Sees bundle upsell opportunities and lower operations costs
December 4, 2012 | By Sean Buckley
Lowell McAdam, CEO of Verizon Communications (NYSE: VZ), on
Tuesday revealed that the telco will replace the decades-old copper wires that
were severely damaged by Hurricane Sandy with fiber.
Verizon's 140 West St. CO was one of the locations flooded
during Superstorm Sandy. (Source: Verizon)
McAdam told attendees at the UBS Financial conference that
while the company could not offer an estimate on the actual damage to its
network, he sees an opportunity to "take advantage of this
disruption" and proceed with the fiber replacement strategy.
Specifically, the service provider will replace damaged
copper in both New York City's Broad Street area and areas of New Jersey such
as the Barrier Islands.
"In Broad Street, that is literally the entire feeder
cable [that] will be converted over to fiber," he said. "And I think
that will help us in a number of ways. We have got that platform then that we
can build on, but the businesses will be able to add services, higher-speed
services, change their services much more easily than we could in a copper
environment."
Similarly, in the Barrier Islands' area of New Jersey, the
telco said in many cases it has copper and fiber cable running parallel down
the same street.
"The edict from Bobby Mudge, our President of CMB, and
our Chief Technical Officer, Tony Melone, is you will not replace copper unless
God gives you a pass and God is busy right now," McAdam said. "So
there aren't any passes."
By equipping these once copper-fed customers with fiber,
Verizon has the immediate opportunity to upsell customers a dual and even
triple play set of data, voice and video services that many could not get
before.
"More often than not when we move a customer off of
voice onto FiOS, they take either a double play or a triple play right after
that because I think they have seen the resiliency of those networks,"
McAdam said. "FiOS, the minute power came back, FiOS was back up in the
majority of the cases."
McAdam added that besides being able deliver multiple
services and potentially drive up residential service ARPU, the migration
"will reduce our maintenance costs dramatically." One of the major
issues with the aging copper network is that every time a customer calls the
telco about a problem they have with their DSL line, it often means it has to
roll a truck to have a technician come out and diagnose and repair the line.
The CEO's statements reemphasize what Fran Shammo, Verizon's
CFO, said about the copper network in September during the Bank of
America/Merrill Lynch 2012 Media, Communications and Entertainment conference.
Shammo said the "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.
Verizon's plans have gotten the attention of Jefferies, a
global securities and investment banking group. Jefferies wrote in a
competitive analysis report that Verizon may make an even broader
copper-to-fiber conversion in its network footprint next year.
"In our analysis we had noted that the timing of
acceleration is not known," Jefferies wrote. "However given the
comments today, we believe 2013 could be the year when Verizon begins the
copper shutdown in real earnest. According to our analysis the cost savings
could be significant, and will likely lead to multi-year earnings lift."
Jefferies agrees with Verizon that "there is scope for
material up-selling."
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