweet spot at this point in time, which is the spectrum that we have been swapping for [with competing carriers], so we have a very efficient portfolio of spectrum and I think we have shown through the years that we are very efficient on how we use spectrum.

Keep in mind that, as I said, we will participate in the auctions because we will need more spectrum, but right now our current position is that with the AWS that we have and that we are launching in markets that you know in New York and San Francisco, Chicago we are lighting that spectrum up. It is pretty much completed in New York. We will continue to add to that, but keep in mind though too that we will also re-appropriate our 3G spectrum to 4G.

So we will take that PCS spectrum that has been running in our 3G network — as the volume of that network continues to decrease as we move more 3G phones to 4G, we will bring re-appropriate that spectrum over to the 4G LTE. So three to four years we are in very good shape from a spectrum holding position, but we will participate in the upcoming auctions.

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