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Trends in Verizon FiOS’s Internet Net Additions

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Verizon FiOS’s Internet net additions in 4Q16

In the previous part of this series, we looked at some pay-TV market trends that are affecting Verizon Communications (VZ). The telecom (telecommunications) company is managing the secular challenges of the pay-TV space by focusing on its Internet offering in Verizon FiOS.

During the last quarter of 2016, Verizon added 68,000 Verizon FiOS Internet subscribers compared to 82,000 net additions in 4Q15. The net gains were offset by declines in DSL-based Internet connections, roughly by the same amount.

Verizon FiOS’s Internet penetration rose 20 bps (basis points) to reach 40.4% in 4Q16 compared to 40.2% in 4Q15. Verizon FiOS’s Internet subscribers rose ~4.3% on a YoY (year-over-year) basis to ~5.7 million at the end of 4Q16.

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Verizon FiOS’s Instant Internet

During Verizon’s 4Q16 earnings conference call, management mentioned that it continues to innovate its FiOS platform by utilizing fiber assets. In January 2017, Verizon introduced Instant Internet, a new service that offers both upload and download speeds of 750 megabits per second. The service, which has been introduced in New York, New Jersey, Philadelphia, and Richmond, is set to expand to other markets.

Verizon expects solid FiOS Internet net additions to continue since the company has overcome the impacts of its strike and could see margin benefits from the new union contract over time.

Although Verizon managed to gain 68,000 net FiOS Internet customers in 4Q16, its biggest threat comes from cable companies such as Comcast (CMCSA) and Charter Communications (CHTR), which are managing to add the most Internet subscribers.

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