Summary
FiOS is certainly a bold step and huge investment by Verizon and need support by trend setting end users. ROI wise it is a risky move and risk has to be shared by partners in ecosystem. Not only the network but also the web based communication and ecosystem of middleware, video encoding, content protection, test and measurement, IT software platform have to perform in sync. to make the service an eventual consumer delight.FiOS has certainly an upper hand in network, service support and marketing aspect. For business model and customer care, the company claims to have delivered by getting around 40% market share in last two years but it is too early to claim.
Analysis
The FiOS service by Verizon is among the biggest (though not the first or most advanced) roll out of fibre to the home to deliver triple play services incl. IPTV as the most demanding application. The FiOS is opening the new era of truly converged services where data, voice and video is available from the single wire and end users consumers can view, produce and share content on multiple devices.
The FiOS roll out has significance for similar terrestrial broadband roll-outs around the world especially for geographic large countries in BRIC since they are expected to follow same path and market trend. Not only the network but also the web based communication and ecosystem of middleware, video encoding, content protection, test and measurement, IT software platform have to perform in sync. to make the service an eventual consumer delight.
In such broadband services the five critical components are:
<!--[if !supportLists]-->1. <!--[endif]-->Business Model: The content (type, programming, packaging) , the video formats (including content management system), the CPE and subscriber equipment (PC/TV/Mobile/laptop/phone)
<!--[if !supportLists]-->2. <!--[endif]-->Network: From Core- aggregation to access designed and implemented to take content and applications form origin to end user. Careful design and implementation practices are critical to credibility and profitability of the service provider.
<!--[if !supportLists]-->3. <!--[endif]-->Service Support: Management of order, subscriber, authentication, encryption, billing, roaming and mobility along with the necessary IT platform.
<!--[if !supportLists]-->4. <!--[endif]-->Marketing: Customer acquisition, innovative services and advertising.
<!--[if !supportLists]-->5. <!--[endif]-->Customer Care
In my view, FiOS has certainly an upper hand in network, service support and marketing aspect. For business model and customer care, the company claims to have delivered by getting around 40% market share in last two years but it is too early to claim.
The carefully devised advertisement action plan is critical since it has to help fast customer acquisition building on their desires and demands consumers unmet by existing service/cable provider. Beside acquisition, it also helps turn customers into informed loyalist while encouraging them to spend more money (increase ARPU). As long as $200 spend per customer is justified by ARPU lock-ins via year contract and adhere to expected ROI one shall not complain. In my view celebrity endorsement, innovative ting , reputation of Verizon and freedom of new choice makes a good Ad. combination for FiOS.
Bundling of services is critical and with FTTC network (that off course comes at high cost) FiOS is best laid out to deliver them which in turn will help increase ARPU and reduce churn. Also not to forget mentioning that content will be critical and quality of content along with packaging will crucial since it is supposed to be most significant portion of ARPU.
As far as competition with cable, the empirical evidence shows that the availability of multiple options to customers will eventually result in market expansion and better services with market driven prices.
But still the service itself is the key and the superior performance will be the critical in word of mouth publicity and eventual service success.
FiOS is certainly a bold step and huge investment by Verizon and need support by trend setting end users. ROI wise it is a risky move and risk has to be shared by partners in ecosystem. E.g. revenue sharing arrangements, cost sharing arrangements, vendor financing, local government investment sharing, breaking service into components and each component to justify its cost vis a vis outsourcing option and eventually the use of underlying infrastructure not only for triple play but to deliver lot of other applications to end users.
NOTE: In India, looking at the sophistication of the services and highly inter-dependant technical ecosystem, few operators are now engaging in managed service network model. Also the infrastructure sharing is in vogue and looking the vast geographic area and relatively low ARPUs, the service providers are adopting the optimized combination of wired (FTTC/DSL/Cable) and wireless (WiMax, LMDS, 3G) broadband access technologies.
