Telco hoping consumers choose new fiber diet
KELLER, TEXAS: When telco giant Verizon lit up its newly installed fiber-optic television service, dubbed FiOS, last month in this rapidly growing Texas suburb of 30,000 residents, the launch came amid the pomp and ceremony usually afforded momentous cultural events--with one Verizon exec labeling the occasion no less than "a seismic shift in pop culture."
In late September, Verizon also reached what it calls a "bellwether" for its new TV service by signing a 15-year franchise pact in its first major market--Fairfax County, Va., adjacent to Washington, D.C.
Located just north of Dallas, Keller is 90 percent non-Hispanic white, with a median household income of about $90,000, according to the U.S. Census Bureau. The area is already established Verizon territory (although it shares parts of it with SBC), where it boasts a ready base of 8,800 households for Verizon phone and broadband services.
North Texas and Northern Virginia are hardly alone; shortly after the Keller launch, the telco announced its first agreements in the Northeast--Massapequa Park in New York and Woburn, Mass. The company also filed for a statewide franchise from the Texas PUC, which it expects to be approved by the end of October.
Areas in at least 15 states currently are seeing FiOS activity at various stages, although the entire U.S. is not currently on Verizon's To-Do List. Instead, the telco plans to heavily penetrate the regions it does choose to go headend to headend against cable.
Verizon's recently published rate card for Keller boasts prices noticeably below typical cable and DBS rates: Notably a bare-bones Basic package starting at $13 and an Expanded Basic package (as many as 180 analog, digital and music channels) for $40. It's offering at least 20 HD channels, and is bundling two dozen Spanish-language channels into one package. The HD set-top box goes for $10, and a combo HD-DVR service is $13. (Pricing in Verizon's future FiOS markets will vary.) Unlike typical cable offerings, FiOS TV also is offering Basic subscribers--not only digital customers--VOD and PPV options, too.
Verizon completed its sign-up of major content providers for the Keller rollout with a late long-term pact with Walt Disney Company that gives FiOS customers access to a dozen Disney channels--including retransmission consent from ABC-owned stations, the various ESPN and ESPN-HD channels, ABC Family, Toon Disney, and others. (Verizon would not confirm that deals with other content providers beyond the Keller market were in place yet.) Additional agreements to carry The Weather Channel, Lifetime Television, TV shopping network HSN, Jewelry Television and Ovation--The Art Network along with the WWE 24/7 video on demand subscription service were also announced as this issue was going to press.
The not-for-profit public interest group Public Knowledge calls the Disney agreement a "win-win" situation for both sides in the ongoing debate over copyright protection and privacy in the digital era. PK President Gigi Sohn said the deal "affirms the obligations of carriers to work with content providers to stop the spread of illegal content by passing on notices to subscribers engaged in alleged unauthorized distribution."
According to Verizon spokesperson Sharon Cohen-Hagar, "We're talking about providing value...in regard to quality of service. But with our planned diversity of programming, like Disney, and with the [Expanded Basic] package at only $39.95, we think that's a much better value than cable is offering."
Cohen-Hagar said Verizon's ongoing rollout of fiber to the premises will mean, technically, there will be a lot of untapped capacity to quickly expand services in the future. "Fiber has enough capacity that we can easily provide even higher speeds down the line. It comes down to customer choice. If the customer wants more services, that's great. If not, that's okay, too."
Although she said Verizon would ideally prefer to have its subscribers sign up for bundled services--telephony, broadband and FiOS TV--it does not plan to impose higher rates for fiber-TV customers who do not use its other services--not directly, anyway. Customers who also subscribe to Verizon voice and computer broadband services will receive $10 off their FiOS bills (or $5 off for either service).
A new survey by Maribel Lopez of Forrester Research points out that Verizon "beat SBC out of the gate" with its Keller launch, and says Verizon "now provides a credible content alternative for TV programming." Lopez suggests that Verizon "can't compete nationwide, but isn't trying to...That means it will be years before Verizon is available broadly enough to pose a threat to large cable operators."
Forrester Research finds about half of 4,752 U.S. consumers surveyed would switch TV providers in order to save $15 a month, while nearly a third would switch for $6 to $10 less in payments. And in what perhaps will only make competitors wince, Forrester finds that nearly one-in-five households (17 percent) "are likely to switch" from their current cable or DBS service to FiOS TV--even without lower rates.
Yet Verizon's big fiber dig has not been without some early problems. It's constructing a passive optical network (PON) with fiber extending from central offices to un-powered hubs, in which the fiber (laid to follow copper configurations) can be optically split up to 32 ways. In Fairfax County and elsewhere, power and cable lines accidentally have been severed. In some cases, as The Washington Post and other media recently documented, fiber tubing had been strewn haphazardly across private property and sometimes left unattended for weeks.
"With huge projects like this when you're overlaying copper wire with fiber, given the nature and magnitude of the problem, accidents unfortunately will happen," Cohen-Hagar told TV Technology. "We try to be as careful as humanly possible. In some cases, we found we had been using maps that obviously had become outdated over time."
Verizon typically disconnects (although it says it does not rip up) existing copper lines, once the fiber has been installed for new customers. This may prove to be a problem because fiber does not carry its own electric charge; it relies on existing electrical outlets at the premises, and if a customer loses power for any reason, FiOS TV (and fiber phone and broadband) will not work--including 911 calls. While Verizon installs a back-up battery at each dwelling, the company concedes the batteries only last about 4 to 6 hours.
Verizon is hoping to complete FiOS pass-bys for up to 3 million premises by the end of 2005.
Telco hoping consumers choose new fiber diet