Verizon Dials DSL Down, Prices FiOS Up

Verizon Communications, aiming to improve
the profitability of its wireline unit, will no longer
sell digital subscriber line over copper in areas where
FiOS is available.

At the same time,
the telco is planning to
implement additional
price hikes for its FiOS
bundles over the next
two quarters, according
to chief financial
officer Fran Shammo.

Verizon added
180,000 TV and 193,000
FiOS Internet subscribers
in the first quarter,
but lost 89,000 DSL
subscribers in the period
on a sequential
basis and shed 440,000
total voice connections
in the period.

FiOS now represents
63% of Verizon’s consumer wireline revenue — or about
$2.2 billion for the first three months of 2012 — up from
54% a year ago. Consumer wireline revenue grew a modest
1.7%, while Verizon’s overall wireline segment (which
includes enterprise and wholesale) posted operating revenue
of $9.9 billion, a year-over-year decline of 2%.

The wireline business “is a drag on growth and a drag
on value, and it still accounts
for almost half
of proportionate revenue
and 70% of invested
capital” for Verizon
as a whole, Sanford
Bernstein senior analyst
Craig Moffett wrote
in a research note.

Shammo said Verizon’s
initiative to migrate
copper plant in
FiOS markets to fiber
will provide long-term
benefits in terms of operating

“It is better for us
long-term to get most
of these customers off
of our copper network
to our FiOS network,” he said. “Number one, we will see
a long-term benefit [as] our repairs and maintenance decrease
over time. We will also get the upsell capability to
start selling these voice customers on better speeds of FiOS
and better experience, and also then into the linear TV
product that we have to offer.”

In the small number of areas Verizon converted from
copper to fiber in trials last year, the telco is now starting
to see a 30% sale upgrade on those customers.

On another vector, Verizon in the current quarter is raising
lease fees for FiOS TV DVRs by 6% — from $15.99 to
$16.99 per month — and hiking set-top box rates in the
New York metro area 17%, to $6.99 monthly.

In addition to that, over the next two quarters, Verizon
will “have several price-ups in our FiOS packages,” Shammo
said. Verizon also will “rebundle certain of our packages
to better bundle our content in order to make it more
profitable, based on the tier that you pick from us.”

Overall for the first quarter, Verizon reported total consolidated
revenue of $28.2 billion, up 4.6% year over year,
with net income attributable to Verizon of $1.7 billion (up

Meanwhile, Verizon is still in negotiations with the
Communications Workers of America and the International
Brotherhood of Electrical Workers, covering about
45,000 union workers in its wireline unit who have been on
the job without a contract since August.

Verizon is “standing strong” in dealing with the unions,
Shammo said. “In order for us to be competitive with our
[cable] competitors, who don’t have these very lucrative
benefits and average salaries of $90,000, with an incremental
$50,000 of healthcare and pension on top of that, we
need some cost restructure here,” he said.