Verizon to raise FiOS rates
Verizon (NYSE: VZ) customers can expect to see bigger bills for FiOS TV and Internet services, as part of the carrier's efforts to recoup infrastructure costs and boost earnings.
Verizon Communications plans, in the coming months, an "across-the-board increase" in FiOS rental service prices, a top executive said at an investor meeting this week.
The fiber-optic service's price hikes are aimed at bolstering profitability for Verizon, its chief financial officer, Fran Shammo, told attendees at the J.P. Morgan Global Technology, Media and Telecom Conference in Boston.
"We have to do a better job in discipline of price increases and I think that you'll see us do some price increases here over the next two quarters to offset the content increase and that will also contribute more profitability to the bottom line," Shammo said Wednesday at a panel moderated by JPMorgan Chase analyst Phil Cusick.
FiOS subscribers face increased rack-rate pricing as well as higher monthly rental charges for set-top boxes and digital converters, Shammo said.
"So, we were actually below-market compared to our competitors on the amount of fee that we charge on the rental of a set-top box or a digital converter box," he noted.
The increased rental-fee rates are intended to offset some costs associated with the $23 billion fiber-to-the-home FiOS network buildout, among other major capital outlays by the company.
"We are switching around our bundles and the customers that are coming out of the current bundles will be priced up to the newer bundles. So you are going to see really a shift over the next two to three quarters in price-ups coming out of FiOS," Shammo told investors at the JPMorgan TMT Conference.
FiOS, he added, is a "superior product," noting that FiOS customer service received positive marks in the June issue of Consumer Reports, and an industry-high ranking in the recently released American Consumer Satisfaction Index (ACSI).
"We were happy to see that Consumer Reports claimed us the best overall against all cable and satellite providers," Shammo said.
On fiber-optic FiOS service's growth, Shammo said "each and every quarter" Verizon continues to increase profitability.
In terms of FiOS net subscriber adds per quarter, he said the "sweet spot" is between 180,000 and 200,000 accounts. That ideal pace, he said, allows growth but reduces expenditures such as overtime pay for backed-up installations.
New York-based Verizon reported April 19 it ended the first three months of 2012 with 5 million FiOS Internet subscribers and 4.4 million FiOS TV subscribers. In its first-quarter 2012 financial statement, Verizon reported that 63 percent of its wireline consumer revenues were generated by FiOS.
The global market research firm Strategy Analytics, in an April 27 report, said Verizon has a "promising" outlook for the remainder of the year. Noted were first-quarter increases in FiOS subscribers and an uptick in ARPU, or average revenue per user.
Strategy Analytics forecasted Verizon's FiOS broadband and TV business will continue this year to grow, projecting FiOS Internet subscriptions will top 5.6 million and FiOS TV subscriptions will near 5 million by year's end.
Verizon FiOS is available in portions of 12 mostly Eastern states and the District of Columbia, southern California and Texas. Shammo told investors Verizon currently has no plans to build out its FiOS service to new areas.
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