Verizon's Shammo: We'll continue to migrate problem copper customers to FiOS

Fran Shammo, CFO and VP of Verizon (NYSE: VZ), said that if customers want their FiOS Fiber to the Premises (FTTP), they should pay a premium.

Looking to up the revenue gain it gets from FiOS, the service provider increased prices on its FiOS service in the second quarter, a trend that Shammo reiterated will continue into the third quarter.

“On the revenue side of the house, we really concentrated this year on getting our price points equivalent to where the rest of the market was,” he said. “We were actually underpriced with a superior product to cable so the concerted effort was to do some price ups that will continue into to the third quarter.”

Beginning in the first quarter, the price increase effort has begun to pay off in terms of increasing FiOS profitability in the second quarter. Verizon reported that it had a 2.5 percent mass market revenue increase during Q2.

One of the other notable changes with FiOS in the recent quarter was that it had a significant speed increase on a number of its key data tiers and introduced a new 300 Mbps tier.

The service provider increased the speeds on three of its current levels: 25/25 increased to 50/25; 35/35 climbed to 75/35 and 50/20 rose to 150/65. A new speed tier, 300/65, doubles the current 150/35 top tier.

As part of its move to increase profitability of its FiOS service at a time when its DSL subscriber base continues to defect to cable in areas where the FTTH service is not available, the company began migrating some customers over to the fiber service.

“We are really on a concerted effort to really spend our capital and our dollars more efficiently from getting people off the copper network and onto the FiOS network,” Shammo said. “You have probably seen us shift a little bit between going after our growth adds and mining our base.”

Shammo added that it gets two benefits from mining that existing copper-based broadband customer base.

First, a copper customer who is classified as a “chronic customer”–who has two truck rolls to service the copper line during a six month period–will have those on-site service calls minimized by moving to FiOS.

“When you think about this customer, that’s four truck rolls a year, and I am losing money on that copper customer,” Shammo said. “If I can take that chronic customer and move them to FiOS, I deplete the amount of operational expense to keep that customer on and they get the benefit of FiOS Digital Voice, which is clearer, and put their DSL service onto a FiOS Internet where they realize the FiOS speeds.”

The second benefit is that Verizon is seeing voice and DSL customers bundle more FiOS services.

“What we are seeing preliminary is that even if we take a voice and DSL customer and move them, they are starting buy-up in bundles because they are seeing the value of the higher speeds,” Shammo said. “Then, we open up the sales routine to go after them for the FiOS TV product.”

This effort in the near-term may have had a negative effect on how many subscribers Verizon added in the second quarter, among other reasons.

During the quarter, the telco reported that video subscribers grew by just 120,000 compared to 184,000 a year ago, while data subs were up 134,000 compared to 189,000. Both video and data subscriber numbers fell below market and Verizon projections.

At the same time, non-FiOS residential connections declined 199,000 in the quarter which, while a 6.6 percent decline, represented an improvement over the 240,000 line loss posted last year.

Telecom Italia gives more thought to spinning off wireline network

Telecom Italia (NYSE: TI) COO Marco Patuano said on Friday that spinning out wireline network is an “interesting” idea, while confirming that it is conducting discussions with a state-backed financing body to collaborate on new broadband projects.

“There is a dialogue that continues,” Patuano said in a Reuters article. “The possible separation of the access network into another company is an option that both (Telecom and Cassa Depositi e Prestiti) are looking at with interest.”

News of a potential spinoff should be of no surprise as Franco Bernabe, Telecom Italia’s CEO, who said in April it was considering spinning off its wireline network as a way to pay down debt and expand its investments in its own nationwide FTTH network.

TI’s network, according to the Reuters report, is worth about €9-€15 billion ($11.6-$19.4 billion).

Patuano’s statement comes on the heels of an agreement Telecom Italia signed with Swisscom’s Fastweb just last week to build a hybrid fiber/copper Fiber to the Cabinet (FTTC) network to bring higher speed broadband services to more premises throughout Italy.

Fastweb’s Swisscom dedicated €400 million ($516.8 million) to fund the FTTC project, which it said will bring broadband services 20 percent of Italian homes.

Under the terms of the agreement, Fastweb will build out fiber connections to each cabinet and then use VDSL to deliver services to homes and businesses via Telecom Italia’s copper network infrastructure.

Because the new FTTC network is being built as an open access network, other interested service providers could participate.

Ovum: 2Q12 PON and VDSL2 sales look good

Ovum says in its new "Market Share Alert: 2Q12 FTTx, DSL, and CMTS" report that sales of PON and VDSL2 gear grew strongly in the second quarter of 2012. Within the PON space, a general shift from passing customers to connecting them means that OLT shipments are losing steam, however.

The market research firm notes that the shift from DSL-based access networks to fiber to the home (FTTH) and building (FTTB) continues. Where carriers don't want to completely abandon their copper cables, they're installing VDSL2 equipment. The two trends mean that DSL sales overall in 2Q12 shrank, but VDSL2 sales reached a record 6.3 million ports. VDSL2 represented 57% of all DSL shipments in North America, and 43% in EMEA, Ovum estimates.

Meanwhile, the shift towards FTTH/FTTB customer connections can be seen in the fact that 2Q12 marked the first year-over-year decline in global PON OLT port shipments in more than three years.

With much of the action in China, vendors from that country dominated port shipment share during 2Q12, as the table below indicates.

FTTH/FTTB PON OLT ports ZTE Huawei Fiberhome
FTTH/FTTB PON ONT/ONU unitsHuawei ZTEAlcatel-Lucent 
DSL ports HuaweiZTE Alcatel-Lucent


Ovum notes that just because you ship the most ports doesn’t mean you make the most money.

"The division that has opened up recently between PON volume and revenue trends continued in 2Q12 due to price wars, particularly in China, and will have an impact on vendor results and strategy," says Kamalini Ganguly, analyst, Network Infrastructure Practice. "The conversation in fixed access tends to be around shipment volumes, but the focus should really be on revenues and profits. The PON price wars in China and elsewhere are not sustainable. Revenues are not keeping pace with growth in volumes. Vendors – even Huawei – are being pickier about projects and markets. If price pressures continue, there may be more vendor consolidation like that of Calix's acquisition of Ericsson's PON portfolio."

Meanwhile, CMTS sales were more similar to DSL than PON quarter on quarter, but such softness is not unusual at this time of the year. Shipments are still high — up 10% from the same quarter in 2011, Ovum notes. "CMTS annualized shipments in North America and EMEA are at their peak," offers Ganguly.

Cisco, ARRIS, and Motorola were the market share leaders in port shipments during the quarter, according to the report.

Qatar’s Q.NBN: “We aim to have maximum fibre coverage by 2015″

The Middle Eastern state of Qatar has bold plans in place to overhaul its communications infrastructure with a massive fibre buildout, as part of the country’s Vision 2030 project which aims to transform the country through investment in advanced technologies into a knowledge-based society.

Ahmed Al-Sulaiti, CTO of Qatar National Broadband Company (Q.NBN), tells us about the progress his team has been making.

What progress has QNBN made so far with its deployment?

As one of the many pilot projects, more than 4,000 units in one of the major Real Estate Development projects in Qatar-Barwa City are now connected with fibre-to-the-home (FTTH) infrastructure delivered by Qatar National Broadband Network Company (Q.NBN).

Q.NBN has recently signed milestone agreements with operators in Qatar. The first agreement was signed with Qatar Telecom (Qtel), and builds on the relationship and cooperation established between Q.NBN and Qtel last year.

Under this new agreement, Qtel will supply Q.NBN with duct network access and access to other passive telecommunications infrastructure over the next 20 years.

Another agreement has been signed with Vodafone, and is the first such wholesale agreement to enable a licensed telecom operator to use Q.NBN's network to deliver telecom services to customers. As such it is an important step towards establishing Q.NBN's commercial offering in Qatar.

Work on the infrastructure is scheduled to kick-off in July, and we aim to have maximum fibre coverage by 2015.

What key services will the network be used to deliver?

Q.NBN will focus solely on the deployment of network infrastructure, providing equal and open access to operators to offer choice for the end-user and efficiently leverage existing and new infrastructure in Qatar.

What impact will the network have on Qatar’s role in the MEA region’s ICT industry?

Qatar National Broadband Network Company (Q.NBN) is a shareholding company wholly owned by the government, with a mandate to enable accessible high-speed communications with the right cutting edge technology platform across Qatar.

Q.NBN, one of the first government initiatives of its kind in the region, reflects Qatar’s Vision 2030 to transform the country through investment in advanced technologies into a knowledge-based society and make Qatar the best connected country in the Gulf Cooperation Council (GCC) and one of the best connected in the world.

Through its visionary and collaborative approach to the market, Q.NBN will help to empower the nation with broadband fibre access to citizens and businesses alike in line with the Qatar ICT Strategy 2015. Q.NBN serves the wider digitisation agenda of the country.

The next generation fibre optics network which is the alternative to copper will become exponentially faster, bringing community and enterprise benefits of enhanced delivery of services, cost savings, increased competitiveness and improved sustainability.