Verizon’s Fios video net additions in 3Q17
A primary driver of Verizon’s (VZ) wireline segment is its Fios service, a fiber-optic network service that provides users with video, voice, and Internet. The telecom (telecommunications) company is well positioned with Fios but lacks scale in broadband and video services. In 3Q17, Verizon lost 18,000 Fios video customers compared to 36,000 net additions in 3Q16.
In 3Q17, its Fios video penetration fell 160 bps (basis points) to 32.9% compared to 34.5% in 3Q16. The fall was mainly driven by softer linear TV demand as customers migrated to OTT (over-the-top) offerings and competitive promotional offers.
The online video streaming market in the United States is a crowded segment. OTT video streaming services deliver content directly to users over the Internet as an alternative to signing up for cable or satellite connection. OTT offerings slow down pay-TV subscriber momentum as a result of cheaper online alternatives. This phenomenon is known as cutting the cord.
More and more users are opting for OTT over high monthly satellite and cable bills. According to Digitalsmiths’ 2Q17 report, approximately 36.2% of pay-TV customers pay more than $100 per month to their service provider. Dish’s (DISH) Sling TV, Netflix (NFLX), and Sony’s (SNE) PlayStation Vue are the leading services in the online video streaming space.