Verizon's FiOS vs. DSL Service: Battle of the Brands

| About: Verizon Communications (VZ)
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Competitive positioning is a tricky matter in any business. Companies work hard to educate and train consumers about their product. Sometimes they do such a good job at it that they have trouble educating their customers about anything new. Verizon (NYSE:VZ)carved-out a nice spot as a low-cost player in the broadband market with its DSL service undercutting cable providers on price. Now, Verizon wants to go premium with a fiber optic service it calls FiOS. Unlike common coaxial cables, fiber-optic cables are not subject to electromagnetic interference and can transmit more data, faster and farther. While this presents a high performance alternative to cable, it’s not clear that prospects are getting the message.

In July, 8 million unique visitors (UVs) went to 25% of them clicked-through to broadband FiOS and/or DSL-related pages. A healthy 88% of UVs visiting these pages did not exhibit customer-related behavior, and looked more like prospects rather than existing Verizon customers. Many of them actually subscribed to competitors, like Cox, Comcast, Qwest or RCN. While Comcast subscribers were the overwhelming majority of this last group, they represented less than 3% of Comcast’s massive subscriber base overall. Meanwhile, at least 16% of RCN subscribers visited Verizon’s broadband pages, and virtually all of those UVs were interested in FiOS.

But this interest in FiOS was the exception to the rule:
• In July, Verizon’s DSL-related pages saw 150% more UVs than all its FiOS-related pages together. Remove Verizon subscribers (who probably already have DSL) and that figure jumps to 250%.
• Qwest subscribers appear the least interested with only 1 in 6 viewing any FiOS pages.

With FiOS being a substantively better product (technically speaking) than cable, Verizon should have the opportunity to compete as a premium player in the broadband market. Strong branding is a good first step. Prospects currently view FiOS as Verizon’s “DSL upgrade” and as comparable to cable, but they need to view FiOS as having leapfrogged cable into the high-end of the marketplace. 54% of visitors who entered “fios” into a search-engine clicked through to and affiliated sites. As a next step, Verizon may want to decrease, or continue decreasing, its DSL marketing efforts… and begin retraining consumers (especially the competition’s customers) that FiOS is what they really want.