Verizon's Fiber Festival

Verizon (VZ) revealed details on the progress of its $6 billion-a-year fiber optic expansion.

To date, the phone giant's so-called FiOS effort has netted 500,000 Internet subscribers and 100,000 TV users, according to an investor presentation by company executives Wednesday.

Though the penetration rates, or percentage of households taking the services, is relatively low -- 15% for Net access and 10% for TV -- Verizon says advanced features, customer loyalty and lower costs will help lift the fiber business out of the red in 2009.

Verizon has budgeted $22.9 billion for the effort. The company says extending fiber to a neighborhood and installing it in a house costs about $1,816 per home. The company predicts it can cut that total per home cost to $1,350 by 2010.

Some Verizon observers were encouraged by the performance, but they said they didn't put much weight on the company's projections.

It's a lot of "hype," says one investor. "No one's models key off of 2010" guesswork.

Overall, Verizon says it has fiber passing 5 million homes and will easily hit its 6 million homes passed target for the year. The goal is 18 million homes passed, or half of the phone company's customers, by 2010.

The FiOS TV offering was available to 1.8 million homes as of today, and 100,000 households have opted for the service. Of those customers, Verizon estimates that two-thirds of those customers came converted from cable.

As for the triple play of TV, phone and Net, Verizon says 79% of its TV customers take the full bundle of services.

Looking ahead, the company says it expects to bump up video revenue by adding advertising to its video-on-demand services. The company also plans to introduce interactive video games as an added service.

A Verizon representative outlined a prototype for a video phone to be available next year and an advanced remote control to help manage all the services.

Verizon shares dropped 35 cents to $37.61 in late-morning trading Wednesday.

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