Verizon CFO: FiOS Price Increases Probable In 2012

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Verizon Communications 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]. But what I would say is that the pricing has not actually changed," Shammo said on the call Tuesday. "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."

In the fourth quarter of 2011, Verizon posted a net gain of 194,000 FiOS TV and 201,000 net new FiOS Internet connections. 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.

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 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.

FiOS will also participate in the joint development agreement between Verizon Wireless and the MSOs, Shammo added. "And being a superior product already, that innovation will add what we can bring to the consumer base from an overall perspective. So I think overall, I am very optimistic on our FiOS penetration for 2012," he said.

In the fourth quarter, FiOS TV penetration was 31.5% versus 28.0% a year earlier, while FiOS Internet penetration was 35.5% at the end of 2011 up from 31.9% at year-end 2010. The FiOS network passed 16.5 million premises at year-end 2011, up more than 900,000 year-over-year.

Verizon has continued to lose voice connections, declining 7.2% year-over-year to 24.14 million at the end of 2011.

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.

"The math would say if there is a chronic problem that we have to visit more than two times a year, the actual financial benefit of us transforming that to FiOS pays for itself within that year," he said. "What that brings is that brings an enormous expense savings to us from just an overall operational plant perspective."