Verizon FiOS’s video net additions in 4Q16
A key driver of Verizon Communications’ (VZ) wireline segment is its Verizon FiOS service. Verizon FiOS is a fiber-optic network service that provides customers with Internet, voice, and video. The company is well positioned with FiOS but lacks scale in video and broadband service. During the last quarter of 2016, Verizon added 21,000 FiOS video subscribers compared to 25,000 net additions in 4Q15.
In 4Q16, Verizon FiOS’s video penetration fell 80 bps (basis points) to 34.3% compared to 35.1% in 4Q15. The fall was mainly due to softer linear TV demand. However, Verizon continues to see strong demand for custom TV offerings.
The trend of softer linear TV demand is coming from the fast growth in video streaming, the OTT (over-the-top) market. The online video streaming market in the United States is a crowded segment. In addition to Netflix (NFLX), online video streaming services such as Dish Network’s (DISH) Sling TV and Time Warner’s (TWX) HBO are vying for potential customers in this segment.
According to reports, pay-TV providers such as Verizon, Comcast (CMCSA), and Charter Communications (CHTR) are currently losing customers to online video streaming companies. It’s a phenomenon known as cord-cutting.
However, Verizon is optimistic and sees an opportunity to further penetrate the video streaming market in the coming years.