Record DSL Adds for Bells

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Verizon Inc. and SBC Communications Inc. reported record digital subscriber line additions in first-quarter 2005, with SBC adding 504,000 subscribers and Verizon picking up 385,000 units.

Verizon also said it was “encouraged” by take rates for broadband data within its “FiOS” fiber-to-the-premises markets, but acknowledged the “vast majority” of broadband additions came through traditional DSL units.

Verizon is offering 5-, 15- and 30-Mbps service tiers in FiOS areas. Some of those markets will launch video services later this year.

On a first-quarter earnings call last week, chief financial officer Doreen Tobin said, “We are encouraged by FiOS take rates we are seeing in many of our markets.”

Thanks to direct marketing, she said, “we are seeing a significantly higher response than normal.”

But she said it was too early to break out FiOS data subscribers from traditional DSL subscribers.

“The vast majority by far is DSL,” she said.

But Verizon plans to use the FiOS differentiator in data speeds to bundle in its FiOS TV offering. The company has signed programming deals with Discovery Networks U.S., Starz Entertainment Group LLC, Showtime Networks Inc., NBC Universal and A&E Television Networks.

Still to sign affiliation deals are Disney-ABC Cable Networks Group, Turner Broadcasting System Inc., Fox Cable Networks Group, Home Box Office, Rainbow Media Holdings Inc. and Viacom Inc.'s basic networks, among others.

Although the channel lineup appears to mirror cable's, Verizon CEO Ivan Seidenberg said the telco will offer additional programming capabilities, such as a multi-room experience, and package that with FiOS's higher data speeds for competitive purposes.

Verizon said its first-quarter capital expenditures reached $3.6 billion, compared to $2.6 billion in first quarter 2004, largely because of the FiOS build. Tobin said Verizon's total workforce has grown from 139,000 last year to 142,000 this year, with 7,500 solely dedicated to FiOS. She expects Verizon to add another 1,000 to the payrolls by year's end.

But Tobin said the company's expenses remain in line because of workforce reductions in other areas. And much of the increase in capital expenditures was covered by the company's year-over-year jump in revenue and earnings.

First-quarter earnings reached $1.8 billion on revenue of $18.2 billion, versus earnings of $1.2 billion on revenue of $17.1 billion in the year earlier period.

The shift to wireless and cable competition continued to hurt retail access lines, which dropped by 357,000 lines in first-quarter 2005, although that was half of the loss (705,000 lines) from the year earlier period. But the addition of 1.4 million Verizon Wireless customers, contributing $49 a month in revenue per subscriber, more than made up the difference. The wireless unit now accounts for some 40% of Verizon's revenue.

Tobin said Verizon was “exceeding its targets” for its new VCAST service, which offers more than 300 video clips a day on a third-generation (3G) cell phone, but said it was too early to break out subscription figures.

Many cable networks are supplying clips to the service.

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