May 5, 2005 2:32 PM PDT
Cablevision: We're not afraid of Verizon's fiber
On Thursday, Verizon announced it was expanding its Fios service to 10 new communities on Long Island, New York. The new service will compete head-to-head with existing services from cable operator Cablevision.
During a conference call with analysts and investors on Thursday, Tom Rutledge, chief operating officer of Cablevision, responded to Verizon's announcement by saying he is not worried about Verizon's latest push into the company's region.
"The impact has been almost completely insignificant," he said. "It makes you wonder why that kind of capital is being spent."
In one community where Verizon ran two direct-mail campaigns and full-page newspaper advertisements, Rutledge said, only 46 customers out of 9,272 homes had signed up for Fios. And of those 46 homes, 20 of them also had Cablevision's high-speed data service.
Despite Cablevision's claims, Verizon said that the cable company is speaking out of both sides of its mouth.
"Clearly they are worried because we are entering the market with a better and more cost-competitive service," said Mark Marchand, a spokesman for Verizon. "Otherwise, why would they be fighting us in the regulatory arena, filing documents demanding that we stop our fiber build?"
Verizon is building the all-fiber network to 39 communities on Long Island, including the 10 new ones announced Thursday. And the carrier is already offering the Fios service in six of the 39.
The new network promises to boost data-transmission rates to as high as 30mbps, a huge increase over the 1.5mbps to 3mbps offered by DSL (digital subscriber line) service today. It also will offer voice and video over the same network. The company has developed a tiered pricing model that includes a plan to offer 15mbps service for $44.95 per month.
Cablevision currently offers a 10mbps high-speed data service for either $44.95 or $49.95, depending on the package.
Verizon is spending billions of dollars building Fios. But some analysts say the company has no choice but to invest in a new network. Unlike the cable networks, which were upgraded a few years ago, Verizon's and the other phone companies' DSL networks are limited in terms of capacity.
Because of these earlier upgrades, cable companies have been able to add new services, such as telephony and high-speed data, to their existing TV service to offer customers a "triple play" of services. Verizon has already offered telephony and data services, but plans to use Fios to add television service.
While Fios provides a huge improvement over Verizon's existing DSL network, Cablevision and other cable operators around the country likely will be able to boost capacity on their networks to match whatever speeds Verizon offers.
"If we had to go head-to-head with them in terms of speed, we could," Rutledge said.
Verizon's city-by-city push to deploy Fios will likely help put the broadband fight on a level playing field, but analysts say that it will be a long time before consumers see the benefits of a price war.
"For one thing, no one really needs that kind of bandwidth right now," said Alan Bezoza, an analyst with Friedman, Billings, Ramsey. "The other thing is that Verizon is rolling out this service very slowly. Cable has already been aggressive in getting its services out there, and it can ratchet up speeds whenever it needs to meet needs of customers."
CNET News.com's Ben Charny contributed to this report.
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