Is FiOS a Good Investment for Verizon?

With more and more communications companies developing their own methods of high speed internet and television transmission, it should come as no surprise that Verizon has jumped on as well. The company has begun to roll out it's massive FiOS program. Which seeks to provide consumers with amazingly fast (roughly 50 megabytes a second) internet service and crystal clear high definition television. Rather than finding a way to shove more information at greater speeds through the existing copper wires used by most companies, Verizon seeks to accomplish this by replacing the existing wires with fiber-optic cables, which are much faster. The downside, however, is that these are also very expensive to install, with an estimated cost of $700 per home. Reactions to this have been mixed, and many are wondering if the costly move by Verizon is going to pay off for them, or if it is going to end up costing them money in the long run.

In regards to strategy, this is a perfect example to study the inner-workings of Verizon and find out what is going on with the company. One of Verizon's chief goals has always been innovation, and the company spends roughly seventeen billion a year on developing new products and strategies. Verizon has done repeated analysis of this move, and their planning has showed that even though FiOS may be costly in the short term, it has the potential for long term gains down the road. The company is attempting to move further away from traditional communication methods, and has begun to drop off in providing land line phone service (which will eventually be phased out entirely). To this end, the FiOS maneuver fits perfectly. Verizon plans to gain a competitive strategy advantage over their competition (AT&T primarily) by being the first to use new technology. It is a major resource investment for the company, and not one without risks, but Verizon is attempting to be a first-mover in their market, and the move does fit with their growth strategies.

Verizon has always been a company that has attempted to innovate. Although some of their recent actions have definitely left their customers and investors a tad bit puzzled. To find an example of this, we need only look back at the Alltel merger debacle. Although it has still not been finalized, and there is no word yet on the stance that the government is taking on the matter, the merger has been viewed by most to be a questionable decision at best. Verizon has recently shown up behind AT&T in overall profits, and for the company to acquire another division, especially one that is already in high amounts of debt is not a financially savvy maneuver.

Personally, even though Verizon has made some questionable decisions in the past, the FiOS service really does seem as though it will pay off. The service is currently up over one million subscribers from the previous year, and has released to very positive reviews in the public. Of course, it is a major investment, and some analysts have speculated that Verizon has the potential to lose over six billion dollars if things do not go as planned. However, Verizon has always been a company whose strategy thrives on being the first and the fastest. I feel if they stick with the FiOS service, and fully commit their resources, it will turn out positive for both the company and their customers.