Verizon Playing Catch-Up Against Cable Firms
By Bruce Mohl, The Boston Globe
May 7–Sherri Patti of Woburn jumped from Comcast Corp. to Verizon Communications for its FiOS fiber-optic triple play of phone, TV, and Internet. She says she’s getting more for less money.
Michael McGrath of Woburn switched from Comcast cable to FiOS. He says his TV picture is better now, although he misses the New England Cable News channel and Fox Sports New England, both of which are missing from the Verizon channel lineup.
Stephen Gorin of Westwood replaced his Verizon DSL with Verizon’s new fiber-optic Internet service. He says his speed has improved, but he was surprised at the six hours it took to install the service.
“It’s hard to see how the economics work,” Gorin said.
Reports such as these are trickling in from the front lines in the all-out war going on in Massachusetts for wired customers. Verizon is picking off cable TV customers with its souped-up FiOS fiber-optic service, payback for the phone customers Comcast and RCN have taken from it. But the big question is whether Verizon can play catch-up fast enough in such a crowded field.
Verizon is spending $20 billion to build out a fiber-optic network that will have far more speed, capacity, and flexibility than its existing copper-wire system. The rollout is running ahead of schedule, but so are many of the costs. In first quarter results announced last week, Verizon said FiOS costs reduced per-share earnings by 6 cents a share, or 9.6 percent.
Verizon is pressing Congress to pass a law that would allow it to bypass local TV franchising authorities so it could deploy video services more quickly, but in the meantime it is slogging away town by town, house by house. Verizon has installed fiber in 40 of the tonier Massachusetts communities but has negotiated TV franchises in only three — Woburn, Reading, and Lynnfield. The company declines to say how many FiOS customers it has signed up.
Verizon officials in late February estimated it costs nearly $1,000 to bring fiber near a home. The cost to bring fiber into a home is falling, but Verizon officials admitted last week that they haven’t yet reached their target cost of $717 per installation.
Long installs are a potential money pit for Verizon and a major hassle for customers, who in most cases have to take an entire day off to be there. Anthony Imperioso, a police officer who lives in Woburn, already had the day off, so his day-long install didn’t bother him. Patti said her installation took 7 1/2 hours. McGrath’s installation took nearly 11 hours.
Verizon officials say it takes time to install what is basically a new telecommunications platform at each home. Company officials also say installers are doing a lot of hand-holding with customers, making sure they get the “wow effect” of FiOS.
“Verizon went above and beyond the call of duty,” McGrath said. “There’s been five to six followup calls just to make sure everything is working well.”
The reasons consumers give for switching to Verizon’s fiber-optic service vary. Some are turned off by the steady rate increases of cable companies. Some lust for the picture quality and speed of FiOS. Some merely like the convenience of having all their telecommunications services, including wireless, on one bill.
In Woburn, Verizon is competing against two cable companies, Comcast and RCN, and two satellite companies, DirecTV and Dish TV. Verizon’s FiOS TV and Internet monthly services cost $40 apiece or $70 as a bundle, plus $4 to $13 for a set-top box. Phone plans vary, with unlimited domestic calling costing anywhere from $25 to $40, depending on the features and type of service.
The TV service includes 118 channels, 47 music channels, and 16 high-definition channels. Internet speed is currently an agile 5 megabits per second, but Verizon last week doubled that in New York, New Jersey, and Connecticut at no extra charge.
Comparable packages at competitors cost more, but apples-to-apples comparisons are difficult. Both Comcast and RCN are currently offering three-way bundles that cost roughly $100, although both bundles have fewer TV channels than Verizon. Comcast’s bundle price expires after 12 months and then rises to $121.
Jason King, who moved to Woburn in March, researched every company’s offering before deciding to buy Comcast’s bundle, largely based on price. At the end of a year, he said, he might reevaluate.
“When you say Verizon, you don’t think TV,” he said. “It seems like sort of an education process.”
The customers I interviewed chose their company based on its current array of products and prices, but officials at Verizon’s Waltham research facility say their biggest selling point is the future. The officials say their fiber will be capable of carrying far more content at faster speeds than cable. The top Internet speed now is 30 megabits per second, but speeds of 100 megabits per second may be possible as early as next year.
Personalized TV is also coming. Verizon officials say customers will soon be able to click a button on a remote and call up weather and traffic by ZIP code. Later this year, viewers will be able to call up community public announcements, such as school cancellations.
But right now Verizon is playing catch-up with RCN and Comcast. RCN moved into Milton last week, its 16th Massachusetts community and its first expansion since it emerged from bankruptcy protection last year.
Comcast, after completing a major overhaul of its network in 2003, has ratcheted up the speeds of its Internet service, beefed up its video-on-demand offerings to 7,000 programs, and cut customer complaints with its four call centers in Massachusetts. The cable giant is also preparing to take another bite out of Verizon later this year by launching a wireless phone service that will run on the Sprint network.
Kevin Casey, president of Comcast’s northern division, said the cable company has plenty of bandwidth to offer advanced telecommunications services, and will have even more in 2009 after the nation scraps analog TV signals.
For consumers, the big unknown with Verizon is whether its TV prices will go up as steadily as cable’s prices have risen. Verizon is making no promises, but Casey says there’s no escaping the escalating cost of programming, particularly sports programming.
“You’ve got to pay the Manny tax,” he said.
—–
To see more of The Boston Globe, or to subscribe to the newspaper, go to http://www.boston.com/globe.
Copyright (c) 2006, The Boston Globe
Distributed by Knight Ridder/Tribune Business News.
For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.
VZ, CMCSK,