Verizon intends to have the last word on their “winback” marketing tactics. They were recently rebuffed by the FCC and told to stop contacting customers to attempt to win them back after receiving a competitor number porting request. Verizon filed a petition with the U.S. Court of Appeals for the District of Columbia, seeking to stay the recent FCC decision. Verizon is using the first amendment right of free speech as the core of their argument, arguing the FCC decision violates this right. Verizon is also arguing the decision violates section 222(b) of the Communications Act of 1996. Look for this to drag out for a while. Get the details from this Light Reading post.

Verizon lost one at the FCC. Cable competitors brought a complaint against Verizon regarding some customer win back tactics being used by the phone giant. The complaint alleged that upon receiving a telephone number porting request to a cable competitor, Verizon would contact the customer in question and try to “win them back.” Cable companies claim such tactics were not only unfair, but illegal. The FCC issued a Memorandum Opinion and Order against Verizon and in support of the cable companies complaint. It's somewhat of a surprising development, considering the FCC's own enforcement bureau came out with an opinion siding with Verizon. Apparently several FCC commissioners were not impressed with that opinion.

Verizon did fire back against the original complaint, and issued a complaint of their own regarding the process to switch video service providers. Verizon claims that the process for video switching requires the customer to initiate action with the existing provider, whereas a telephone switch does not. Both points seem to be valid. Whatever the process, it should be comparable and equal. Both telcos and cablecos should have an equal chance to “eat each others lunch.”

Verizon used the NXTComm conference to announce the expansion of their 50 Mbps broadband service for their entire FiOS footprint. Verizon says the ultra fast broadband service, which also includes a 20 Mbps upload speed, will be available to 10 million homes. The increases in speed also include 20/20, 20/5, and 10/2 Mbps FiOS plans as well. "The Verizon network is delivering broadband speeds that are unmatched by any competitor," Verizon COO Denny Strigl said during an address at NXTComm. Verizon had offered these speeds in limited markets previously. Strigl added, “We've already had successful trials of the 100-megabit home, which will be a reality faster than anybody thinks." FiOS Internet 50/20 Mbps service is available in New York and Virginia for $89.95 and elsewhere for $139.95 a month with an annual service plan. The 20/20 Mbps FiOS Internet service is available in all FiOS markets for $64.99 a month with an annual service plan.

Verizon is gaining the “king of broadband speeds” moniker for these upgrades. But for how long? Their cable competitors, namely Comcast, have committed to DOCSIS 3.0 deployments that will offer comparable broadband speeds. All of these ultra fast broadband plans are more for public relations battles than significant broadband market share gains – at least for the time being. The pricing associated with these service plans are out of reach for most consumers. For now these moves grab the attention and imagination of the industry, but will do little in terms of impact on earnings and market share. In time that will change. Perhaps, it ‘s a leading indicator of the future where 20 Mbps+ speeds become the norm for residential broadband.

Verizon announced a new FiOS TV promotion, the Summer Movie Pass, which offers 90 days of free access to movie channels, four free VOD movies, and a free 90 day upgrade to their Home Media DVR package. The free movie channels will include Showtime, Starz, The Movie Channel, Encore, Sundance Channel and IFC. The Home Media DVR allows multi-room DVR functionality, among other features. The movie feature package is priced at $14.99/month. The promotion ends on July 19th.

Verizon will begin marketing its Flex Double Play Bundle this week which offers wireless service with broadband and/or FiOS TV, and no need for a wireline. The new bundle applies to Verizon’s DSL plans of 3 Mbps or FiOS broadband plans of 20 Mbps. It does not apply to their 7 Mbps DSL or 50 Mbps FiOS plans, or their DirecTV video plans. The bundle provides a discount of between $8 and $20 per month, depending on the services selected. Verizon spokesman Bill Kula tells the Associated Press, “We remain very bullish on the traditional copper-based phone service, but we also recognize that there's a growing segment of society that wants to have wireless as its principal home service.”

AT&T launched a similar bundle without a landline last year. These moves are recognition by larger telecom service providers of wireless substitution. Carriers with wireless and broadband assets are at a competitive advantage, relative to wireless substitution, because they have the option of pursuing customers who want to cut the cord. From a wireline carrier’s point of view, having the ability to serve customers who leave the wireline behind with a wireless product presents a tremendous competitive advantage, especially against competitors who can only offer video and broadband options. We always talk about the triple play in terms of voice, video, and data. We’ll begin to see the context of triple play expand to include wireless, video, and data.

Verizon announced the expansion of 7 Mbps DSL service to an additional 3.4 million customers across 20 states and the District of Columbia. The move in effect doubles the capacity of Verizon’s most widely deployed DSL service of 3 Mbps. Verizon began the upgrade in January, when they announced its availability with 400K customers.

A very interesting competitive development is taking place in the Dallas, TX suburbs. Verizon is apparently preparing to overbuild AT&T U-verse territory with Verizon FiOS service. This is a first, at least that I'm aware of, where large incumbent "baby bells" enter each other's territory with competing landline services. Apparently, the rules have changed, and dramatically so. Verizon appears to be taking advantage of statewide video franchising rules (as Texas provides), and acting as a cable overbuilder, as opposed to a traditional telecom CLEC. The development was reported in this OneTrack post. I guess the gloves are slowly coming off.

This strategy does go counter to conventional wisdom. Verizon is entering the market as the third triple play provider, competing with well established brands (not to mention the DBS competition). Most business consultants would advise against such a move. What does Verizon have up their sleeve? Do they feel that strongly about FiOS and its competitive advantage/differentiation? Perhaps. It will be an interesting test case to observe. If Verizon has some success with this overbuild strategy, will we see it in more territories where Verizon is geographically positioned against AT&T and Qwest? Verizon's purchase of GTE several years ago gives them multiple territories in multiple states that are closely aligned with incumbent AT&T and Qwest territories. Qwest would seem to be more vulnerable, since they have no triple play network of their own. Of course, if Verizon aggressively moves on an overbuild strategy, AT&T certainly won't sit back and wait - they may decide to strike first. I recognize this is just speculation, seeing as the first household in AT&T territory has yet to be lit with FiOS. But this is definitely a development to keep a close eye on. We may be witnessing the first salvo of an historic competitive battle.

The proverbial cat is out of the bag. Verizon is acquiring Alltel for $5.9 billion, plus the assumption of $22.2 billion in debt, a deal that was first reported by CNBC yesterday. "This is a perfect fit, with Alltel's high-value post-paid customer base, its solid financials, our common network technology, and significant, readily attainable synergies," says Verizon CEO Ivan Seidenberg. Alltel serves more than 13 million customers in markets in 34 states, primarily in more rural markets. Verizon expects the deal to close by the end of the year.

As we noted in an earlier post, this deal creates some interesting competitive implications, all of which can’t be examined this quickly. The deal seems to have come together really fast. There must have been some motivated principals. The Wall Street Journal reports that the previous buyers of Alltel were anxious to sell because their original leveraged buyout terms were becoming increasingly “ugly.” They are basically breaking even on the deal, and avoiding potential losses, because the complex debt transactions of the original buy out are now coming back to haunt them because of the credit crisis in the U.S. economy. The new outcome, if it passes regulatory muster, will create the largest wireless carrier in North America, with 80 million or so subscribers. By our estimation, Verizon, the quintessential traditional wireline telephone company, will now have double the number of wireless subscribers, compared to its wireline access lines (40 million as of their last quarterly report). Perhaps we should start thinking of Verizon as a wireless company with some wireline assets, as opposed to the opposite.

Verizon announced an increase in overall channel line up, with emphasis on 25 new HD channels, which will be available this summer. With the expanded HD line-up, FiOS customers will soon be able to get somewhere between 52 and 65 HD channels, depending on their location. New HD channels will include Lifetime, Animal Planet, TLC, Science Channel, Smithsonian Channel, Starz, and Showtime. Verizon also reiterated their commitment to offer 150 HD channels by year end 2008. "The popularity of HD, sports and multicultural content continues to grow, and we're committed to leading the industry in the scope and quality of our programming offerings," said Terry Denson, vice president - FiOS TV content and programming.

In addition to the new HD line-up, Verizon will be adding a new sports channel, Setanta Sports, “… a premium channel dedicated to bringing European and International soccer and rugby to U.S.-based fans.” Verizon says they will be the first terrestial based video provider to make Setanta available, at least at the time of launch. In some regards, Verizon is playing catch up with HD. Its main competitors, Comcast, Time Warner Cable, Cablevison, and DirecTV are actively increasing their HD line-ups as well. It’s a little difficult to say who has the lead among traditional cable companies, because line-ups change depending on location. DirecTV, who by most accounts, has established itself as the overall HD leader. Verizon appears to be up to the challenge, and should their promise of 150 HD channels by the end of the year hold true, they will be more than capable of meeting HD competitive challenges.

Update-6/5/2008 - As of 10:00a ET, the Wall Street Journal is reporting that Verizon and Alltel have come to terms on a sale, with Verizon offering $5.9 billion and the assumption of $22.2 billion in debt. More to follow soon.

There is a rumor floating around that Verizon is in talks to purchase Alltel Wireless for $27 billion. If the rumor holds true, a Verizon acquisition of Alltel would create the largest U.S. wireless carrier, surpassing the current leader AT&T, with a combined 80 million subscribers. AT&T currently has about 72 million subscribers. Such a move would have interesting competitive implications. For example, it may open the door for other interested carriers, wireline or wireless, to gain or expand wireless assets because anti-trust concerns will certainly force Verizon and Alltel to shed some overlapping or dominant territory. Secondly, it would expand the Verizon footprint and brand into more rural territories and perhaps impact wireless substitution there. Much more information to come on this potential blockbuster deal.