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November 19, 2009 4:00 AM PST

Broadband economics: How I'll save $700

by Marguerite Reardon
  • 59 comments

It's a simple principle of economics: competition and more customer choice results in lower prices.

And so it is true of broadband services. With about 65 percent of the U.S. population now subscribing to broadband, cable operators and telephone companies are duking it out for new customers. The companies are offering cut-throat prices and new promotions to win over new subscribers.

For consumers in areas of the country where competition is heating up, the savings can be huge. For example, Verizon Communications, which has been losing DSL customers to competitors, this week announced aggressive new promotional deals for its high-speed DSL and Fios, fiber-to-the-home Internet services, as it tries to tempt new subscribers.

New Verizon DSL customers can get six months of free Internet service if they commit to a one-year contract. The company also announced a slew of deals for Fios customers, including one that offers new Fios TV subscribers who sign up for service as part of a bundle, free multiroom DVR capability for three months.

These deals sound terrific to consumers, like me, who live in markets with at least two broadband competitors. But for millions of Americans living in rural regions of the country and for people living in some urban areas, where carriers don't find it profitable to offer service, only one choice of Internet provider exists today.

And as a general rule of thumb, these consumers aren't usually offered enticing promotional deals or discounts on service. In fact, on average they pay much more for their services than people living in more competitive markets.

A task force at the Federal Communications Commission that is developing a national broadband policy highlighted this fact as a major barrier to universal broadband access during an open meeting at the commission on Wednesday.

The group also noted that broadband service providers tend to deploy service in higher income neighborhoods where more people are likely to sign up for service over low-income areas. As a result these markets generally have only one provider. What this means is that lower-income people, who have less disposable income, are often the ones forced to pay higher prices, while people who have more money pay lower prices for service.

Big savings in the Big Apple
To test this concept and to see if I could significantly put a dent in my monthly expenses, I decided to investigate my own broadband options in New York City, where I have lived and been a cable subscriber for nearly 12 years. With a little bit of leg work, I quickly discovered, I could save nearly $700 in one year by switching broadband providers.

I currently pay about $147 a month for cable TV and broadband service from Time Warner Cable. This bill does include two DVRs, two remote controls, and HBO channels and on-demand services. But it does not include taxes or a home phone service.

I live on the Upper West Side of Manhattan and even though I have seen Verizon putting fiber underneath the street on my block and even though my inside sources at the company have told me that two central offices near my neighborhood are currently being upgraded this month to provide Fios TV service, I am still not yet eligible for Fios service.

The only option I have from Verizon right now is DSL service. With the new six-month broadband-for-free promotion, Verizon is offering a triple play package that includes 3 Mbps or 7.1 Mbps DSL, DirecTV Plus DVR package, and Verizon's unlimited local and long-distance calling plan for $70 per month for the first six months.

During the second six months of this annual plan, the bundle with up-to-3 Mbps service is $99.99 per month. And for the faster 7.1 Mbps broadband service, the price is $109.99 per month after the first six months.

Factoring in the first six months of free DSL service in this total package, my average monthly cost would be $90 per month for home phone, broadband, and subscription TV services. This is an average savings of $57 per month over my current service, and a yearly savings of about $684.

I called Time Warner Cable to see if the company could beat Verizon's price. The best price offered to me for the same exact package, which includes one set-top box with DVR service, was $119 per month before taxes. The only difference in this package is that I would not have to sign a contract, but the price would be guaranteed for a year. The representative I talked with on the phone offered to give me free Showtime service for a year to sweeten the deal. Even at this price, Verizon's offer is still $29 a month cheaper than Time Warner's revised service. In total, I would still be saving $348 for the year.

But there is one catch to Verizon's deal. Verizon guarantees the price of the bundle for a year. And if customers cancel the service during that time period there is an early termination fee. But DirecTV requires users sign a two-year contract. And pricing on the TV service is not guaranteed during the second year, which means it could go up significantly in 2011.

What's more, if Fios becomes available in my building, I can upgrade my Internet and phone services at no penalty. And I would be eligible for whatever special deal Verizon might offer me. But I would have to pay a penalty to DirecTV if I terminate my TV service early to get Fios TV.

Still, with a yearly savings of almost $400 to $700 sitting on the table, I'd be a fool not to make some kind of change now. But just imagine if there was a third or even a fourth competitor in my market? The savings could be even greater.

More competitors lead to lower prices
According to a Pew Internet and American Life Project study released in June, the more competitors there are in a market, the cheaper the price of the service for consumers. In the survey, about 21 percent of high-speed Internet users said they had only one choice in broadband provider. And on average these customers spend about $44.70 a month on high-speed Internet service. About 69 percent of respondents said they had two choices in broadband providers, and on average they spent about $38.30 on Internet per month. Average prices fell yet again for the 17 percent of respondents who said they had four or more broadband provider choices. The average amount they paid for service was about $32.10 per month.

What this tells us is that more choices matter. And when broadband service providers are forced to compete, consumers get better deals.

This basic thesis was also the conclusion of a recent study (PDF) commissioned by the FCC and conducted by Harvard University's Berkman Center for Internet & Society. This study concluded that that other countries have faster and cheaper Internet access because there is more competition. The report went on to conclude that this new competition was made possible by regulatory policy that promoted open-access rules or rules that force service providers to share their infrastructure with competitors.

"The lowest prices and highest speeds are almost all offered by firms in markets where, in addition to an incumbent telephone company and cable company, there are also competitors who entered the market, and built their presence, through use of open access facilities, " the report says.

The report has gotten plenty of criticism. AT&T and the National Cable & Telecommunications Association have filed letters warning the FCC against applying the findings to its national broadband policy. The NCTA said the FCC should be careful in accepting these results when past attempts here in the U.S. to impose open access rules have failed.

Whether open access rules really create more competition is debatable. But one thing that cannot be debated is the effect that more competitors have on prices and the quality of service in the overall market.

With this in mind, I hope that the FCC's new national broadband policy, when it's finally presented to Congress in February, will do more than simply ensure everyone in the U.S. has access to at least one broadband provider. I hope the plan also includes aggressive measures to encourage competition among two or more companies in as many markets as possible.

Originally posted at Signal Strength
October 26, 2009 6:00 AM PDT

Verizon profit dips, but wireless stays strong

by Marguerite Reardon
  • 11 comments

Verizon Communications posted on Monday a third-quarter dip in profits, though the company's wireless business showed strong results.

The carrier's overall profits were hurt by the continued decline of its wireline business. But the company is making up for much of the loss with wireless.

That said, Verizon did not add as many customers in the third quarter as AT&T, which had a stellar quarter due to strong sales of the Apple iPhone. Verizon is hoping to pick up ground through its broad partnership with Google announced earlier this month. In addition, Verizon is adding Research In Motion's new Storm 2 to its lineup.

Verizon reported third-quarter net income of $2.88 billion, or 41 cents a share, on revenue of $27.3 billion. Excluding charges, per share earnings fell to 60 cents from 66 cents last year, but the company beat analyst estimates of 59 cents per share.

Verizon's total operating revenue grew 10 percent to $27.3 billion, compared with the third quarter of 2008. This includes revenue from Verizon Wireless and Alltel. If Alltel, the regional wireless operator Verizon acquired in January, had been part of Verizon a year earlier, the revenue increase would have been 0.6 percent.

Verizon Wireless, which is jointly owned by Vodafone Group, continued to show strong growth, despite competition. The company added 1.2 million new customers in the quarter, bringing its total customer base to 89 million. It reported a churn rate for its contract customers of 1.13 percent.

Verizon Wireless also increased its revenue by 24 percent in the third quarter to $15.8 billion. Much of this growth is due to an increase in data services. As the company offers more sophisticated phones, it is requiring more of its customers to sign up for some type of data plan.

Overall wireline revenue fell 4.8 percent to $11.6 billion. Much of the decline comes from customers ditching wireline phone service. That said, Verizon is looking toward its Fios fiber-to-the-home network to provide growth.

The company added 198,000 Fios Internet customers and 191,000 Fios TV customers in the quarter, boasting a 12.6 percent increase in average revenue per user.

Originally posted at Signal Strength
August 21, 2009 11:00 AM PDT

Verizon turning cell phones into TV remotes

by Marguerite Reardon
  • 11 comments

Verizon Communications is getting ready to launch a new feature that allows its Fios TV customers to interact with their sets using their Verizon Wireless cell phones, according to a story published by Dow Jones News service.

The company has been talking about the capability for months, and it recently demonstrated an application that will turn Verizon phones into a remote controls for the Fios TV service. The application is expected to be commercially available in the next three months.

The handset remote control application will only work with Wi-Fi enabled handsets and will use a Wi-Fi network instead of the Verizon cellular network to access the Fios service. Wi-Fi is only available on a select handsets from Verizon Wireless.

Originally posted at Signal Strength
July 27, 2009 12:55 PM PDT

Verizon changes tune on Wi-Fi

by Marguerite Reardon
  • 19 comments

Verizon Communications has had a change of heart about using Wi-Fi to extend its wireless broadband offering as the company announces free access to Wi-Fi hot spots for its Fios and DSL Internet customers.

On Monday the company announced that customers subscribed to its Verizon Fios Internet service with 20Mbps per second downstream and 15Mbps upstream or faster and customers who subscribe to its 3Mbps/768 Kbps or higher DSL service will be able to connect to Verizon Wi-Fi hot spots, at no additional charge as part of their broadband service.

Verizon has partnered with the Wi-Fi service Boingo to offer access in thousands of locations throughout the U.S. including hotels, airports, restaurants, coffee shops, retailers, convention centers and public locations across the U.S. The company has a Web page where customers can locate these Verizon hot spots. For example, in New York City, the service is available at many Barnes & Noble bookstores, as well as at JFK airport, and in some Starbucks locations.

For the past few years, Verizon has downplayed the importance of Wi-Fi. The company experimented with deploying its own Wi-Fi hot spots several years ago in New York City, turning old phone booths into wireless hot spots. The service never took off, and Verizon dismantled the hotspots. The company was also a vocal critic of many municipal Wi-Fi projects, including the one in Philadelphia.

Instead Verizon has always pushed its 3G wireless network and more recently it's soon-to-be-built 4G wireless network as a perfect solution for its subscribers on the go.

But as other broadband providers start offering Wi-Fi access for free with their services, it seems that Verizon has decided to jump on the Wi-Fi bandwagon. AT&T has been offering free Wi-Fi to its high-speed Internet customers for more than two years. And cable operator Cablevision, which competes in Verizon's territory, launched its Wi-Fi service last year. Cablevision and Comcast have teamed up to provide free Wi-Fi access to their subscribers who commute by offering the service on train platforms .

Verizon spokesman Eric Rabe argues that the Verizon offering is better than what cable offers because it is available nationwide. The cable Wi-Fi networks are only available regionally where the cable providers operate.

Rabe stopped short of admitting that Verizon has changed its tune when it comes to Wi-Fi. He said the company is merely answering the demand from its customers.

"I would call this an expansion of the way we see mobility," he said in a phone interview. "We are broadening how people access the Internet when they aren't at home. And we're doing it because our customers have told us it's what they want."

Rabe does not think that the new Wi-Fi offering will cut into the company's wireless broadband business, which requires a monthly service and contract to get access to the company's 3G wireless network on laptops. This service costs about $60 a month for up to 5GB of Internet usage a month. While the speeds on the 3G network are slower than when using a Wi-Fi hot spot, the wireless broadband card offers access to the Net wherever Verizon's 3G cellular network is available.

"Our cellular 3G network allows people to be truly mobile," he said. "And you can't do that with hot spots. So I don't think it will compete at all with our wireless broadband service. There will still be a lot of users, particularly business customers, who still want the reliability and ubiquity of 3G wireless."

Verizon has also been touting its new 4G wireless network, which will be in trials later this year in Seattle and Boston. The new network, which uses a technology called LTE, or Long Term Evolution, will go live commercially in 2010. The company expects to have the entire network built out by 2013. Verizon's plan is for the 4G network to provide wireless connectivity to a whole range of devices other than cell phones, laptops, and Netbooks.

Rabe said that any Wi-Fi device that can download "access credentials" from the Verizon Web site, should be able to access the Wi-Fi hot spots. Some Windows Mobile phones may be able to access to the Wi-Fi hot spots, but he isn't certain that that is the case. And he could not confirm whether the Apple iPhone would be able to connect to the Verizon hot spots. AT&T , which is the exclusive U.S. carrier for the iPhone, already offers free Net access to iPhone users in its more than 20,000 hot spots.

Verizon intros on-the-go DVR programming

January 7, 2009 9:01 PM PST
by Marguerite Reardon
  • 6 comments

LAS VEGAS--Verizon will soon allow some Fios TV customers to remotely access their DVRs online from a computer or via a Verizon Wireless cell phone, the company is expected to announce Thursday at the Consumer Electronics Show that it.

Using the remote access service, Fios TV subscribers are able to remotely review, change or add recording requests, delete recorded programs, browse and search TV and video-on-demand listings, and set parental ...


Read the full post at CNET's CES 2009 blog.
October 6, 2008 4:00 AM PDT

Verizon bets big on network infrastructure

by Marguerite Reardon
  • 28 comments

From Verizon CIO Shaygan Kheradpir's 38th floor apartment on the Upper East Side of Manhattan with panoramic views of the East River, I saw first-hand the fruits of the company's $23 billion gamble to build a new fiber network directly to customers' doorsteps and a glimpse into where the strategy will lead next.

Kheradpir had invited a handful of journalists to his swank pad to show off the latest enhancements to Verizon's Fios TV service. The new features, which include everything from new widgets for getting weather and local traffic to a specially designed ESPN fantasy football application to remote control of DVRs, are rolling out across Verizon's Fios footprint right now with New York, Verizon's largest market, expected to get the enhancements starting October 9th.

While its cable competitors look for ways to curb their customers' usage of their networks by either slowing down certain applications or metering usage, Verizon plans to spend about $23 billion through 2010 to take fiber directly into people's homes to actually increase the amount of bandwidth people consume. The company also recently spent $9 billion on 700Mhz spectrum in the Federal Communications Commission's auction, which it plans to use to build a new fourth-generation wireless broadband network, again with the hope that people will choose bandwidth-intensive applications.

Verizon's Fios to the home

Verizon plans to spend about $23 billion through 2010 to take fiber directly into people's homes.

(Credit: Verizon)

Verizon's commitment to betting big on bandwidth could cement its dominance in the communications market for years to come. But these bets don't come cheap. And as network operators find themselves in tighter competition with Internet giants such as Google, they could end up simply becoming dumb pipe providers, competing on speeds and feeds rather than services.

There's no doubt that service providers are caught between a rock and a hard place. Not only must they compete with each other, but they also have to think differently and innovatively to compete against new Internet competitors, who are using the service providers' high-speed infrastructures to deliver competing voice and video services.

While other service providers, like AT&T and the cable companies, have tried to deliver new services and enhancements by incrementally upgrading their infrastructure, Verizon has gambled all its chips by spending billions of dollars on fiber infrastructure that it believes will future-proof its network.

Verizon's Kheradpir admitted that Verizon's fast fiber pipes will likely be used to deliver new applications and services that Verizon may never be able to monetize. But the super fast infrastructure also provides Verizon with a blank canvas that its own developers can use to create new services.

"The network that Verizon has created with Fios is a dream for software developers," he said. "It's what we all dreamed of when we were in school. It's basically an unlimited pipe that can be used to develop whatever you want."

The main thing the ultra-fast fiber network enables is the ability to deliver rich content, namely high-definition video. According to J.D. Power and Associates, the number of households that report viewing high-def programs has nearly doubled since 2007, reaching 55 percent this year.

Kheradpir also believes that HD doesn't stop with TV. People will increasingly want high-definition Web video and high-definition digital music. That's why Verizon is promising at least 100 HD channels as part of its Fios service in places like New York City. But high-definition content eats up bandwidth, making it difficult for many of Verizon's competitors to keep up with demand. Verizon's competitors are also introducing enhanced offerings. Time Warner Cable, which competes with Verizon in New York City and the surrounding area, is also pushing for 100 HD channels by the end of the year.

Still, Kheradpir believes Verizon is better positioned with its all-fiber network to stay ahead of the HD curve.

Building the network at home
As home networks increasingly look more like corporate local area networks, Kheradpir also sees an opportunity for service providers to manage their networks. He calls this the "consumerization" of IT. The difference between networks in the home and in the office is that instead of shuttling corporate data back and forth, people are sharing digital pictures and music, watching high-definition video and using VoIP services to stay connected to family and friends. And this basic difference means that service providers have to think differently about serving these customers.

"IT in the corporate environment is all about improving efficiency," Kheradpir said. "But in the home, it's about improving quality of life."

Verizon CIO Shaygan Kheradpir

Verizon CIO Shaygan Kheradpir

(Credit: Verizon)

And that is where Kheradpir believes Verizon can add value. Not only can it provide the basic infrastructure, but it can build the applications that ride over this infrastructure to improve users' experiences. This means allowing people to access their digital content from wherever they are on whatever device they want, he explained. And because few people have IT managers living with them, it also means hiding the complexity and management of the technology in the network far from the end user.

Verizon has worked this concept into its latest Fios TV upgrade. Its new set-top boxes will automatically discover all connected devices whether they're wired or wireless, and it will allow people to view photos or video or listen to music from any device on the network. This means that you can share pictures from a PC hard drive on a computer. Eventually it could also allow people to listen to the digital music that's stored at home on their PC while on their cell phones.

"The consumer doesn't want to think about where they store their content," Kheradpir said. "Our view is that people should leave their pictures and music where it is. And we will extend the network to get it for them."

The latest version of Fios TV will also include remote DVR control. Initially, this feature will allow users to control their DVR from an Internet-connected PC. But the company also demonstrated how it can be done via a cell phone. Using a mobile Web site on phones such as the LG Voyager and the enV, subscribers will be able to set recording schedules, search for recorded shows, and enable parental controls.

In addition to needing someone to manage their home "IT" needs, Kheradpir believes that consumers want more personalized content. Again, a high-speed network can help facilitate this. For example, Verizon has added widgets to its latest Fios upgrade that allow third-party developers to create applications for personalized local weather, traffic, and horoscopes. One Verizon engineer even created a Facebook application so that people can access status updates on their TV screens.

Verizon has also included a "What's Hot" application that anonymously keeps track of what people are viewing to show people the most popular TV shows in their areas. Kheradpir said that Verizon is able to offer more personalized services because of the bi-directional nature of its network. Not only can Verizon broadcast content to its subscribers, but it can collect information and allow for individual interaction to provide consumers with a more personalized experience.

Seeing returns
So far, Verizon's gamble appears to be paying off. In areas where it sells Fios TV, Verizon has been able to steal customers from cable and satellite providers. And as of the end of June this year, Verizon had increased its Fios TV penetration rate to 19.7 percent from 13.3 percent in 2007. In total, the company has 1.4 million Fios TV subscribers.

Verizon is also getting high marks from customers. In a recent J.D. Power and Associates survey, Verizon Fios TV ranked higher than cable or satellite in terms of customer satisfaction. Specifically, customers said Fios TV's picture clarity and programming exceeded their expectations. AT&T, which provides its U-Verse service, also got high marks for its IPTV offering.

Verizon's goal is to attract 4 million customers by 2010, giving it a market penetration of about 25 percent. And it hopes to attract about 7 million Fios Internet customers, for a penetration rate of 35 to 40 percent.

But Fios is just the beginning. Verizon is also in the early stages of planning its fourth-generation wireless network that will be used to deliver the connected experience to wireless devices. While Kheradpir admits it is still in the early days on the wireless front, he sees it as an important piece of the strategy.

"Wireless is a key lever," he said. "From the time we wake up until we go to bed we generally have a wireless device within reach. So it makes sense to extend this strategy to those devices as well."

Indeed, everyone in the communications sector sees wireless as the next major frontier. Verizon's cable competitors Comcast and Time Warner Cable have invested in the new Clearwire joint venture, which will combine Sprint Nextel's WiMax assets with Clearwire's to build a next generation wireless network. Google has also made various wireless investments. Verizon has clearly staked much of its future on a high-capacity wired infrastructure. But it remains to be seen how aggressively the company will bet on its next-generation wireless network.

July 28, 2008 2:12 PM PDT

New York gets Fios TV

by Marguerite Reardon
  • Post a comment

New Yorkers will now officially be able to get Verizon's Fios TV service.

Verizon employees were at Grand Central Terminal in Manhattan Monday to market the new Fios TV service.

(Credit: Marguerite Reardon/CNET Networks)

The phone company launched the new service Monday in what is the largest launch of Fios TV to date. Initially, about 300,000 of the city's roughly 8 million residents will have access to the service. But Verizon plans to be able to offer the service to at least three million homes and businesses in New York City by year's end.

Verizon representatives were on hand all day Monday at the busy Grand Central train station in midtown Manhattan to get the word out about the launch.

Verizon, which will be competing head on with Time Warner Cable and Cablevision, is offering its basic triple package that includes 20 Mbps downstream and 10 Mpbs upstream data, phone service with unlimited local calling, and Fios TV service for an introductory rate of $94.99 for the first year of service.

Exactly how much it will cost after the promotion ends is somewhat of a mystery, if you talk to representatives at Grand Central Station. Representatives I talked to at Grand Central couldn't tell me how much I could expect to pay after the promotion. But given the competitive nature of the New York market, it's likely that consumers will not pay much more than the introductory rate and could even pay less if Verizon slashes prices to compete with Time Warner Cable and Cablevision, which also offer triple play services in different parts of New York City.

But price won't be the only differentiator for Verizon. The company also announced Monday that it will offer 100 high-definition channels in all its markets. And the plan is to increase that number to 150 channels by year's end.

Verizon launched its Fios TV service a couple of years ago and is now offering it in parts of 13 states. While the company had a banner 2007 and racked up thousands of new subscribers in the first quarter of 2008, it missed some analyst expectations for the second quarter.

But Maura Breen, Verizon's general manager for New York City, said she expects the third quarter to bring in many new subscribers. She attributed the dip in subscriber growth in the second quarter to a slowdown in marketing and promotions offered to get people to sign up for the service. And she expects the company's aggressive launch in New York City to lead the charge for the third quarter.

"I think we are going to see a knockout third quarter," she said. "We've already seen some very good presale numbers for New York City. And we expect it to be at or ahead of what we see for the rest of the Verizon territory."

New York City is a crucial market for Verizon, she added. Not only is it the biggest city in Verizon's territory, but the company has been providing phone service to New Yorkers for more than a 100 years.

"It sounds kind of corny, but we are the hometown team," she said. "We needed to be able to provide a full suite of products and services here. And New York is the toughest and most complex market, so if we can do it here, we can do it in any city."

One of the biggest challenges for Verizon has been negotiating with individual building landlords and real estate developers. The company has worked with bigger developers to sign on entire portfolios of buildings. And in March it began wiring Stuyvesant Town and Peter Cooper Village, one of Manhattan's largest apartment complexes.

But Verizon has made strong commitments to the city to have its build out complete by 2014. The deal it struck with New York's Franchise and Concession Review Committee calls for the company to make Fios available in 57 percent of Manhattan, 13 percent of the Bronx, 15 percent of Queens, 12 percent of Brooklyn, and 98 percent of Staten Island by the end of 2008.

Breen said the company has already covered 25 percent of city with fiber. And it will simply be a matter of building on that footprint and extending fiber to individual buildings. Breen said the company is committed to reaching residents in buildings both large and small. She said people interested in the service can check to see if Fios is offered in their neighborhood, and if it is and is not yet offered to their apartment building, they can request that Verizon contact the building owner to set up some kind of deal.

July 28, 2008 9:31 AM PDT

Verizon counts on wireless for profits

by Marguerite Reardon
  • 3 comments

Verizon Communications' wireless business continues to boost the company's profits as its landline business sputters, according to second-quarter earnings reports.

verizon

On Monday, Verizon reported a 12 percent increase in second quarter net income. The company reported that profits jumped to $1.88 billion in the second quarter from $1.68 billion during the same quarter a year ago. This increase came as the company only slightly grew its revenue, which was $24.12 billion for the quarter up from $23.27 billion a year ago.

Wireless once again proved to be the big growth engine for Verizon, which jointly owns Verizon Wireless with European phone company Vodafone.

During the quarter, Verizon added 1.5 million new subscribers bringing its total to 68.7 million. This is an important achievement given the fact that more than 80 percent of all Americans already own a cell phone. AT&T, Verizon's chief rival, added 1.3 million wireless subscribers during the second quarter.

Currently, Verizon lags behind AT&T by only 4.2 million subscribers. But that will soon change after Verizon completes the $28.1 billion acquisition of Alltel, which has 13 million customers. Once that merger is complete sometime later this year, Verizon will be the largest wireless operator in terms of subscribers in the U.S.

But as Verizon's wireless business continued to grow unabated, the company's landline business was much less impressive. Revenue for all of wireline fell about 1.8 percent to $12.1 billion. As expected the company saw declines in its residential phone lines. During the quarter, Verizon lost 920,000 access phone lines, which was about an 11.4 percent drop from a year ago. But this drop in access lines has largely been expected as residential customers cancel second phone lines and use alternative services such as wireless or voice over IP services.

While it was expected that Verizon's traditional phone business would continue to fall, it was somewhat surprising that the company also saw some weakness in its newer broadband services. For one, the company missed some analyst targets for signing up new Fios TV customers. Fios TV is Verizon's answer to cable TV, and it's delivered over the company's all-fiber network.

Verizon reported it had added 176,000 new customers for the service. But this fell short of some expectations. For example, Dow Jones News reported that Bank of America had projected Verizon would add 260,000 new Fios TV customers.

This news comes just as Verizon launches Fios TV in New York City. The company sees densely populated urban areas like New York City as a big opportunity as it expands the Fios service. And adding the video to its package should help the company compete more directly with cable operators, such as Time Warner Cable and Cablevision.

But it wasn't just Fios TV that disappointed. Verizon also lost a considerable number of DSL subscribers, about 133,000 to be exact. The second quarter is typically weaker in broadband because college kids go home for the summer and cut off their broadband service. But it looks like the company is hitting a slump in DSL subscribers as it pushes its Fios service. Meanwhile, Fios Internet took up some of the slack adding about 187,000 new customers.

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