Monday, October 30, 2006

Verizon: Can You Stream My Data Now?

Verizon announced their Q3 2006 Earnings today and there are a number of things I wanted to comment on. You can find their slide pack here. Additionally, Ars Technica covers it here and Om Malik covers it here.

  1. Earnings of $1.9 billion (66¢ per share) on revenues of $23.3 billion, an increase of 25.8 percent from Q3 2005. Nothing wrong with generating nearly $2B of cash in a quarter. Hurt me with that problem.

  2. Wireless becomes the largest US Wireless company, based on revenues. Verizon is also the largest Wireless Data provider based on data revenue. Perhaps that is in part because...

  3. Wireless Data revenues nearly doubled year-over-year. Now, Wireless Data revenues are only $1.2B (14.1%) of the $9.9B total Wireless revenue bucket, but at those kinds of growth rates, and I think it will get even stronger in the next 12 months, Wireless Data services will get serious notice by the Verizon execs.

  4. Wireline Data revenues of $4.1B, up 89.3% over Q3 2005. Now we're talking. That's a significant increase in data services. American homes are hungry for it. Give it to them.

  5. Wireline Data revenue is now 32% of Wireline total revenue. And, not surprisingly, "Revenue mix continues to shift to data". That may be because...

  6. Wireline Data services (FiOS) are becoming increasingly available for sale in 16 states, as Verizon’s FTTP (fiber to the premises) network passed a total of 5.3 million premises. That's not many homes, to be sure. Verizon needs to accellerate the pace of this program.

  7. Penetration of FiOS Internet service now stands at 14%. So, if Verizon can get FiOS service to 100M households, and increase their penetration to 25%, they will have 25M subscribers to their data services. But, equally important, is their TV service...

  8. Penetration of FiOS TV service now stands at 10%. TV and Internet service is getting confusing for the folks like Verizon. Still, if they can increase FiOS availability, they will be able to deliver Video service either as data or a something resembling "cable". They don't need to figure out the answer -- the market will decide for them (but they will need to do both). Of course, Verizon will have Phone as well on top of this network (whatever "phone" means in a few years).

Verizon gets it. It's not about the Benjamins. It's all about the data. Deliver data faster and more reliably to the millions of handsets and homes, and you own a significant asset for the future.

Verizon has made a strong push to own the data path. On the wireless side, they are making ground with their EV-DO and Revision A EV-DO support. Still can't compete with Europe and Asia, but it is about the best that's out there now. On the wireline side, the FiOS Fiber Optic network they are installing will be the launch pad for what Americans will do on the Internet (inflection point: year 2010). By owning the data path, Verizon will be positioned to offer key Internet services that Comcast should have been able to do long ago. Missed opportunities.

And, the best part is, Verizon appears to be able to build out the FiOS network while still making a profit. To me, this tells me that they are not being aggressive enough with the FiOS build out. If they put an extra $2B in their pockets this quarter, they should be investing that in the FiOS network first, and the Wireless Data networks second. We'll see if they can continue to execute. Verizon should be sprinting to get the FiOS network build out done as fast as possible, especially since they are still generating cash.

Personally, I'm not a fan of Verizon Wireless -- too many bad past experiences. It is not likely that they will get me back as a customer.

However, I will definitely switch to Verizon FiOS services when/if they ever get to the San Francisco Bay Area.

And, if they offer a compelling enough package of FiOS and Wireless Data... well, they may win me back after all. Customer re-acquisition by kicking butt on the raw delivery of data.

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  1. [...] Mobile data services revenue ~$20B — comparable to online ad revenue. Supports what I was saying in my article on Version. [...]

  2. [...] Mobile data services revenue ~$20B — comparable to online ad revenue. Supports what I was saying in my article on Version. [...]


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