It's earnings report season, and it looks like the short-term thinking of investors has been ruling the day with telcos. Verizon has watched earnings tumble as they make significant investments in their FIOS system while Qwest tripled their profits by building a whole lot of nothing and cutting retirement benefits. Investors have reacted accordingly to drive Qwest stock higher while Verizon stays flat despite their significant investments in an upgraded network they are likely to use for the next fifty-plus years. Meanwhile, AT&T's second-rate U-Verse network is slow but cheap, keeping investors happy while putting on a "we do fiber too" facade for the general public. It's only a matter of time, however, before those last mile issues catch up to them and force the expensive upgrades that Verizon has already jumped on top of.
Diving deeper into Verizon's numbers, we see that the take rate for FIOS is about 13% of homes served with a jump of over 20% in the last quarter alone. Over 42% of Verizon's new broadband customers signed up for FIOS so the demand for the higher-speed connections is definitely there. Verizon has also positioned itself as a triple-play provider with this network and has been entering new markets to aggressively compete with incumbent phone and cable providers. Companies like Qwest and AT&T that refuse to make these kinds of capital investments are going to be stuck in the perpetual state of catch-up with more nimble competitors and networks.
Who knew that big, bad Verizon would end up being the company to lead the charge on making good on the industry's broadband promises? Better late than never.
(See full articles here, here and here.)
