Post by Skaggs on Sept 25, 2005 9:48:06 GMT -5
Cable has TV phoning it in
Telecom giant has a vision of offering new TV service through fiber-optic cables and Capital Region may be a testing ground
By LARRY RULISON, Business Writer
First published: Sunday, September 25, 2005
Verizon Communications Inc. is trying to turn the $63 billion cable TV industry on its head, and the Capital Region is shaping up to be a battleground.
New York City-based telecommunications giant, which employs 3,000 people locally and had $71 billion in worldwide revenue last year, wants to do something unthinkable just years ago: sell TV programming.
The plan is to offer TV through fiber optic cables -- so called "fiber to the premises" -- that Verizon is installing straight to homes in communities across the country, including the towns of Bethlehem and Colonie. The fiber optic supports a new Internet service called FiOS that has download speeds of up to 30 megabits per second, compared to less than 10 Mbps for a cable modem or DSL Internet connection.
On Thursday, Verizon took the wrapping off of its TV product, called FiOS TV, an all-digital TV service that will provide 180 channels for less than $40 a month. It is first being offered in Keller, Texas, a small city north of Fort Worth.
The move comes as cable companies are eating the lunch of telephone companies by selling digital phone service that is "bundled" with Internet and TV service at a discount.
"Verizon saw the writing on the wall," said Ed Kear, a computer networking consultant who lives in Delmar and bought the FiOS service last week, the earliest it was available on his street. "They want to get some of the customers back that they lost."
Jim Murtagh, chairman of the management department at The Sage Colleges in Troy, said Verizon has no choice but to get into other businesses like TV.
"There are plenty of folks that, we know, don't have a home phone; they have a cellphone," he said. "If that market starts to dry up, what (Verizon is) looking to do makes perfect business sense."
Time Warner Cable, the dominant local cable company with 340,000 customers, says it is ready for a fight with Verizon over TV because it has been fighting with competitors like satellite TV for years. Satellite has 23 million subscribers nationwide, compared with 71 million for cable. Just 10 years ago, satellite had fewer than 2 million subscribers, according to the Satellite Broadcasting and Communications Association.
Time Warner also is getting ready to acquire another competitor, Adelphia Communications Corp., which provides service to 60,000 customers in Glens Falls, Canajoharie, the Berkshires and Bennington, Vt.
"We welcome competition," said Peter Taubkin, vice president of government relations and public affairs for Time Warner's Albany division. "We face it every day."
Smaller cable companies in the region could also be affected.
Valstar, a subsidiary of Germantown Telephone Co. that provides cable service to 1,040 customers in Clermont and Germantown in Columbia County, is one of them. Sherry Barringer, human resource director for Germantown Telephone, said satellite is Valstar's biggest competitor right now.
"As far as Verizon goes, I think we're OK," she said. "But it's not to say in the future they're not going to come in (to Valstar's market)."
Cable may have some breathing room. The fact of the matter is Verizon is a long way from offering TV on a widespread scale unless it can change state or federal laws. Like its cable competitors, Verizon is required to negotiate cable franchise agreements in the communities it plans to offer TV service, and those franchises need approval of the state Public Service Commission.
The task is daunting, if not downright impossible. Although Verizon has negotiated a small number of franchise agreements in California, Texas, Florida and Virginia, it has yet to secure one in New York. It is close to getting one in Massapequa Park on Long Island, but has ongoing negotiations with more than 40 other New York municipalities.
What Verizon wants is federal or statewide franchise reform so it doesn't have to negotiate with each community. Ivan Seidenberg, Verizon's chief executive, made this appeal in speeches to business groups in Boston and Long Island last week, and there is also federal legislation under consideration that would eliminate local franchise requirements but still keep intact the fees -- as high as 5 percent of local cable TV revenue -- typically negotiated under the agreements.
"We're looking for any way that could speed up the franchise process," said Verizon spokesman Clifford Lee. "In the meantime, we're not going to stand around and wait."
Richard Alteri, president of the Cable Television and Telecommunications Association of New York Inc., a trade group based in Albany, said he would rather Verizon go to the Public Service Commission and apply for a statewide franchise that includes "substantially" all of the conditions of the franchise agreements negotiated in New York by cable companies.
"Bring it on," Alteri said of the competition. "Just make sure the playing field is level."
It's hard to say how far away Verizon is from offering TV service locally. The company has started selling FiOS in Delmar and Slingerlands within the town of Bethlehem, but it won't say how many subscribers it has so far. Verizon also won't say when it wants to begin offering TV service or when it might begin the franchise negotiation process in Bethlehem or Colonie.
Officials in both towns said they have not yet been approached about it.
"It's still in the planning stages," said Susan Hayes, a government affairs director for Verizon. "It's still very far off."
Cable franchises are a huge source of revenue for local municipalities. Time Warner paid $74 million in franchise fees in New York state last year, and local cities, towns and villages would stand to make millions more if they were to grant franchises to Verizon. The PSC ruled in June, in a case brought by the cable industry and local municipalities, that Verizon must get franchise agreements from New York communities before selling them TV programming.
Bethlehem Supervisor Theresa Egan said Verizon is welcome to come asking for one. Time Warner paid the town $374,601 in franchise fees last year.
"We would encourage a competitive market," Egan said. "We would certainly sit down and negotiate a franchise agreement with them."
Egan hasn't heard much about Verizon's drive for state or federal franchise reform, but she believes that would be difficult -- on the state level at least -- because of the divisiveness of the issue.
Daniel Plummer, a Bethlehem Town Board member and a principal in the government affairs firm Griffin, Plummer & Associates LLC, also supports Verizon's entry into the local TV market. He helped negotiate the town's most recent franchise with Time Warner.
"I would support Verizon coming in in a heartbeat," Plummer said. "Where there is price competition there will be lower prices."
Timothy Lance, chairman of the mathematics department at the University at Albany and president of the New York State Education and Research Network, a nonprofit that provides high-speed computer network services to academic and research institutions, said Verizon's TV offering won't transform the TV market. But it might force telecommunications companies to spend more money.
"I think it is just plain old competition," Lance said. "It's probably going to be eclipsed by some other breakthroughs. It might be the motivation for each to upgrade their infrastructure.
Whether or not TV is available, FiOS already is making a good impression on Bethlehem residents. Ken White, 54, lives in an undeveloped part of the town and works from his home as an irrigation design consultant. Because of where his house is -- his mailing address is Feura Bush -- he doesn't have cable TV access and DSL doesn't work, so he has been using satellite TV and Internet.
He got FiOS in late August, and he loves it, especially because the fast upload speeds allow him to quickly send large files to customers or photos to family.
"When they ran the new cables, I got pretty excited," he said.
White expects Verizon could offer FiOS TV in Bethlehem nine months to a year from now, and he'll get it as long as the price is right.
"I'd love to get the (dish) off my roof, just to make my house a little cleaner," White said. "As long as they're competitive, of course, we'll change. If they're not, we won't. But they will be."
Larry Rulison can be reached at 454-5504 or by e-mail at lrulison@timesunion.com.
All Times Union materials copyright 1996-2005, Capital Newspapers Division of The Hearst Corporation, Albany, N.Y.
Telecom giant has a vision of offering new TV service through fiber-optic cables and Capital Region may be a testing ground
By LARRY RULISON, Business Writer
First published: Sunday, September 25, 2005
Verizon Communications Inc. is trying to turn the $63 billion cable TV industry on its head, and the Capital Region is shaping up to be a battleground.
New York City-based telecommunications giant, which employs 3,000 people locally and had $71 billion in worldwide revenue last year, wants to do something unthinkable just years ago: sell TV programming.
The plan is to offer TV through fiber optic cables -- so called "fiber to the premises" -- that Verizon is installing straight to homes in communities across the country, including the towns of Bethlehem and Colonie. The fiber optic supports a new Internet service called FiOS that has download speeds of up to 30 megabits per second, compared to less than 10 Mbps for a cable modem or DSL Internet connection.
On Thursday, Verizon took the wrapping off of its TV product, called FiOS TV, an all-digital TV service that will provide 180 channels for less than $40 a month. It is first being offered in Keller, Texas, a small city north of Fort Worth.
The move comes as cable companies are eating the lunch of telephone companies by selling digital phone service that is "bundled" with Internet and TV service at a discount.
"Verizon saw the writing on the wall," said Ed Kear, a computer networking consultant who lives in Delmar and bought the FiOS service last week, the earliest it was available on his street. "They want to get some of the customers back that they lost."
Jim Murtagh, chairman of the management department at The Sage Colleges in Troy, said Verizon has no choice but to get into other businesses like TV.
"There are plenty of folks that, we know, don't have a home phone; they have a cellphone," he said. "If that market starts to dry up, what (Verizon is) looking to do makes perfect business sense."
Time Warner Cable, the dominant local cable company with 340,000 customers, says it is ready for a fight with Verizon over TV because it has been fighting with competitors like satellite TV for years. Satellite has 23 million subscribers nationwide, compared with 71 million for cable. Just 10 years ago, satellite had fewer than 2 million subscribers, according to the Satellite Broadcasting and Communications Association.
Time Warner also is getting ready to acquire another competitor, Adelphia Communications Corp., which provides service to 60,000 customers in Glens Falls, Canajoharie, the Berkshires and Bennington, Vt.
"We welcome competition," said Peter Taubkin, vice president of government relations and public affairs for Time Warner's Albany division. "We face it every day."
Smaller cable companies in the region could also be affected.
Valstar, a subsidiary of Germantown Telephone Co. that provides cable service to 1,040 customers in Clermont and Germantown in Columbia County, is one of them. Sherry Barringer, human resource director for Germantown Telephone, said satellite is Valstar's biggest competitor right now.
"As far as Verizon goes, I think we're OK," she said. "But it's not to say in the future they're not going to come in (to Valstar's market)."
Cable may have some breathing room. The fact of the matter is Verizon is a long way from offering TV on a widespread scale unless it can change state or federal laws. Like its cable competitors, Verizon is required to negotiate cable franchise agreements in the communities it plans to offer TV service, and those franchises need approval of the state Public Service Commission.
The task is daunting, if not downright impossible. Although Verizon has negotiated a small number of franchise agreements in California, Texas, Florida and Virginia, it has yet to secure one in New York. It is close to getting one in Massapequa Park on Long Island, but has ongoing negotiations with more than 40 other New York municipalities.
What Verizon wants is federal or statewide franchise reform so it doesn't have to negotiate with each community. Ivan Seidenberg, Verizon's chief executive, made this appeal in speeches to business groups in Boston and Long Island last week, and there is also federal legislation under consideration that would eliminate local franchise requirements but still keep intact the fees -- as high as 5 percent of local cable TV revenue -- typically negotiated under the agreements.
"We're looking for any way that could speed up the franchise process," said Verizon spokesman Clifford Lee. "In the meantime, we're not going to stand around and wait."
Richard Alteri, president of the Cable Television and Telecommunications Association of New York Inc., a trade group based in Albany, said he would rather Verizon go to the Public Service Commission and apply for a statewide franchise that includes "substantially" all of the conditions of the franchise agreements negotiated in New York by cable companies.
"Bring it on," Alteri said of the competition. "Just make sure the playing field is level."
It's hard to say how far away Verizon is from offering TV service locally. The company has started selling FiOS in Delmar and Slingerlands within the town of Bethlehem, but it won't say how many subscribers it has so far. Verizon also won't say when it wants to begin offering TV service or when it might begin the franchise negotiation process in Bethlehem or Colonie.
Officials in both towns said they have not yet been approached about it.
"It's still in the planning stages," said Susan Hayes, a government affairs director for Verizon. "It's still very far off."
Cable franchises are a huge source of revenue for local municipalities. Time Warner paid $74 million in franchise fees in New York state last year, and local cities, towns and villages would stand to make millions more if they were to grant franchises to Verizon. The PSC ruled in June, in a case brought by the cable industry and local municipalities, that Verizon must get franchise agreements from New York communities before selling them TV programming.
Bethlehem Supervisor Theresa Egan said Verizon is welcome to come asking for one. Time Warner paid the town $374,601 in franchise fees last year.
"We would encourage a competitive market," Egan said. "We would certainly sit down and negotiate a franchise agreement with them."
Egan hasn't heard much about Verizon's drive for state or federal franchise reform, but she believes that would be difficult -- on the state level at least -- because of the divisiveness of the issue.
Daniel Plummer, a Bethlehem Town Board member and a principal in the government affairs firm Griffin, Plummer & Associates LLC, also supports Verizon's entry into the local TV market. He helped negotiate the town's most recent franchise with Time Warner.
"I would support Verizon coming in in a heartbeat," Plummer said. "Where there is price competition there will be lower prices."
Timothy Lance, chairman of the mathematics department at the University at Albany and president of the New York State Education and Research Network, a nonprofit that provides high-speed computer network services to academic and research institutions, said Verizon's TV offering won't transform the TV market. But it might force telecommunications companies to spend more money.
"I think it is just plain old competition," Lance said. "It's probably going to be eclipsed by some other breakthroughs. It might be the motivation for each to upgrade their infrastructure.
Whether or not TV is available, FiOS already is making a good impression on Bethlehem residents. Ken White, 54, lives in an undeveloped part of the town and works from his home as an irrigation design consultant. Because of where his house is -- his mailing address is Feura Bush -- he doesn't have cable TV access and DSL doesn't work, so he has been using satellite TV and Internet.
He got FiOS in late August, and he loves it, especially because the fast upload speeds allow him to quickly send large files to customers or photos to family.
"When they ran the new cables, I got pretty excited," he said.
White expects Verizon could offer FiOS TV in Bethlehem nine months to a year from now, and he'll get it as long as the price is right.
"I'd love to get the (dish) off my roof, just to make my house a little cleaner," White said. "As long as they're competitive, of course, we'll change. If they're not, we won't. But they will be."
Larry Rulison can be reached at 454-5504 or by e-mail at lrulison@timesunion.com.
All Times Union materials copyright 1996-2005, Capital Newspapers Division of The Hearst Corporation, Albany, N.Y.
