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Verizon CFO: Younger Demo Prefers Broadband Video to Bundled Channels

22 Jul, 2014 By: Erik Gruenwedel

Younger consumers prefer to pay for high-speed Internet and not so much for bundled TV channels, Verizon CFO Fran Shammo told analysts. Speaking July 22 during the telecom’s fiscal call, the executive appeared to underscore the obvious about a college-age or 30-something consumer transfixed by over-the-top video.

“Within this younger generation, a year ago we tested the ability to have them select whether they wanted large TV bundles and lower Internet speeds or high Internet speeds and lower TV bundles, and what we saw is the majority of the this segment selected the highest speed that they could get and didn't really care about how many TV stations they got because most of them are consuming their video via the Internet,” Shammo said.

Yet, terms such as “cord-cutting” and “cord nevers” remain routinely dismissed by senior executives from media companies, multichannel video distributors and even OTT video providers as inconsequential hype. Indeed, most research reports contend that at most less than 10% of U.S. broadband homes have opted out of pay-TV service.

“The data shows that there’s zero cord-cutting. We’re at a 100 million [cable households] and [it] goes down a little bit every year as students move, but it’s the same as [it was] last year,” Netflix CEO Reed Hastings said in an earnings call last year.

While Hastings continues to position Netflix and OTT video as complementary (versus adversarial) to the pay-TV ecosystem, Verizon isn’t taking any chances. It has aggressively sought out apartment complexes and other multiple-unit dwellings (MDU) in metropolitan areas testing broadband-centric subscription packages.

Shammo said the MDU market remains a work in progress, due in part to the transitory nature of the residents.

“Part of the strategy is to accumulate the new residents coming in to continue to use FiOS,” he said.

Indeed, Verizon added 100,000 FiOS video subscribers in the second quarter (ended June 30), which was down nearly 29% from 140,000 net additions in the previous-year period. It ended the quarter with 5.4 million video subs. Verizon upped broadband subscriptions 1.5% to top 9 million for the first time.

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