Nobody Knows What Will Drive Verizon Revenue in 10 Years

When Verizon CEO Lowell McAdam says “I can't tell you 10 years from now what at top line revenue is going to look like for Verizon,” that is a practical observation about what his firm has encountered in the past, and what it can expect for the indefinite future.

In other words, it is not a vague analogy, but a rather historically correct and quantifiable description of how Verizon's revenue actually has changed over the last couple of decades.

One rule of thumb I use for service provider revenue is that tier-one service providers have to replace as much as half their present revenue about every decade. That is a simple reflection of the fact that every telecom product has, like every other product, a life cycle.

The maturation--and falling prices and revenues--of fixed line subscriptions, long distance voice, mobile phone service, text messaging, linear video, fixed line internet access and now mobile internet access service provide clear examples.

That, in turn, is why I consider the business model the single most important issue for any tier-one service provider.

Much of that upside--it is hoped and expected--will come from any number of new use cases, applications and revenue streams from the broad internet of things or pervasive computing ecosystems.

But some of the upside could well come from market share gains in existing markets where Verizon does not compete, such as the fixed internet access business out of region. For Verizon, out of region means the bulk of the United States.

Assume there are about 118.3 million U.S. homes. Assume Verizon passes about 23 million of those locations (after the sale of about 3.7 million voice connections, 2.2 million high-speed data customers and 1.2 million video customers. or about 19 percent of U.S. homes.

In other words, Verizon does not compete to sell fixed network services to about 80 percent of U.S. homes.

AT&T, in contrast, passes about 62 million U.S. homes, or roughly 52 percent of U.S. homes.

U.S. Households- Renters & Owners
Type of Household
% of U.S. Total
% of U.S. Total
Source: 2015 American Community Survey, 1-Year Estimates, US Census Bureau. Updated 10/2016

Source: FCC

Verizon, in other words, has an opportunity to take market share in 80 percent of the fixed network internet access business where it does not presently compete, assuming it can leverage its mobile network, and 5G, to supply fixed wireless connections to the 80 percent of U.S. homes it does not presently reach.

That could happen if the new 5G network does in fact promise gigabit (or even hundreds of megabits per second data rates) across most of the addressable base of U.S. homes, across the 80 percent of homes where Verizon does not have a fixed network.
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