The cost of FiOS is falling

Verizon last month shed a lot more light on the math behind its fiber-to-the-premises initiative. In a typical market, for example (one with 25,000 phone lines), Verizon expects to spend about $45 million to push fiber to the home — about $20 million of it just to pass near the homes. “Early on, you see heavy spending in cost to pass,” said Doreen Toben, chief financial officer. “Later on, cost to connect really kicks up.” Eighty percent of the necessary spending is done in the first three years, and at the end of that three years, the local network should achieve positive earnings before interest, taxes, depreciation and amortization. By the fourth year, the network should reach positive operating income. And by the fifth year, Verizon expects to have 37% penetration of the local data market and 24% penetration of the video market. With just $39 per month in incremental cash per subscriber, Verizon said it can yield an 11% return on its investment by 2010.