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Verizon Plants FiOS in AT&T's Backyard

Phil Harvey
1/13/2009
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Verizon Communications Inc. (NYSE: VZ) is preparing to offer its FiOS fiber-to-the-home services to an entirely new set of customers in North Texas by the end of February, Light Reading has learned. This rare occurrence where a telco goes outside its traditional phone network will put Verizon's FiOS in a head-to-head battle with AT&T Inc. (NYSE: T)'s U-verse in some neighborhoods.

Is this a change in strategy for Verizon? Is it an affront to AT&T on the carrier's home turf? Is this an early sign of the Apocalypse? None of the above, actually. This will, however, be great theater for a world of broadband watchers.

Getcher popcorn ready
FiOS and U-verse are as fundamentally different as the companies that offer them. Heavy Reading analyst Adi Kishore says this tiny Texas cage match won't make a difference on a national scale, but it will be interesting because of the two telco TV approaches being compared. "We just don't have a competitive unbundled consumer telecom environment in the US, so this is the only way the two big boys can have it out," he writes in an email to Light Reading.

Light Reading has learned that the first customers Verizon is aiming to reach live in parts of Tarrant, Dallas, Colin, and Denton counties -- areas that are outside the reach of its traditional copper-based phone network, but close enough to Verizon's FiOS video facilities that it makes an extra fiber extension worth a little added expense.

In June, Light Reading reported that Verizon had filed regulatory paperwork allowing it to offer TV service in areas where AT&T and Time Warner Cable Inc. (NYSE: TWC) were the two main wireline competitors. As we noted then, these areas are examples of places where, though Verizon doesn't have a traditional phone network present, it does have a video serving office nearby. (See FiOS vs U-verse.)

Sources say Verizon has found it is well worth the five- to six-mile fiber extension to be able to reach a few new customers and to fully use the capacity of those video serving assets that the company has already bought and switched on. Not everyone agrees with that rationale.

"This is a wonderful microcosm of insanity," says industry analyst Kermit Ross, principal of Millennium Marketing. "Verizon is losing POTS lines by the millions, and it seems to me they ought to be doing more to stop the flow of customers fleeing their own territory, before they start looking for customers elsewhere."

Well, It's a Sign...

Verizon says it has more than 1.6 million customers subscribed to its FiOS TV service, which is available for sale to more than 8.2 million homes and businesses in 14 states. AT&T, as of December 2008, had more than 1 million U-verse subscribers and plans to pass about 30 million "living units" by the end of next year.

There is no proof at all that the carrier is challenging AT&T on its own turf -- or has plans to do so -- in other parts of the country. Indeed, Verizon frequently uses North Texas for key broadband-fed battles (it launched FiOS in nearby Keller, Texas, in 2004, after all) because the regulatory landscape here is as friendly to new video services as the region's early adopter customers. Verizon has said before that its take rates of FiOS services in North Texas are double the national average.

A French Connection?
Analysts say a prolonged fight against other traditional telcos -- in addition to all the cable and satellite competitors -- wouldn't be a wise idea. Even in countries where telcos do compete head to head, they do so with some eye toward self-preservation.

In France, where three telcos compete with the cable MSO, various FTTx builders are tacitly agreeing not to build in the same places, except in Paris, notes Heavy Reading's chief analyst Graham Finnie. Finnie says keeping the take rate of new services as a high percentage of the total homes passed is too critical for the telco business case to allow for taking on many more wireline competitors in a saturated market.

All the same, consumers care most about price, speed, and premium content, says Finnie, and it may not matter as much if these services are coming via fiber-to-the-home or fiber-to-the-node.

— Phil Harvey, Editor-in-Chief, Light Reading

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DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:14:22 PM
re: Verizon Plants FiOS in AT&T's Backyard
For the link:
http://www.dslreports.com/show...
bored_lurker
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bored_lurker,
User Rank: Light Beer
12/5/2012 | 4:14:18 PM
re: Verizon Plants FiOS in AT&T's Backyard
"Verizon is losing POTS lines by the millions, and it seems to me they ought to be doing more to stop the flow of customers fleeing their own territory, before they start looking for customers elsewhere."

This guy is joking, right? He is pulling your leg, right? No one in their right mind can believe that, can they?

That is about the dumbest thing I think I have ever read, or at least really close to it. People are not "fleeing their territory", they are fleeing a technology, being POTS lines, and trying to save that business is like trying to put a cork in a hole in the Titanic. I live in said north Texas and people here are saying "I and everyone in my family have a cellphone that I pay for, what do I need a landline for?" At the same time people who live outside FIOS territory are say "I wish I could get FIOS", which, I don't know, sounds like a good business plan to me.

The market and the money are in video and internet access, someone tell the grandpa "analyst" that building a better or cheaper carriage is not going to save any telco's horse and buggy landline business. Of course they should nurse that business and ride it for all it's worth, but is NOT the future. Anyone saying different wants to sell you something.

Now I could be wrong because if I was right we'd be seeing traditional telco switch manufacturers going bankrupt and .... oh, wait ;-)

Bored
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:14:18 PM
re: Verizon Plants FiOS in AT&T's Backyard
Well, I think his overall point was in line with a knock I have on all the phone companies -- they're tossing aside billing relationships to chase pay TV customers.

If they were better run companies, they'd take care of current customers while expanding and it's not terribly obvious to me that ANY of the big phone companies are doing that. And that's too bad, given that POTS is such a cash cow:

http://www.lightreading.com/bl...

DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:14:17 PM
re: Verizon Plants FiOS in AT&T's Backyard
Appreciate the link:
http://www.fiercetelecom.com/s...
bored_lurker
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bored_lurker,
User Rank: Light Beer
12/5/2012 | 4:14:17 PM
re: Verizon Plants FiOS in AT&T's Backyard
Phil,
your other article makes my point. What I want out of my land line is the ability to check my v-mail from the web, send and receive text, and be able to use it in my car and at the other end of my flight in a distant city. What can any RBOC do to provide that for me on a landline? That is called a dying technology.

To be sure POTS lines are not dead yet, just like the guy in the Holy Grail, and to quote John Cleese "he soon will be". Some applications may never die.

And of course it is a cash cow. All technologies make the most money at the end of their life cycle and after 130 years hopefully so! But thinking that propping up POTS lines sales is going to happen by reducing pricing and adding features misses the point. POTS sales aren't being lost, they are being REPLACED.
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:14:16 PM
re: Verizon Plants FiOS in AT&T's Backyard
Thanks to D Magazine's blog FrontBurner for the link:
http://frontburner.dmagazine.c...


nodak
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nodak,
User Rank: Light Beer
12/5/2012 | 4:14:16 PM
re: Verizon Plants FiOS in AT&T's Backyard
I agree with part of what Phil is saying, before poaching in someone else's territory, take care of your own first. Why are they busy expanding FiOS into ATT territory when they are hemorrhaging customers to the local MSO in so many of their current territories that do not have FiOS installation on the horizon.
fiber_r_us
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fiber_r_us,
User Rank: Light Beer
12/5/2012 | 4:14:15 PM
re: Verizon Plants FiOS in AT&T's Backyard
I am in one of the aforementioned North Texas counties, and in an ATT service area serviced with only the basic 6Mb/s DSL service because I am slightly out of range for U-Verse. And, ATT only delivered this service in the last two years!

I for one welcome our new fiber overlords! As soon as I can get FiOS, I will kill my ATT land-lines, and my DirectTV services as fast as I possibly can.
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:14:14 PM
re: Verizon Plants FiOS in AT&T's Backyard
I'm not asking phone companies to prop up POTS sales. I'm wondering why they don't take measures to hold on to those billing relationships and upsell them to new services?

You can do that by adding value, lowering the price, and that might help their customer acqusition cost.
opticalwatcher
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opticalwatcher,
User Rank: Light Beer
12/5/2012 | 4:14:13 PM
re: Verizon Plants FiOS in AT&T's Backyard
I think Phil and bored_lurker are both right. bored's quote:
"What I want out of my land line is the ability to check my v-mail from the web, send and receive text, and be able to use it in my car and at the other end of my flight in a distant city. What can any RBOC do to provide that for me on a landline? "

This has been my thoughts for the last 5 years. Why the heck don't they provide advanced services on their landlines? That would require spending money to upgrade equipment for their highest paying customers--a concept that seems to be in their blindspot. Just hook VOIP equipment to the ends of the landline and you're there. Seems like a no-brainer to me.
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