FiOS

J.D. Power: TelcoTV Beats Cable

Bernie — Wed, 01 Oct 2008 21:16:28 -0400

The latest J.D. Power rankings for television service has AT&T U-verse and Verizon FiOS beating cable companies in customer satisfaction. There’s a sense of irony here, because according to J.D. Power, cable companies have been beating phone companies in telephone satisfaction. Payback I guess. AT&T U-verse led the pack, with the highest ratings in three of the four regions, including North Central, West, and South. Verizon FiOS ranked highest in the East region. WOW was the highest rated cable company, finishing second in the North Central region. DirecTV was the highest rated DBS provider, finishing second in the East.

Like the cable companies ratings in voice, telcoTV providers are probably on somewhat of a honeymoon with subscribers. Being the new kids on the block with new features and aggressive promotions tends to leave a “good taste” in the mouth of consumers. These ratings will mean much more after a few more years of competition in many more markets than today.

Verizon Showers Comcast Home Turf With New HD

Bernie — Mon, 22 Sep 2008 09:14:04 -0400

Verizon announced its FiOS capable networks in the Philadelphia region now have access to 56 new HD channels, raising the total HD channel availability to 86. Philadelphia is home to Comcast headquarters. “As a result of this enhancement to the FiOS TV lineup, Verizon is now offering consumers here more HD than both Comcast and RCN offer,” Verizon says in a company statement. The new HD line-up includes Animal Planet, TLC, Science, Smithsonian, CNN, CNBC, Lifetime, Bravo, TBS, History Channel, Weather Channel, USA and SCI FI channels. Verizon is putting on a full court press in Comcast home turf territory, and is heavily marketing both the new HD line-up and their current free 12 month multi-room DVR promotion. Care to guess how many Comcast employees are signing up for FiOS?

Marketing the Triple Play with Barbeque and Potato Chips

Bernie — Fri, 12 Sep 2008 23:00:56 -0400

Verizon is slowly making their way through New York City and meeting their cable competitors head on. Time Warner Cable and Cablevision share various parts of New York City and its 8 million potential subscribers. Cablevision has more experience in battling Verizon, having tangled with them in various New York suburbs. They’re meeting the FiOS challenge quite nicely. It will be interesting to see if they can repeat their suburban success in the city. Bloomberg News highlights this pitched battle in a revealing article. Verizon is using a variety of marketing tactics to build market share, including barbeques in New York’s boroughs and potato chip and soda parties in Manhattan skyscraper lobbies. On a good night, they’re getting 30 subscribers a building to churn over to FiOS. Well, at least until DOCSIS 3.0 shows up anyway.

Feet on the Street is Answer to Telco Competition

Bernie — Tue, 09 Sep 2008 22:26:44 -0400

Comcast COO Steve Burke says the way to counter competition from telcoTV competitors is to put “feet on the street” and get local. Burke made the comments at the Merrill Lynch 2008 Media Fall Preview in Marina Del Rey, Ca. Burke is talking about getting back to cable TV sales and marketing basics – knocking on doors and taking names. According to Burke, it’s working. “In places where we’re competing against FiOS, we’re doing better this year than we were last year or the year before,” he said.

Cable, more so than telco has a long legacy with knocking on doors. I can remember some decades ago, when the cable man showed up at our door. He was an excellent salesman because he managed to co-opt my brother and I into the sales process. There we were, the three of us trying to convince my mother how desperately we needed that 30 channel package. After all, what household in the early eighties could get along without HBO? She respectfully declined. But it didn’t last long – she eventually gave in. The moral of the story – feet on the street banging on doors works. And cable has much more experience at it than telco. Is this tried and proven sales strategy behind telco's DSL losses last quarter?

AT&T Confirms Whole Home DVR

Bernie — Tue, 09 Sep 2008 09:53:18 -0400

AT&T confirmed a previously reported soft launch of whole home DVR. The service, called Total Home DVR, allows up to eight connected televisions to view recorded DVR content. AT&T joins Verizon FiOS who offers a similar product. Both companies are trying to gain a competitive edge, using multi-room DVR strategies to differentiate themselves over cable and DBS competitors. DVR differentiation will be interesting to watch over the coming months. Cable may try to exploit a networked DVR service, which could help level the playing field with multi-room DVR options. Networked DVR received a new lease on life after a recent court ruling in favor of Cablevision, which tried to launch the service last year, but was sued by several movie studios to stop it.

No Slowdown in TelcoTV

Bernie — Wed, 27 Aug 2008 09:01:43 -0400

Recent days have seen a flurry of new launches for video services by both AT&T and Verizon. Markets like Jacksonville, Florida, South Bend, Indiana, and Hampton, Virginia are all now able to receive video from the local phone company in addition to cable and DBS options. And it’s not just the large players either. Smaller telcos across the U.S. continue to launch IPTV services. Avail Media, an aggregator of content and IPTV solutions for smaller telcos, announced 20 new affiliates this week. The competitive posturing continues as well, with all kinds of promotions being offered to entice people to switch services. I live in the D.C. area and noticed a commercial from Comcast the other day promoting free DVR for a year – a direct response to Verizon FiOS’ ongoing free multi-room DVR promotion. The ongoing battle lines seem to be intensifying. Should be fun to watch.

Justifying FTTH

Bernie — Tue, 19 Aug 2008 10:25:10 -0400

Recent discussion about cable companies beating telcos with new broadband additions has reignited the debate of FTTH and justifying its expense. One argument suggests that cable companies appear to be winning the current broadband battle because their network is superior to a telco’s copper and DSL based network. FTTH would level the playing field, the argument suggests. There is some evidence to support this theory. When you look at Verizon, they did see a big drop in DSL adds last quarter – but they also added new FiOS broadband customers at a much faster rate than DSL customers. But at what cost? In a recent New York Times article, Craig Moffett, an analyst with Sanford C. Bernstein is quoted as saying “… that Verizon would be $6 billion in the hole [as a result of FiOS] when all was said and done.” The New York Times article examines both Verizon’s and AT&T’s strategy for meeting the cable competitive challenge. It’s illustrative of an ongoing debate faced by telcos – should I “bite the bullet” and go with FTTH now, or should I try to extend the life of my copper plant investment for as long as possible. Both sides of the argument have merit.

The extending copper plant argument suggests that you should not strand too much investment in a new wireline network like FTTH, when the technology environment is changing so rapidly. Among other ongoing developments, there is no denying the momentous shift towards wireless for both voice and data. So there is some concern that plowing all this investment into FTTH may not pay off. The New York Times quotes AT&T CTO John Donovan as saying, “The last thing we want to do is overdeploy fixed capacity into the ground where there is no recovery for being wrong by putting in too much.” You certainly can’t disagree with the premise. Of course there is always a flip side to every argument. The competitive race is going on right now. The last thing any telco can do is stand still. FTTH proponents will argue, indecision will just allow cable competitors to pick you off, using a robust triple play bundle, powered by their “superior” network. So while you may not have “over invested” in a FTTH network, you also may not have a stable enough customer base to continue as a going concern over the long term.

What gets lost in this argument, especially when put into the context of Verizon and AT&T, is the impact of wireless. AT&T and Verizon can both afford to somewhat gamble with their wireline network of the future choice. The reality is, both of these companies are now really wireless companies, with wireline assets. Wireline derived revenue is increasingly becoming a minority of their revenue generation. If either of them mis-steps with their wireline strategy, they can afford to adjust accordingly. Other telcos who do not have that luxury are much more at risk with this decision. If you don’t have wireless, then your future obviously rides with broadband. Becoming the best at offering broadband in your given market should be the aim. Deciding on which route to take to achieve that objective will depend on a variety of factors. Factors like consumer preferences, competitor capabilities (present and future), technology innovation implications, and market demographics and firmographics, to name a few. Telcos need a comprehensive understanding of all of these factors before deciding which direction to take. Once these issues are understood, decisions about pulling the trigger on FTTH now, later, or never are much easier to make.

FiOS Looking to Pre-empt Network DVR?

Bernie — Tue, 12 Aug 2008 22:28:00 -0400

Verizon announced their latest FiOS promotion which offers free HD DVR or free Home Media DVR service for 12 months. Their Home Media DVR is a multi-room DVR service and allows the viewing of recorded programs on up to six televisions throughout the home. Multi-room features are increasingly becoming a competitive differentiator among telco and cable competitors. Verizon’s new promotion is coming on the heels of Cablevision winning a network DVR court case that conceivably will allow them to offer a network DVR product. Network DVR allows service providers to offer DVR services without the need for a DVR capable set top box in the home, resulting in a potentially lower cost DVR service. Time Warner is also eyeing a network DVR product as a result of the court win. Is Verizon’s move a pre-emptive strike against network DVR? Perhaps. There are certainly other considerations for the promo, but it sure doesn’t hurt to have it in your back pocket when/if your cable competitors roll out a network DVR product. The promotion runs through October 4th.

FiOS is Not a Slam Dunk

Bernie — Fri, 01 Aug 2008 11:08:18 -0400

The past few days, I’ve written a post or two about how in 2Q08, big cable “cleaned big telco’s clock.” I use the term big in recognition of the hundreds of small telcos across the U.S. who may not be experiencing a similar “beat down.” More than likely, these advantages will see-saw from competitor to competitor over time. I’m sure we’ll see big telco take it to big cable in quarters to come. But one particular circumstance is worth noting. It’s Cablevision’s continuing success in meeting the competitive challenge of Verizon FiOS. Cablevision reported somewhat envious numbers for 2Q08 that demonstrate they are in no way ceding their business to Verizon. Some facts to take notice of:

Basic video subscriber additions up by 7K from 1Q08 – adding basic cable subs in this competitive environment is almost unheard of from cable companies

Broadband customers additions up 52,000 or 2.2% from March 2008 and 227,000 or 10.5% from June 2007

Digital voice customers up 81,000 or 4.8% from March 2008 and 367,000 or 26.2% from June 2007 – Cablevision leads all cable companies in voice penetration of homes passed at 37.6%

Achieved ARPU per Basic Video Customer of $132.29 in the second quarter – another industry leading metric

Cablevision intends to begin their migration to DOCSIS 3.0 and will also be deploying a mesh Wi-Fi network across their footprint, both of which will build additional value into their product portfolio

Achieving these results alone is impressive. Achieving them in the face of competition from FiOS is borderline amazing. This is not a single quarter phenomenon – Cablevision has been achieving these results for some time. It takes a little thunder out of the FiOS buzz and also reveals that FTTH triple play deployments are not bullet proof. Telecom carriers who are looking to FTTH to address their competitive challenges, especially in the face of declining DSL adoption, should look at this example as a cautionary tale. A FTTH network alone may not be enough. When faced with a competitor who is more than willing to take FTTH head on, telcos could find themselves in a “dog fight.” Cablevision has proved that they cannot only compete against one (with billions in backing by the way), they can succeed against it. As FiOS moves into more Cablevision territory throughout New York City, this pitched battle will be worth watching.

What’s Wrong With DSL?

Bernie — Mon, 28 Jul 2008 17:55:10 -0400

Recent quarterly reports from the likes of AT&T and Verizon paint an ugly picture for DSL. AT&T’s DSL growth rate slowed significantly last quarter, adding only 47K net new subscribers. Verizon fared much worse, losing 133K DSL subs. It’s true that Verizon’s marketing attention is FiOS right now, which certainly contributes to their DSL losses, but are those losses a reason for concern? Maybe. In their last quarterly report (1Q08), Comcast reported that 66% of their new cable modem customers defected from DSL. On the surface, one could argue that DSL is losing the broadband war. Perhaps this issue is apropos to Verizon and AT&T alone. Both of them are somewhat distracted. As mentioned earlier, FiOS has all the attention at Verizon and AT&T is in the midst of iPhone mania. It might not be fair to generalize DSL’s woes based on those two alone. As other telcos release their quarterly numbers, we may see a more general trend that either supports or detracts from this potential DSL growth hypothesis.

We all know that broadband growth is slowing. And the U.S. economy and the uncertainty it creates doesn’t foster great conditions for growth in any sector. These factors may be impacting DSL’s apparent slowing momentum. But what’s troublesome for DSL carriers per the economy, is that DSL has historically been the broadband “value play” (across a national average – this “value” price advantage is not present in every market). Logically speaking, in this economy, DSL should be holding up well relative to other more expensive broadband options. To get a true picture of DSL’s potential trouble, we’ll have to closely examine upcoming cable modem numbers. If cable modem additions are not slowing at relatively the same pace, DSL may indeed have a problem. It may signal telecom carriers will have to increase their efforts to make their bundle more attractive and their value proposition more relevant with subscribers. As their quarterly numbers reveal, AT&T and Verizon have less to worry about on this issue, because wireless revenue comes in to save the day for them. DSL carriers who don’t have that luxury may indeed need to ask what’s wrong with DSL. What is your DSL experience revealing for you?