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How Softer Linear TV Demand Impacts Verizon’s FiOS Video Business

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Verizon’s FiOS video net additions in 1Q17

A key driver of Verizon’s (VZ) Wireline segment is its FiOS service. Verizon’s FiOS is a fiber-optic network service that provides customers with Internet, voice, and video services.

Verizon is well-positioned with FiOS, but it lacks scale in terms of video and broadband services. In 1Q17, Verizon lost 13,000 FiOS video subscribers, compared to 43,000 net additions in 1Q16.

In 1Q17, Verizon’s FiOS video penetration fell 120 basis points to reach 33.8%, compared to 35.0% in 1Q16. This fall was mainly due to softer linear TV demand. The trend of softening linear TV demand is coming from the fast growth in the video streaming or the over-the-top (or OTT) market and competitive promotional offers.

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OTT market

The online video streaming market in the United States is a crowded segment. In addition to Netflix (NFLX), pay-TV providers 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 in a phenomenon known as cord-cutting.

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