Verizon Communications said if FiOS grows to the point where the service is on track to garner up to 7 million Internet customers and up to 4 million TV customers by year-end 2010, then FiOS should start generating positive operating income sometime in 2009.
Based on the same assumptions, Verizon expects its capital investment in FiOS from 2004 through 2010 will total $18 billion.
Capital expenditure per home is falling. Last month, Verizon said, the average capex to pass a home was $873, and to actually connect a home $933. The cost to pass is lower than expected, but the cost to connect higher; Verizon did not explain why. By 2010, these expenditures are expected to average $700 to pass a home and $650 to connect a home.
Included in Verizon’s profitability calculation is the expectation of savings of approximately $1 billion in annual, ongoing operating expenses by 2010 as a result of the efficiencies gained from fiber network facilities.
Verizon plans to pass 18 million homes with its fiber network by the end of 2010, or more than 50 percent of the approximately 33 million households in the company’s 28-state wireline service area. The FiOS network build-out is on target to pass a total of 6 million premises by year-end 2006, with an additional 3 million a year planned through 2010.
Verizon said FiOS will be “available for sale” to only 5 million of the 6 million homes passed by the end of 2006 (which seems to stretch the definition of “homes passed”). Verizon’s video franchises allow it to offer TV to about 1 million of its FiOS households; it expects franchises to cover 1.8 million homes by the end of the year.
Verizon did not say how many FiOS customers it has now, but said it is on pace to meet targets. Those targets include half a million data customers and 100,000 video customers by the end of Q3, and 725,000 data subscribers and 175,000 video customers by the end of the year.
About two-thirds of its video subscribers have switched from cable, Verizon said.
Monthly churn rates for both video and data are less than 1.5 percent. Verizon also said that nearly 80 percent of its fewer-than-100,000 FiOS TV customers have purchased the triple play.
Verizon detailed the FiOS TV enhancements expected in 2007, including a TV portal, home shopping and interactive broadcasting, gaming, and on-demand and multimedia enhancements.
The company said FiOS also offers future opportunities for convergence with Verizon Wireless and future interactive services, such as intelligent media search, interactive advertising and personal broadcasting.