Telco TV

FiOS Speed Boost Comes With Price Hike

6/25/2012 12:01 AM Eastern

Verizon Communications is betting that for
FiOS Internet customers, speed thrills.

The telco last week raised the stakes in the broadband
wars against cable operators: Verizon increased connection
speeds and pricing for most existing FiOS customers. At the
same time, it’s now touting a top speed of 300 Megabits per
second in many FiOS Internet areas, far ahead of current
cable-operator offerings.

The shift puts TV in a
clearly subordinate role.
Most FiOS bundle customers
will pay $10 to $15 more
per month and will see their
Internet speeds double or triple,
according to Verizon.
However, subscribers may be
able to downgrade their FiOS
TV package to pay roughly the
same monthly total that they
pay now, the company said.

Verizon “seems to
be setting a new precedent” with respect to broadband
pricing, ISI Group senior managing director
Vijay Jayant wrote in a research note. The telco is not moving
to usage-based pricing, as Comcast, AT&T and others have;
instead, Verizon is forcing FiOS customers to pay more for
increased speeds.

“The glass-half-empty view would be that Verizon (which
has essentially completed its fiber build) views its competitive
offering as superior and is pricing it as such,” Jayant said. On
the other hand, the increases could indicate “price rationality,”
and foreshadow price increases on the horizon for MSOs that
compete with FiOS, such as Cablevision Systems.

In any case, Verizon is doubling down on broadband bragging
rights. The telco has crafted a new brand — FiOS Quantum
— for its Internet tiers of 50 Mbps downstream and higher.

The company boasts that the 300-Mbps service is the
fastest wide-scale residential Internet service available in
the U.S. by a wide margin, nearly three times faster than
the 105-Mbps top speed offered by cable competitors, such
as Comcast and Cablevision Systems.

It’s also among the most expensive: Verizon is offering
the 300 Mbps downstream/65 Mbps upstream Internet
service only as a standalone product for $209.99 per month
on a month-to-month basis
and $204.99 monthly
with a two-year contract.

The FiOS Quantum
tiers are not available in
all areas. According to
Verizon, customers may
be charged a network upgrade
fee for 150- and 300-
Mbps service.

“This is about meeting
the bandwidth needs we
see in the future,” Mike Ritter,
chief marketing officer
for Verizon’s consumer and mass-market business unit, said.
“And it’s the not-too-distant future — it’s in the next few years.”

Verizon expects most customers will take middle-tier
speeds: “We think the sweet spot will be 50 to 75 Mbps,”
Ritter said, adding that the 150 and 300 Mbps tiers will become
more important as Internet video usage continues
to increase.

September