Powered by TMCnet
| More

Cable Technology Feature Article

January 07, 2010

Verizon Aiming for 40% Video Penetration

By Gary Kim, Contributing Editor

Verizon’s CEO Ivan Seidenberg reported the company’s goal to reach 40 percent FiOS (News - Alert) TV penetration, up from its current 25 percent level overall. In order to do that, Verizon will have to steal most of that share from cable operators. The issue is how many millions of lost cable customers that represents.
The simple math is that when Verizon (News - Alert) reaches its goal of 18 million FiOS homes passed, a 40-percent penetration rate would imply 7.2 million FiOS TV customers. As Verizon now has about 2.7 million FiOS TV customers, that implies an additional 4.5 million customers, most of which presumably would come from cable's ranks.
According to Verizon officials, the 40 percent penetration goal is reasonable. In some markets, FiOS penetration already is 35 percent to 40 percent, while in some markets penetration reaches 45 percent to 50 percent.
Verizon currently expects to complete its FiOS construction project by the end of 2010, which would allow the company to focus exclusively on marketing, rather than juggling construction and marketing activities.
The 40 percent share is considerably higher than cable TV executives in the past have suggested they might lose to telco competitors. Of course, in the past, telco executives, when pressed on the matter, also have bandied about numbers uncannily similar to the share losses cable executives have said they expected. About 20 percent is a figure executives from both industry segments have suggested was a reasonable expectation of share loss.
Neither sets of executives have been so sure recently, and the reason is simply that actual share losses in some markets have exceeded what executives have said in public might be the case. Cox (News - Alert) Communications, for example, long ago passed the 40 percent mark for voice penetration in Omaha, Neb., for example.
Comcast executives have said they expect to hit the 20 percent to 25 percent penetration level in consumer voice markets at the end of 2009, so it seems fairly clear that 20 percent share losses are too low for either telco or cable executives looking at their core legacy businesses.
That said, cable share gains seem to be slowing in the voice market, and telco gains in the video market, though steady, likewise have been hard fought in most cases. To some extent, bundling tactics are slowing customer defections from telco to cable and from cable to telco.
Still, 40 percent video penetration remains a bit of a “stretch” goal for Verizon. It isn't by any means impossible. Neither will it be easy, though. And few cable industry executives likely thought, at first, that Verizon or any other telco would be able to gain that much share.
It always is a mistake to underestimate a key opponent, and that seems to have been an occupational hazard in both the telco and cable industries some years ago. These days, a more-sober assessment likely is being made.

To find out more about Verizon, visit the company at
ITEXPO East 2010. To be held Jan. 20 to 22 in Miami, ITEXPO (News - Alert) is the world’s premier IP communications event. Verizon’s Director of Global Voice Services, Thomas G. Dalrymple Jr. is speaking during “Hosted IP Telephony Offers, IP Centrex and SaaS.” Don’t wait. Register now.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Kelly McGuire