Analyzing Verizon's growth opportunities and important risks

1 2 3 4 5 6
Part 4
Analyzing Verizon's growth opportunities and important risks PART 4 OF 6

Why FiOS is driving growth at Verizon’s Wireline business

The FiOS Quantum service has gained popularity

Verizon’s (VZ) FiOS is a high-speed broadband connection based on a Fiber optic network. Verizon recently introduced the FiOS Quantum service, which can provide Internet download speeds ranging from 50 Mbps to 500 Mbps. FiOS achieved year-over-year revenue growth of 15.5% in Q1 2014, which was driven by customer additions and FiOS Quantum penetration. The FiOS Quantum service has picked up quite fast, and about 50% of Verizon’s FiOS Internet customers have subscribed to this service. Verizon added 98,000 new FiOS Internet customers in Q1 2014 and now has about 6.2 million subscribers.

Why FiOS is driving growth at Verizon&#8217;s Wireline business

FiOS performance is among the best in the U.S.

As the chart above shows and as Netflix (NFLX) claims, the average prime-time performance for Verizon’s FiOS is among the best of major U.S. Internet providers, although the performance for all Internet providers has deteriorated lately. According to the report, Verizon’s performance was better than AT&T’s (T) and Comcast’s (CMCSA), but it worsened slightly compared to Time Warner Cable’s (TWC) in January 2014.

A Comcast and Time Warner Cable merger could change the broadband market

Incidentally, in February this year, Comcast agreed to buy Time Warner Cable for $45 billion. However, Netflix vehemently opposes this merger because it believes that Comcast is already a dominant player able to capture unprecedented fees from transit providers and services such as Netflix. The combined entity of Comcast and Time Warner Cable would cover 60% of U.S. broadband households, meaning even more anti-competitive leverage to charge arbitrary interconnection tolls for access to Netflix’s customers.

Become a Market Realist member today to enjoy full access