Taking on No. 1
Verizon wants to compete for TV subscribers . . .
Say the name Verizon, and most consumers in America get some clear pictures in their mind. The phone company. The Bell System. The wireless test guy asking, "Can you hear me now?"
But within the next several months, Verizon Communications Inc. will be asking consumers to start thinking of Verizon as a television brand, alongside Comcast, NBC, DirecTV, and Fox.
Why Verizon wants to jump into pay television is clear: Its core telephone and high-speed Internet access businesses are under relentless attack by wireless and cable companies including Comcast Corp. and Time Warner Inc., offering what has emerged as a triple play of voice, video, and data services. Verizon is pouring more than $1 billion into a massive fiber-optic network upgrade that will reach 3 million customers' homes by the end of next year, including thousands in Greater Boston.
But just what Verizon will offer to entice television-loving couch potatoes to defect from cable and satellite remains less than perfectly clear. Company executives predict that it will be an all-digital package, with a core of as yet unnamed news, entertainment, and sports channels competitive with cable and capacity for far more high-definition channels. The price will compete with the average $45 to $60 for midrange cable packages.
Verizon also hopes to offer a more interactive television-watching experience and may give customers more leeway to choose the channels they want a la carte, instead of forcing them to choose take-it-or-leave-it tiers that cable customers typically have to buy to get popular movie channels like HBO or Showtime or premium sports, music, and entertainment programming.
"Platforms that will make a big difference to the customer will be interactive," Verizon chief executive Ivan G. Seidenberg said in a Globe interview last month. "Customizing it, so that you're not requiring people to buy 50 channels or 500 channels, I think we can add a degree of control for the customer. We think we can be one of the only ones to do all the things the customer wants and do them well."
But many analysts are skeptical that the largest of the Baby Bells to be spun out of AT&T Corp. in 1984 can learn how to do television and do it well enough to cover the network overhaul costs. The last big example of a phone company trying to crack the cable market is widely considered a fiasco: AT&T's $100 billion bet in the late 1990s on buying cable television companies to get a wire back into millions of US homes. The fallout from that gambit triggered another AT&T breakup that delivered its cable operations to Comcast.
"There's theory and there's practice to phone companies getting into cable TV," said Josh Bernoff, a media analyst with Forrester Research in Cambridge. "They're going to have to learn a lot more about assembling packages of channels that people want and marketing them."
Moreover, "Verizon basically has one chance to launch this successfully," Bernoff said. "There is not an idea in people's minds now of what it means to get television service from Verizon. If they screw up the marketing, the positioning, the set-top box, they don't have a competitive lineup of channels, or whatever else, they will leave the idea in people's minds that Verizon doesn't know how to do TV."
Verizon has begun amassing cable executive talent, including its move earlier this fall to hire Terry Denson, the former vice president of programming for Insight Communications, the ninth-largest US cable provider. Denson, who is also the former director of business development and affiliate sales and marketing for MTV Networks, is overseeing Verizon's video product acquisition and packaging, pricing, and marketing strategies.
Company officials bristle at suggestions that Verizon is unable to learn how to market a new service. "We heard the same thing when we entered the long-distance business," spokesman Jack Hoey said. "Today Verizon is the third-largest long-distance provider in the US.
"We heard the same thing when we began competing against cable modems," he said, and now Verizon counts 3.25 million broadband Internet subscribers.
While television is a leading capability of the fiber network, Verizon stresses that it is hardly the only feature. The new network will deliver Internet access at speeds of 15 megabits and higher, five times as fast as most cable modems and 300 times as fast as dial-up and with much faster upstream access for online gaming and sharing video, music, and pictures.
"One of the advantages of having this technology in place is that it provides a platform to offer future products that aren't even on the drawing board today," Hoey said.
"It's not a limiting technology. It has the potential to leapfrog cable TV services with broadband and video applications that none of us has yet conceived," he said, including possible applications for telecommuters and people using high-speed Internet connections for medical checkups and taking classes.
Because the television comes over the same pipe and platform as phone and Internet access, industry officials can envision features such as people watching a live baseball game calling up a player's statistics in a pop-up box on the television screen or caller-identification services that flash the number of an incoming call on the television.
Verizon is being closely followed into the television market by SBC Communications Inc., the second-largest US phone company, which serves most of Connecticut and a swath from Ohio to Texas to California. Last week SBC closed a deal to pay Microsoft Corp. $400 million for software to deliver Internet-based television programming, part of a $4 billion network upgrade that, unlike Verizon's fiber-to-the-home approach, will use existing copper phone wires for last-mile delivery of television and broadband services.
Comcast chief executive Brian L. Roberts, speaking with industry analysts earlier this month, acknowledged that Verizon and SBC can be a "meaningful competitor" in pay television. But referring to false starts by the Bell companies in television as far back as 1994, Roberts said: "A number of us have lived through this before. Let's play it out."
Gartner Dataquest media analyst Patti Reali pointed out how saturated the television market is already, with well over 80 percent of Americans getting some kind of pay television. For Verizon to grab any significant market share, "they must have have an incredibly compelling pricing package for their bundle," Reali said. "I think they would be extremely lucky to get 10 percent."
Peter J. Howe can be reached at firstname.lastname@example.org.