Digital Media

NEW YORK--As Verizon Communications looks for ways to differentiate itself from its cable and satellite TV competitors, the phone company is adding new social-networking widgets as part of a broader plan to create a Widget Bazaar for its Fios TV service.

The Widget Bazaar is essentially a scaled down version of the increasingly popular wireless application stores that are hitting the market these days. Unlike the virtual application stores being developed for wireless handsets, Verizon's Widget Bazaar will not be open to a wide range of developers, and the company will retain complete control over what applications are in the Bazaar.

Instead Verizon will provide its software development kit only to a select group of developers, and the applications will be tested and verified for use. So instead of thousands of apps available for download, Fios TV customers will likely eventually see hundreds of lighter-weight widget apps, said Shawn Strickland, vice president of video solutions for Verizon Communications.

The idea behind the Widget Bazaar is to give TV viewers more ways to engage with the TV content they view. And it will offer advertisers, marketers and content owners another way to connect with viewers.

"We are not trying to re-create the PC experience on the TV," Strickland said during a demonstration of the new features at Verizon's headquarters in Manhattan. "We're trying to enhance the TV viewing experience."

Verizon has already been offering some widgets as part of its Fios TV service. The company first launched these one-click Internet-based applications to provide news headlines and weather to its TV viewers. Then it added widgets to allow viewers to see what other people in their vicinity are viewing and to help them discover popular TV shows.

Now the company is adding widgets for the popular social-networking Web sites Twitter and Facebook. At least initially, each of these applications will only allow users to read and access information. Posting new information will be very limited in the first version of the widgets, Strickland said. This means that users will be able to read updates on Twitter and Facebook, but they won't be able to update their accounts from their TVs.

In its first version the Twitter widget will offer a more generic Twitter experience. Subscribers won't be able to access their individual Twitter accounts. Instead they will be able to see tweets from the entire Twitter community based on either a category or topic they've selected or based upon what they're currently watching on TV. The way it works is that the screen is split into two sections. And on one side a small window plays the video, while on the other side of the screen, the tweets fill up the screen.

Verizon executives demonstrate the Fios TV Twitter Widget.

(Credit: Marguerite Reardon/CNET )

The Twitter feed could come in handy while watching a live event, like a baseball game or the presidential inauguration, Strickland said. For example, if a Fios TV subscriber is watching the Yankees baseball game, he can continue watching the game while also following a Twitter feed about the game or the team.

Because the Twitter feed comes from the entire Twitter community, it's not necessary for viewers to even have their own Twitter account. Eventually, Fios TV subscribers will be able to access their own Twitter accounts to tailor the tweets they view from the Fios TV service.

The Facebook widget works in a similar way. Fios TV viewers can continue watching a TV show while accessing their Facebook account on the other half of the screen. When in the Facebook application, Fios TV subscribers can view status updates, photos, and other posted items from their friends or from their own page. Since the application allows pictures to be blown up on a big screen TV, Strickland believes that sharing pictures with friends and family from Facebook will become one of the primary uses of the Facebook Widget.

Verizon demonstrates its Fios TV Facebook Widget.

(Credit: Marguerite Reardon/CNET )

Unlike the Twitter Widget, which doesn't allow any updates or posts from the TV, the Facebook widget allows users to update their status based on what they are watching on TV. But other updates aren't possible in this first version of the software.

Strickland emphasized again that Verizon is not trying to replicate the Facebook experience from the Web on the TV. But he said that other features and functions will be added down the road. For example, in its first release, the Facebook Widget only allows one user account to be accessed per set-top box. In a few weeks, the application will allow multiple Facebook members to view their profiles and their friends' profiles from a single set-top box.

"We are not trying to re-create Facebook or Twitter for the TV," he said. "Viewers don't want to take time out from their TV. But we are trying to bring these social-networking applications to the mass market in a way that enhances their TV experience."

These two new widgets are just the beginning of what Verizon plans to do with the Widget Bazaar and the Fios TV service in general. The company also plans to add online video viewing to the Fios TV service. Later this month, Fios TV subscribers will be able to search for and view videos from sites such as DailyMotion.com, Veho, and BlipTV. These videos are mostly user-generated or are from independent sources. While Verizon has plans to strike more deals with other online video providers, Strickland said it's unlikely the company will add access to produced content from sites like Hulu.com or from Netflix's video-on-demand service.

Most of the new widgets that will be released will be automatically pushed to subscribers' set-top boxes. And they will come at no extra charge to customers. But some widgets, mostly games, will cost additional money. Verizon already offers some casual games for free as part of the Fios TV service, and they have been a huge success with many subscribers playing the game for an average of 45 minutes each.

One of the main reasons why applications such Facebook and Twitter will initially be consumption-based is because Verizon still hasn't come up with a really good way to provide textual input into the TV experience. Strickland said the company is considering a variety of options for allowing people to input information and interact with the service. One possibility is using smartphones.

"A lot of people are already using smartphones with our wireless service," he said. "The device has been paid for and subsidized already, so it makes sense to use it for other things. I think this adds more functionality at a lower cost than developing an advanced remote control. "

Strickland said that Fios TV customers should expect to see new widgets coming online all the time. The company has greatly reduced the amount of time it takes to develop and roll out the new applications. And it's preparing to introduce a whole slew of new ones in the future. Some widgets to expect in the future include more games as well as widgets developed by programmers and ones to help enhance other online experiences. For example, MTV may want to create a widget to highlight the top song or music video of the day. And Verizon could also offer an online music video widget to stream services like Pandora to the TV.

Verizon's latest enhancements and the emergence of its Widget Bazaar come as the company turns up the heat on its cable TV and satellite TV competitors. While cable has made some technical strides lately to increase bandwidth and functionality, Verizon increasingly is adding more Internet-focused functionality to its service. Strickland believes this is the advantage that the company's all-fiber network has over its competitors. Because it has near limitless bandwidth, it has the capacity to offer advanced interactive services.

Verizon will begin rolling out the new Facebook and Twitter widgets on Wednesday morning in markets in six states including New York, New Jersey, Maryland, Virginia, Pennsylvania, and Texas. The rest of the Verizon Fios TV markets will get the update starting Thursday. Subscribers will not need to do anything. The updates will come automatically to their set-top boxes.

Instead of a bloody price war between cable operators and phone companies in the TV market, battle lines are now being drawn over who has the most compelling new features.

Digital video recorders, on-demand services, and more recently Web sites such as Hulu.com have taught people that they don't have to be beholden to a TV schedule. But the TV industry is about to be shaken up even more as phone companies and cable operators, which are all vying for your viewing eyeballs, add new features to their services to lure customers.

So what's it mean for you, the consumer? Well, it's not likely to mean lower prices on the services you already buy. Verizon Communications has already started moderately increasing the price of its service bundle for new customers. But what it's likely to mean is that consumers will get a lot more bang for their buck. When it comes to TV, that means a lot more access to the shows and movies you like, when you want to watch them, and on any device you want to view them on. At least that's the promise.

Whether the dream lives up to the expectation is another story. While some of these new services are being rolled out as we speak, some are still being tested and aren't quite fully baked. But at the very least the revolution is quietly under way and TV viewing could be a whole lot different in just a few short years.

"I think what we (Verizon and AT&T) are doing is pressuring the rest of the market to respond," said Shawn Strickland, vice president of Fios product management for Verizon Communications. "So Comcast can't just respond to what we are doing in a single market, but they have to respond to AT&T too and it drives innovation in the entire market."

For years, not much had changed in terms of the TV viewing experience. Programmers would highlight their popular shows and vie for top ratings in Nielsen surveys. And viewers would sit back and enjoy their favorite shows. Aside for some competition from satellite providers, for the most part, the cable industry had enjoyed a near monopoly on the TV market. That is until the phone companies came along with their dreams of marrying Internet technology to the TV.

Who would have thought just a few years ago that it would take the old stodgy phone companies to stir things up in TV? But that is exactly what's happened as AT&T has entered the TV market with its U-verse service and Verizon Communications has taken on cable operators with its Fios service.

In just a few short years, these phone companies have gone from playing catch up to their rival cable providers, to actually leading the industry in terms of innovation with new interactive services that leverage their Internet-based networks.

But the cable industry hasn't sat idly. The major players in the market, namely Comcast and Time Warner Cable, have been upgrading their networks to add more capacity both to their Internet services and to their video services. And they've been forging ahead with new digital video recording features and video on demand content. Now, they are about to take the biggest plunge yet into the uncharted territory of online on-demand access to TV shows and movies.

For consumers these new services will soon offer broader access to more content, on more screens and at times that are convenient for viewers and not TV programmers. And thanks to the wonders of the Internet, consumers will also be able to interact with what they're watching.

More interactivity for viewers
For the phone companies, the future of TV is also about deepening the experience and providing more interactivity for viewers. For Verizon's Fios customers this means being able to discover new shows by checking what is the most popular content being watched in their neighborhood. The company also offers sports and news widgets, and its working on social-networking applications that will integrate TV viewing with Twitter and Facebook.

For AT&T's U-verse customers it means taking a TV event and providing a deeper dive. During the PGA Masters golf and the March Madness NCAA basketball tournaments this spring, AT&T partnered with CBS Sports to provide Web-based applications to coincide with TV viewing (CNET News is owned by CBS.) During basketball games, statistics and scores were added to March Madness fans' online brackets so they could be viewed as the games were unfolding.

And Masters golf fans were able to view multiple video feeds on their TV screens to keep up with action at different points on the course. Viewers could also check the score board online to see how the leaders were shaping up. And this information wasn't just available online or on TV, but using an application for the iPhone, it was also available on mobile devices.

"With this kind of experience viewers start to have more control and a deeper engagement with the content," said Jeff Weber, vice president of video products for AT&T. "This is very clearly for customers who care about these types of events, but it gives them an opportunity to be engaged in a way they couldn't before."

But Weber also acknowledged that viewers were primarily interested in watching these sporting events. And he said there was a fine line between balancing the deeper richer experience with not interfering with the primary activity of TV viewing.

"At the end of the day, the killer application is still watching TV," he said. "So we needed to deliver ESPN with as good a quality or better than the cable companies into the living room. But now that we have done that, we are pushing ahead to make it a much richer experience for the consumer."

Verizon's Strickland said adding interactivity to the TV viewing experience also increases the opportunity for advertisers. And it offers a new way to monetize the TV viewing experience.

"The TV is the best entertainment storefront out there," he said. "People spend an average of six hours a day in front of the TV. And interactivity with that audience provides a lot of opportunity to advertisers."

This aspect of the new television age may or may not appeal to consumers. But the truth is that providing TV service and creating content is expensive. And as more people gravitate toward watching recorded TV shows and skipping advertising or even viewing video on demand content, TV providers and the programmers that create the content need to find ways to make money to augment losses in the traditional business model.

Because the phone companies have built their networks using IP technology, they've been able to push the envelope in terms of interactive features. And in the case of Verizon, its fiber architecture has also given it a considerable amount of bandwidth capacity to push the envelope in terms of on-demand services. As a result, today Verizon is offering more than 100 channels of high-definition content. And it's able to match cable competitors in terms of video on demand services.

Cable upgrades
But the cable companies haven't been sitting on their hands for the past few years. They've been upgrading their networks and innovating too. Comcast already has Docsis 3.0 technology, which greatly increases broadband speeds and network capacity, in at least a dozen markets. Time Warner Cable was one of the first companies to introduce its start-over solution that allows viewers to start a TV show from the beginning if they come into the show late and haven't recorded it.

But the boldest move by the cable companies is about to get off the ground. Leveraging existing relationships with TV programmers, cable is striking deals to put more video content online. The popularity of Web sites such as Hulu.com, which offers mostly broadcast TV shows for free online after they air, along with other free online video programming, has spurred the cable companies into action.

Time Warner Cable has been trialing a service with HBO that allows people in Milwaukee to watch on-demand HBO TV shows and movies on their laptops. And now Comcast and Time Warner, the media conglomerate and former parent company of Time Warner Cable, are working together to test a new authentication system for accessing Turner Broadcasting content from TNT and TBS.

On Wednesday Comcast and Time Warner announced their new plan to provide authentication to securely distribute video online to cable subscribers. The companies highlighted the importance of allowing their viewers to access content, which they've already paid for via a cable subscription, from anywhere, anytime and on any device.

"This a very logical next step in the evolution of TV," said Brian Roberts, CEO of Comcast during a press conference Wednesday in New York. "Comcast alone has had 12 billion on-demand streams. iTunes has had about 6 billion downloads. This is how consumers want to get their content."

Jeff Bewkes, CEO of Time Warner agreed. "Consumers have spoken," he said. Bewkes added that putting video online for viewers to watch anytime they want on any device will greatly expand the audience and actually provide more revenue opportunity for advertisers. He used HBO as a perfect example. He said that when the company decided to add HBO content on demand for free that viewership went up and people were able to follow more shows. He said he is willing to work with any TV provider to make the Time Warner content available elsewhere.

While it's important to give people a choice in where and when they watch something, Bewkes also noted that the most important thing is simply providing access to the content.

"There has been so much focus on broadband," he said. "But don't miss the importance of the video on demand aspect. Whether its over a set top box or broadband, it will have a dramatic increase in audience."

Results from a new customer survey suggest consumers would rather subscribe to a triple play bundle of services from a phone company than from a cable operator.

On Tuesday the market research firm CFI Group released results from a customer satisfaction study that indicated that almost twice as many consumers are interested in buying a bundle of phone, broadband and TV service from a phone company than from a cable operator. But because phone companies haven't completed rolling out TV and upgraded broadband services to all their customers, more consumers buy the bundle from the cable company. Only about 2 percent of those surveyed subscribe to TV service from a phone company.

Using the American Customer Satisfaction Index created by the University of Michigan, CFI surveyed more than 1,200 consumer households to examine customer satisfaction with video, broadband Internet access and wireless communications services. The group concluded that consumers are more dissatisfied with cable operators than they are with phone companies, which could give phone companies a big advantage in vying for customers.

According to the study, consumers said that high cable rates and poor customer service were the two biggest reasons they would consider leaving a cable provider. And customers also cited faster Internet speeds as a top reason to switch from cable to a phone company's service.

"The cable companies are asleep at the wheel if they don't see the threat from the telecoms," said Phil Doriot, program director for CFI Group. "But the network upgrades aren't going to happen overnight, so cable companies still have the opportunity to improve their customer service and cover their Achilles heel."

Verizon Communications said Wednesday that it's extending its agreement with Yahoo to provide Verizon Internet users with Yahoo's Web portal.

The companies' multiyear agreement replaces a similar arrangement the companies had in place since 2005. Verizon didn't offer details about the duration or financial terms of the new deal. But it did say Yahoo's portal will be the first choice offered to subscribers of its DSL and Fios high-speed Internet service. Verizon will also offer its own branded portal and the MSN portal from Microsoft.

The deal between Verizon and Yahoo appears to only cover Verizon's wired broadband services. The companies made no mention of a deal that included services for Verizon Wireless, which is jointly owned by European carrier Vodafone and Verizon Communications. Recent news articles have reported that Verizon Wireless is close to striking a deal with Google on mobile search and advertising. Yahoo also offers mobile search and advertising products that Verizon Wireless could use as well. AT&T, which has a similar broadband portal arrangement with Yahoo that Verizon has, also has chosen Yahoo as one of its mobile partners.

Verizon Wireless hasn't yet announced any kind of arrangement with Google, so it will be interesting to see if Yahoo can parlay its broadband deal into anything for mobile. Yahoo has a strong portfolio in mobile and it has done well so far in the mobile market. Like Google, it has adapted some of its traditional Web services, like search, for the mobile market.

Earlier this year, Yahoo redesigned its mobile home page and announced Yahoo Go 3.0, an open platform for widgets created by outsiders. It's also been rolling out new partnerships for mobile advertising. In addition to providing search and display advertising for AT&T, Yahoo has also won big deals with other carriers such as Vodafone and T-Mobile in Europe and Rogers in Canada.

Verizon Communications and AT&T have thrown the first blows in an impending broadband pricing war.

Last week, Verizon Communications said it will offer six months of free DSL service to new customers who sign up for a one-year contract and also use the company's traditional landline voice service. The promotion is available until the end of October.

Verizon's DSL service typically costs between $19.99 per month for 768Kbps downloads and $42.99 a month for 7.1Mbps downloads. Add traditional telephone service, and subscribers can get high-speed DSL and phone service for as little as $45 a month versus $65 a month.

AT&T has also upped the ante with a new promotion that guarantees customers its current pricing, which ranges from $20 to $55, for two years, the Wall Street Journal reported Tuesday.

The promotions come as broadband operators saw a sharp decline in new subscriber growth in the second quarter of 2008. Twenty of the largest cable operators and phone companies in the U.S. only signed up about 887,000 new subscribers during the quarter, the lowest level of growth seen in the past seven years, according to Leichtman Research Group.

Phone companies appeared to be the hardest hit by the slowdown, only adding about 23 percent of the customers they added during the same quarter a year ago. Specifically, Verizon lost 133,000 DSL subscriptions in the second quarter as its existing customers upgraded to its Fios network and new broadband users went to cable competitors.

Meanwhile, cable companies, such as Comcast and Time Warner Cable, have fared much better. In total, cable companies added about 75 percent of all new customers in the second quarter.

Comcast, the largest cable operator in the U.S., added 278,000 high-speed Internet subscribers during the second quarter. Comcast executives have said that about two-thirds of its new broadband customers had switched from DSL. And about one-fifth of these customers are signing up for the triple play bundle.

As a result, cable operators haven't felt compelled to lower prices or offer more for less. But as the broadband market gets tighter, a cable response is likely.

Today about 60 percent of U.S. households already have high-speed Internet connections. And of all people who regularly use the Internet, about 90 percent of them already subscribe to broadband service as opposed to dial-up. This means that there is a smaller pool of people using dial-up who may switch to broadband services, a fact that is also likely impacting growth in the broadband market.

Comcast is already starting to see its edge weakening. During the second quarter, the cable operator added about 18 percent fewer customers during the quarter than it did a year ago.

It will be interesting to see what kind of affect the phone companies' new pricing terms will have on the market in the third quarter. Stay tuned.

This broadband war could lead to some good deals for consumers. But bargain shopping consumers will have to read the fine print on these deals. Pesky service contracts with early termination fees that are common in the wireless industry could show up more regularly in the broadband market. Verizon's six-month free DSL promotion requires a one-year commitment. And the company is charging a $79 fee for people who cancel the service early.

Cable operators and phone companies signed up about half the number of subscribers in the second quarter of 2008 that they signed up during the same quarter in 2007.

Twenty of the largest cable operators and phone companies in the U.S. only signed up about 887,000 new subscribers during the quarter, the Leichtman Research Group reported Monday. This was the lowest level of new subscribers the research group has seen in the seven years it's been reporting on the broadband market.

Phone companies appeared to be the hardest hit by the slowdown, only adding about 23 percent of the customers they added during the same quarter a year ago. Bruce Leichtman, president of the firm, said AT&T and Verizon Communications have been emphasizing higher speed and more expensive services to customers over their entry-level DSL services.

"While the relative number of quarterly broadband adds has certainly peaked, the decline in additions this quarter compared to the same period last year was exacerbated by Verizon and AT&T's emphasis on selling higher speed Fios and U-verse bundled services, often at the expense of the traditional DSL service," he said in a press release.

This change in strategy appears to be an attempt to sign up more valuable customers who won't drop their service when the one-year promotion ends.

Meanwhile cable operators managed to sign up around 85 percent as many subscribers as they had during the second quarter of 2007. In the past, cable and phone companies have evenly split the number of new broadband additions. But during the second quarter, cable pulled ahead with a whopping 76 percent of the new business.

While the phone companies' change in strategy could play a role in the lopsided breakdown of new broadband additions, I think it's also worth noting that the market is more saturated. Roughly 90 percent of active Internet users today already subscribe to broadband service. This means that there is a smaller pool of people using dial-up who may switch to broadband services.

Of course, there is still a good proportion of the population that has no Internet connectivity at all, which could provide future growth for the broadband industry. But these customers are likely more price sensitive and some may actually live in areas where broadband service isn't currently available.

What's this mean for broadband providers? I think it means that phone companies and cable operators will have to compete even more on price and value. I doubt the phone companies will drop the pricing of their ultra high-speed services much. Instead, I think they will price their bundled services more aggressively to encourage consumers to sign up for broadband services as well as their phone and TV services. They may even try to link their wireless services in with these packages, creating a quadruple play value package that the cable companies won't be able to compete with.

I also predict that the phone companies and cable operators will be forced to extend their promotional offers. Consumers have gotten savvy enough to know that they can cancel their service (or at least threaten to leave) when the promotion is over and move to another provider.

Cable companies now have 35.3 million broadband customers. And phone companies have 29.7 million subscribers. AT'T has the largest number of subscribers with 14.7 million customers. Comcast, the largest cable operator, has 14.4 million.

Verizon Communications reached a deal with labor unions representing 65,000 employees, averting a strike that could have disrupted its operations across its Northeastern and Mid-Atlantic territories.

The company on Sunday reached tentative agreements with the Communications Workers of America, which represents some 50,000 Verizon technicians and the Electrical Workers union, which represents about 15,000 of Verizon's affected workers.

The new contracts, which have been shortened from five years to three years, include wage increases that total 10.5 percent over the next three years. As part of the deal, Verizon will transfer more than 600 positions in its business division to the landline group, and it will make 900 temporary workers permanent workers in the landline group. The changes will result in more than 2,500 Verizon employees now becoming union members, The Wall Street Journal reported.

The deal must now be ratified by the unions' membership.

One of the major stumbling blocks of the negotiations was over health care costs. The unions and Verizon agreed to change the way they pay for future retirees who start working at the company after August 2. Verizon agreed to continue paying premiums for active and already retired employees. But the company will contribute a fixed dollar amount for workers hired after August 2, depending on how long they've worked for the company.

The unions had threatened to strike Monday at 12:01 a.m. Talks were extended last weekend after the workers' five-year contract had expired. A strike could have affected the deployment of Verizon's Fios, fiber-to-the-home network.