Verizon versus Comcast has benefit

May 07, 2006|By JAY HANCOCK | JAY HANCOCK,SUN COLUMNIST

The next phase of the telecommunications revolution got to my street a couple of weeks ago, but it showed few signs of dissolving "all of the monopolies and hierarchies and pyramids and power grids of industrial society," as techno-seer George Gilder predicted a decade ago in Forbes magazine.

Instead, it was a dozen guys with shovels, working incredibly hard, digging 3-foot holes so one quasi-monopoly, Verizon, can swipe business from another quasi-monopoly, Comcast.

Whatever. I'm willing to wait for postindustrial anarcho-nirvana if I can save $20 on my cable bill. Rather than ending, the telecom revolution has descended from the stars, rolled up its sleeves and built fiber-optic lines that people will actually use, even if it's only to watch Nationals baseball games.

Verizon and the diligent people laying its fiber-optic cable have launched a significant upgrade to American infrastructure. People were amazed in the 1990s when Iridium spent $5 billion to launch 66 satellites for a planetwide phone system. NASA's annual budget is an impressive $16 billion.

Well, between now and 2010 Verizon will spend what Sanford Bernstein's Jeff Halpern estimates is $22 billion to lay fast cable to the doorstep of millions of homes; wrap phone, TV and Internet into one product; and attack Comcast, Cox, Time Warner and other cable monopolies.

Verizon is a former Baby Bell phone company (once Bell Atlantic and Nynex) that became a national giant through various mergers, most recently with for former MCI Inc. Its stock has suffered from the enormous sums it is investing. But to hear the company tell it, dissatisfied cable customers are responding to its FiOS TV broadband product like Parisians greeting the Allies in World War II.

In the six weeks since Verizon launched FiOS in Howard County, "the response has been great," says company spokesman Harry Mitchell, without offering figures. "We're extremely pleased with it."

Comcast, for its part, says its new phone service is enrolling customers by the thousands, and "our phone customers are coming from somebody," says spokesman Jim Gordon. Somebody such as Verizon, he's saying.

In the seven months since the phone company introduced its first cable TV offering - in Keller, Texas, outside Dallas - it has grabbed 24 percent of the available homes, Mitchell said.

Verizon's FiOS broadband Internet service, which it claims is faster than regular cable because the glass fiber goes all the way to the house, has gained an average share of 9 percent in markets where it has been available six months, he adds.

Seeking 30% share

The company wants a 30 percent share in its markets within five years, which seems doable. It is introducing FiOS TV and Internet in 16 states, including Virginia. By the end of last year, it had laid new cable to 3 million homes; it expects FiOS to be available to 6 million homes by the end of this year.

In Maryland, Verizon sells its Internet/TV combo in only Howard County but hopes to begin soon in Bowie, where it just got a TV franchise. Last week the company struck an agreement to lay cable on public land in Baltimore County, The Sun reported, and it hopes to score a TV franchise there soon.

In places where it has rolled out FiOS, Verizon has undercut prices of entrenched cable companies and prompted them to offer unadvertised deals to customers who threaten to switch, according to a report by Bank of America stock analysts issued in January.

Verizon's most attractive product may be its "triple play" - digital cable TV, broadband Internet and unlimited local and long-distance phone service for $105 per month before taxes. Many Maryland homes pay more than that to Comcast just for Internet and TV.

In other markets, "we discovered that incumbent cable customer sales reps were willing to offer more competitive pricing after mentioning FiOS" - even lower than the FiOS price, said the Bank of America report.

Comcast triple play

In Maryland, Comcast has responded with its own triple play: voice, Internet and TV for 12 months for $99 a month for new customers. Existing customers can add one or two of the products for $33 each. Unlike FiOS, Comcast's triple play is available almost everywhere in Maryland besides Baltimore and will soon be offered there, too, said Gordon. He said there are "no significant differences" between Comcast's lines and Verizon's.

Comcast, for its part, isn't standing still in the capital investment or product-upgrade categories, either. It says it has spent $39 billion on network improvements in recent years. It's rolling out new programs and features, including faster speeds, free antivirus software and video mail, and it says it "competes every day for every customer."

Phone, TV and Internet all on one, cheaper bill? Nirvana may not be here yet, but it gets closer when there is more than one company promising to deliver it.

jay.hancock@baltsun.com

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