Verizon fights for 40% FiOS penetration, two-day deployment

This year Verizon Communications (NYSE:VZ) will finally complete the fiber-to-the-premises network it began building in 2004, and it is already focusing harder on customer penetration within that footprint, which the company is finding surprisingly difficult in part due to persisting operational hurdles, particularly in deploying fiber to apartment dwellers.

“We’re averaging just under 30% [FiOS penetration] for the whole property,” Verizon CEO Ivan Seidenberg said at an investor conference today. “My people think they can get to 34%. They’re not going to get paid very much if they don’t get to 40%. The question is how quickly we can get there.”

With about 18 million homes projected to be ultimately passed in its fiber footprint, the difference between 34% and 40% represents more than 1 million homes. In the most recent quarter reported (the third quarter), Verizon added less than 200,000 net new FiOS customers.

Seidenberg said he’s still “frustrated” with the operational complexity of provisioning FiOS, particularly in multidwelling units, which Verizon has been pushing hard into for at least the last two years.

“We’re finding the gravity of getting into a 30-story building and dealing with landlords and cable companies is taking a little longer,” Seidenberg said. “The operational complexity has, to some extent, been gating the opportunity for growth in net adds. It’s better today than it was years ago, but it should be seamless. It should be done in two days. It should be provisioned over the net.”

Seidenberg vowed to “focus more on steady penetration than on [marketing] promotions in a quarter that you find you have a lot of operating issues associated with that.”

When asked at what point wireless broadband technologies start to compete with wireline broadband -- or at least DSL if not fiber -- Seidenberg said, “In the early years, [DSL] is not substitutable [with wireless broadband]; it’s sort of additive. Five to six years out, there’s going to be some substitutability. As 4G or WiMax is deployed or people do a better job with WiFi, you’ll get some substitutability.”