Verizon: With Frontier deal, FiOS footprint could reach 80% coverage

Verizon Communications' (NYSE: VZ) divestiture of 4.8 million mostly-rural access lines gives it a greater density of fiber-to-the-premises (FTTP) coverage and could allow the carrier to increase that density even further, perhaps reaching 80% of its total local service territory, Verizon said today. 

The deal to sell lines to Frontier Communications (NYSE: FTR) – which include about 750,000 homes passed by Verizon's FTTP network and about 110,000 FiOS high-speed Internet customers -- leaves Verizon with between 9 million and 10 million homes that are outside the areas currently targeted for FTTP deployment. Many of them are within the former GTE properties in Texas, Florida and California.

On a conference call discussing the deal today, Verizon Chief Executive Officer Ivan Seidenberg said the company may deploy FTTP and DSL to those remaining areas.

"FiOS will creep at that 9 to 10 million [homes]," Seidenberg said. "Some of that will get eaten up as technology gives us improvements in our ability to deploy broadband."

"We have no further plans to think about divesting any other lines, because they're part of a bigger business in each of the remaining states," he added. "This kind of completes the picture with respect to where we take our local access business."

Earlier this year, Verizon hinted at moving beyond its original goal of passing 18 million homes with fiber, pointing out that the cost of deployment drops the more Verizon does it, potentially making it economical to bring fiber to places where it was originally considered unjustifiable. "Anything we do beyond 18 million homes would be on a completely different economic model," Seidenberg said in January.

The Frontier transaction, expected to close next year, leaves Verizon with about 27 million homes in total. Verizon expects it FiOS network to pass 17 million homes by the end of next year. When it eventually passes 18 million homes – Verizon's long-stated goal – the network will cover about 67% of Verizon's total network footprint, though Verizon is calling that number about 70%.

"When we get finished with this [divestiture], we'll drive to get somewhere between 65% and 80% FiOS coverage," Seidenberg said today. "The reason I give you a big range like that is, as technology shifts and changes and we get smarter about it, we can compress more work into the same amount of capital expenditure, and we can find ourselves getting slightly more coverage."