April 20, 2005 4:00 AM PDT
Verizon's salvo on cable TV
The New York-based phone giant is spending billions of dollars on state-of-the-art technology that's expected to leapfrog its aging copper network, as well as cable operators, in raw capacity.
But in an effort to get to market more quickly, it will use traditional broadcast technology to deliver its TV service, rather than newer Internet-based technology that's slated to become the centerpeice of pending services from other phone companies. That's helping speed all-important content licensing deals in advance of Verizon's planned TV launch later this year, although it could ultimately leave the service short on new features.
Verizon is spending billions of dollars on state-of-the-art fiber-optic technology that's expected to leapfrog its aging copper network, as well as cable operators, in raw capacity.
Verizon's push into the TV market with its FiOS TV highlights the competitive pressures local phone companies are facing from their cable rivals. Its deal with NBC Universal marks Verizon's first step toward tackling cable providers head-on in the paid-TV market.
On Monday, Verizon announced that it had struck a deal to carry all of NBC Universal's channels on its television service, which is called FiOS TV. It will begin offering the new service late in the third quarter of this year in Keller, Texas, a suburb of the Dallas-Fort Worth area, the company said. Verizon has already signed deals with Discovery Networks and Liberty Media's Starz Entertainment Group. But the NBC Universal deal is its first major broadcast and cable content provider.
"We want to go to market with a service that is familiar to customers," said Sharon Cohen-Hagar, a spokeswoman for Verizon. "It's important for us to not get too far ahead of our customers. But we will still have a lot of aspects of our service that will be different from the cable companies."
Verizon's push into the TV market highlights the competitive pressures local phone companies are facing from their cable rivals. Cable companies such as Comcast, Time Warner Cable and Cox Communications have taken a significant lead in offering broadband Internet access to their TV customers. Many cable companies have packaged voice calling into their plans, creating a "triple play" of services that have caused customer erosion among the Bells.
The Bells have responded by investing heavily in upgrading their networks to create their own triple-play packages. Verizon is in the process of running fiber-optic lines directly into millions of homes to offer faster Internet access, hundreds of TV channels and calling plans.
SBC and BellSouth are not running fiber into homes. Instead, they're running lines to neighborhood "nodes" and then delivering their services through common copper wires.Giving users reason to switch
With roughly 80 percent of the U.S. population already subscribing to some form of paid TV service such as cable or satellite, the TV market will not be an easy one for the Bells to break into. As a result, they will need to differentiate themselves in some way.
"The biggest challenge for the phone companies in offering a TV service is figuring out how to compete in a market that is already very well-served by cable and satellite," said James Penhune, an analyst with Strategy Analytics. "They have to give users a reason to switch to them."
Internet-based TV could be the answer. IPTV will allow users to customize their viewing. Instead of surfing through hundreds of channels of programming they probably never watch, they can download only the TV show or movie they want, when they want it. What's more, the Internet will allow viewers to be more interactive with their content. For example, sports fans could select a particular camera view
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