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Home > Communications > Fiber Optics > Optical
Verizon Should Shed Rural Assets and Focus Full Effort on FiOS
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| Published Date:
June 2008
Published By:
Yankee Group
Page Count:
14
Order Code:
R388-2610
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Yankee Group projects Verizon’s FiOS service will be available to 18 million homes by the end of 2010. Although significant in its raw size and representative of the largest US FTTH project ever, the number represents only about 55% of the total homes passed by Verizon, as shown in Exhibit 1. The challenge for Verizon is deciding what to do with the remaining 45% of homes where FiOS is unlikely to be deployed.
In these non-FiOS markets, Verizon offers a triple-play bundle with its landline voice, DSL and resold DIRECTV. But the lack of fiber fundamentally disadvantages the company because it does not allow Verizon to offer either ultra high-speed internet access services or interactive video services. Yankee Group believes these services, which require FiOS, are the keys to differentiating Verizon from competitors’ offerings. Moreover, there is no difference in consumer broadband and media purchasing and consumption patterns in these different markets; so we conclude that unless they should be offered similar services, action must be taken.
Yankee Group posits that Verizon’s best option would be to dispose of these non-FiOS markets. Customers who reside in non-FiOS markets would be better and more rapidly served through separate entities that could extend the Anywhere Network• to these areas. Furthermore, we conclude:
- Consumers not covered by FiOS will largely reside in rural markets where population densities make it difficult but not impossible to generate sufficient ROI for an FTTH network.
- Although Verizon would take a short-term financial hit by losing voice and some data revenue, the company would be better positioned for overall long-term growth by shedding rural wireline assets.
- Spinning off a separate publicly traded entity that would hold its rural markets would be the most practical option.
- Selling off large groups of access lines to RLECs—similar to its recently closed transaction with FairPoint Communications—or private equity buyers is becoming more difficult but remains a feasible option with multiple potential buyers positioned to acquire such assets.
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