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Can You See Me Now? Good.

Posted on: Tuesday, 8 March 2005, 12:00 CST

BY carolyn shapiro

THE VIRGINIAN-PILOT

Call it the battle of the 700-pound gorillas: Verizon Communications Inc. against Cox Communications Inc., coming soon to a television screen near you.

Verizon, the local telephone giant, plans to begin offering TV programming later this year. The company has started to build out a fiber-optic system, which will allow it to send video signals into homes and businesses.

The move will put the phone company in direct competition with the cable TV companies that operate in its telephone territory where many of them have enjoyed a monopoly on wired TV service.

In Hampton Roads, the primary provider is Cox, serving about 415,000 local subscribers. Charter Communications Inc. serves about 55,000 customers in Suffolk, Isle of Wight and Southampton counties, the Eastern Shore, and the Outer Banks of North Carolina.

Cable operators have spent the past decade inching into the telephone business. Theyve gained significant ground on the Baby Bells, such as Verizon, which operate regional telephone grids and offer basic phone service. Cable also competes head-to-head with phone companies in the high-speed Internet arena and the new phone service known as voice over Internet protocol, or VoIP.

The Holy Grail of telecommunications today is known as the triple play a package of services that handles voice, video and Internet. The cable provider has had one edge over the phone company: television.

We feel this is really the best way for us to compete, said Sharon Cohen-Hagar, a spokeswoman for Verizons fiber program.

Matthew Flanigan, president of the Telecommunications Industry Association, which represents companies that develop equipment for telecom service providers and tracks those trends, went even further. I think its crucial for their existence, for their future existence, he said. Otherwise, consumers will go somewhere else.

Verizon, based in New York, is one of the Baby Bells leading the way to TV. The company is upgrading its copper-wire system with a fiber network that will run new fiber-optic wires to individual businesses and homes.

Fiber-optic lines, which transmit information via light instead of electricity, can carry more data and move it much faster. The information can include sound, pictures and written text.

Verizons fiber system provides a speedier Internet connection than the companys current service: DSL, or digital subscriber line. Ultimately, as the vehicle for TV programming, Verizons fiber lines will carry multiple high-definition channels at once and handle a sophisticated level of interactive viewing. For instance, a subscriber could watch one TV program while flipping through other channels in a corner of the screen .

The fiber system gives cleaner connections than existing copper wires, with fewer points of potential disruption, and it is more reliable and allows for easier maintenance all bringing cost benefits to the company, said Harry Mitchell, a Verizon spokesman. And the system is future-proof, ready for technology and products yet to come.

If there are future applications out there that were not even dreaming of today, this network will be capable of doing that, Cohen- Hagar said.

In 2004, Verizon spent about $1 billion on the fiber rollout and the operating systems to manage it, but future investment depends upon how fast the network develops and how many customers buy the new services, said Harry Mitchell, a Verizon spokesman. The fiber network has been set up for about 1 million homes and businesses so far, and 35,000 to 40,000 new locations are added each week.

So far, Verizon has rolled out fiber in parts of 13 states, including Virginia. As of last month, Falls Church and nearby areas of Northern Virginia were the first on the East Coast to bring ultra- speed Internet access to customers. The first TV offerings will come in the second half of the year, but the company has not said where.

Today , the company opens its Fiber Solutions Center in Hampton, where it will handle technical calls related to the new system.

Verizon isnt projecting when it will run fiber through Hampton Roads, or when its television service will come to the region. In new developments such as East Beach in Norfolk and areas never- before wired for phone service, Verizon is running fiber instead of copper wires to integrate the latest technology.

Until Verizon builds fiber capacity throughout its system, the company has found an interim way to bring television to its customers. It teamed up with DirecTV to offer satellite, or direct broadcast, service and brought it to Hampton Roads last summer.

DirecTV comes in Verizons bundle of services including local and long-distance calling; DSL high-speed Internet access; and sometimes wireless phone plans. That allows consumers to pay for all the services on one bill, and it costs less than buying each service separately, Mitchell said.

Verizons TV service will work like cable. Customers will have a set-top box, running Microsoft software, similar to the converters often used for cable service. Verizon has yet to release its TV rates.

Until Verizons entry, the primary local competitors to Cox are satellite providers DirecTV and Dish Network. That technology delivers TV through a different system from the wire-dependent cable service, and the programming options arent parallel to a cable providers.

Satellite providers also compete only on TV service not with the all-important bundle of services. So Verizons fiber system will pose the most direct answer to Coxs offerings.

Cox, meanwhile, has provided the most formidable competition to Verizon for dial-tone phone service. The federal Telecommunications Act of 1996 broke up the parts of the Baby Bells business, opening them up to competition. It also allowed the Baby Bells to get into long-distance service.

Rival carriers and wireless services have since cut into the share of traditional phone companies, prompting their entry into services such as TV. Theyve got pretty stiff competition that they havent had in the past, said Flanigan, of the telecom industry group.

Cox entered the telephone business in 1997 with business customers and added residents in 1998. In the race to roll out broadband, or high-speed Internet access, cable companies including Cox have beat DSL in the number of modems installed by 2 -to-1 , Flanigan said.

The cable industry has made huge investments in its networks in the last decade to gain this advantage. In Hampton Roads, Cox has spent $500 million to $600 million on system upgrades, said Thom Prevette, a Cox spokesman at its local headquarters in Chesapeake.

Since the day Cox stepped into Verizons prime territory, it has expected the phone company would eventually push back onto its turf. Prevette said he believes Verizon will bring a fiber system to Hampton Roads by the end of the year and its television service soon after.

We feel like weve been preparing for competition for many years, Prevette said. Its just a matter of time before it comes to Hampton Roads.

* Reach Carolyn Shapiro at 446-2270 or carolyn.shapiro@pilotonline.com.

Source: Virginian - Pilot

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