TV Driving Telco Wireline

AT&T, Verizon Pack on Video Subs as DSL, Phone Decline

By Todd Spangler -- Multichannel News, 1/30/2012 12:01:00 AM

Video and advanced broadband services continue to surge ahead for AT&T and Verizon Communications’ residential wireline businesses, driving growth for the telcos as their legacy phone line and DSL connections dwindle.

AT&T’s U-verse TV zoomed along with a net add of 208,000 subscribers to reach 3.79 million in service in the fourth quarter of 2011. Verizon Communications pulled in a solid net gain of 194,000 FiOS TV customers, to stand at 4.17 million total.

Verizon and AT&T — the seventh- and eighth-largest pay TV providers in the U.S. — are nearing the size of Charter Communications, which counted 4.37 million video subs at the end of September 2011.

But while AT&T added 587,000 U-verse broadband customers in the fourth quarter, that wasn’t enough to off set the loss of 636,000 traditional, lower-speed DSL lines.

“[W]here broadband gains were offsetting access-line losses a year ago, now broadband, too, is in decline,” Sanford Bernstein senior analyst Craig Moffett wrote in a research note.

For its part, Verizon added 201,000 net new FiOS Internet connections — for a total of 4.8 million at the end of 2011 — mitigating a loss of 103,000 DSL connections in the period.

As of the end of 2011, AT&T said, it has substantially completed its U-verse deployment, which passes more than 30 million living units.

U-verse revenue for full-year 2011 was $6.7 billion, up 15.9%. In the fourth quarter, consumer IP revenue represented 53.2% of $5.3 billion in wireline consumer revenues (up from 45% in the year-earlier quarter).

“As we scale, U-verse margins continue to improve,” AT&T chief financial officer John Stephens said on an earnings call with analysts.

Overall, U-verse penetration was 15.9% in the fourth quarter, and 25% across areas marketed to for 36 months or more. Average revenue per subscriber for U-verse triple-play customers was nearly $170, up 2.5% year over year.

Verizon will probably hike prices for some FiOS services this year, even as the telco looks to continue to drive up penetration of its fiber-optic video, data and voice services, chief financial officer Fran Shammo said on an earnings call with analysts.

“I know folks are saying that we are overly competitive in pricing [on FiOS],” Shammo said on the call. “But what I would say is that the pricing has not actually changed. And, if anything, if you look at it, there was a price increase in 2011, and there will probably be some more price increases in 2012 as we go here.”

For the full year, FiOS revenue grew 20%, to $8.3 billion. New York is FiOS’s highest-growing market, Shammo said, and he noted that in 2011, FiOS TV penetration surpassed 40% in Virginia.

To try to preserve legacy voice customers and cut operational costs, Verizon in 2012 will begin strategically migrating copper plant over to the FiOS plant in areas where there are “chronic copper problems,” Shammo said.

Shammo said FiOS will continue to compete aggressively with cable, even with the deals Verizon Wireless entered into with Comcast, Time Warner Cable, Bright House Networks and Cox Communications.

Under those agreements — which require approval by the FCC and the U.S. Department of Justice — the MSOs propose to sell Advanced Wireless Services spectrum to the carrier, and the cable operators and Verizon Wireless will resell each other’s products.

Verizon expects FCC and DOJ approval of the deals with cable operators by midyear, Shammo said.