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Why Has Verizon Been Losing Its Fios Video Customers?

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Verizon’s wireline revenues

Verizon’s (VZ) Fios customers have contributed significantly to the company’s wireline segment’s revenues. Fios is a fiber-optic network service through which Verizon provides Internet, video, and voice services to its users. In the second quarter, wireline revenues, excluding the impact of the revenue recognition standard, declined 3.4% to $7.5 billion in the second quarter.

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Declining Fios video customers

While there has been an addition in Verizon’s Fios Internet customers, the wireless service provider has been witnessing a net loss of Fios video customers in the last six consecutive quarters. Stiff competition from popular and less expensive over-the-top (or OTT) video streaming services has dented the growth of Fios video customers. Verizon also lost Fios voice connections in the first quarter.

In the second quarter, Verizon reported net losses of 37,000 Fios video customers. At the end of June, Verizon had ~4.56 million Fios video connections, little lower than 4.597 million connections in the first quarter and from ~4.67 million video connections in the second quarter of 2017.

Cord cutting

Over-the-top (or OTT) offerings have ruptured the growth of the traditional pay-TV subscriber base, known as cutting the cord. Streaming service providers such as Netflix (NFLX), Alphabet’s (GOOGL) YouTube TV, Hulu Live TV and Amazon (AMZN) Prime offer movies and TV shows directly to customers over the Internet at lower rates than a cable or satellite subscription.

Consumers’ growing interest in watching online videos has forced TV distributors and programmers to launch their online TV offerings in the market. Dish Network and AT&T (T) have started focusing on their streaming offerings—Sling TV and DIRECTV NOW, respectively—amid a declining pay-TV subscriber base. The acquisition of Time Warner has also given AT&T access to Turner Broadcasting, which owns CNN.

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