Verizon expects Redbox Instant boost

CEO Lowell McAdams looking to up penetration with FiOS video service

Verizon CEO Lowell McAdam expects Redbox Instant by Verizon, which will roll out late this year, to boost penetration of its FiOS video service.

FiOS, which competes with cable and satellite, has about 4 million subscribers. It has 45% penetration in Texas, McAdam told the Citi Global Internet, Media & Telecom Conference in Las Vegas on Monday, and he said that’s the benchmark for all its markets. The service has made major inroads in the New York-New Jersey area, where McAdam said it lost a few weeks of new installation from Hurricane Sandy.

“I expect to see that penetration improves. It’s not all about opening up new markets to get greater share. I think we can go deeper in markets that we’re in,” he told investors. But he did add that one potential use of Verizon cash is to buttress up FiOS markets with acquisitions — “to wrap up the build, not expand it.”

Redbox Instant by Verizon, a venture with Redbox parent Coinstar, is in internal employee beta testing now and will be opened up to consumers “in a beta sort of format” in late January or early February, McAdam said.

“We feel sort of good about it. We are cautiously optimistic.” But he noted that it’s hard to be more definitive “until you are out there commercially for about six months or so.”

He said FiOS has stopped offering steep discounts and has seen its margin plateau on its way to rising.

“We have done some price-ups. When I compare (FiOS) with a year ago, I feel we were undervaluing FiOS. It was a superior product in the market, but we were positioning it as an insurgent product.”