Verizon Launches an Aggressive $94.99 FiOS Triple Play in New York City

| July 28, 2008 | Digital Home - U.S. | Competitive Update

| Analyst: Larry Hettick

Current Perspective: Positive
Vendor Importance: High
Market Impact: Low

Event Summary

July 28, 2008 – Verizon now offers New York City (NYC) residents a FiOS triple play priced at $94.99 a month that features FiOS Internet at 20 Mbps downstream and 5 Mbps upstream, the Freedom Essentials voice plan, and FiOS TV service with 54 free HD channels -- quickly following up on the July 16, 2008 approval by the New York State Public Service Commission (PSC) for Verizon to provide TV service to all five boroughs in the city. In addition, FiOS TV service now offers 100 HD broadcast HD channels – more than Time Warner and Cablevision combined in New York City.

Analytical Summary

• Current Perspective: Positive on Verizon’s offering New York City (NYC) residents a competitively priced FiOS triple play ($94.99 a month) because it quickly follows the July 16, 2008 approval by the New York State Public Service Commission (PSC) for Verizon to provide TV service to all five boroughs in the city. Also positive for the NYC FiOS TV service to offer up to 100 HD channels, because it gives NYC FiOS customers more broadcast HD channels than Time Warner Cable and Cablevision combined.

• Vendor Importance: High to Verizon, because the launch marks day one of 3.1 million added FiOS TV sales opportunities compared to a nationwide customer base of 22.446 million residential access lines reported in Q2 2008 - approaching 15% of Verizon’s possible target market. Verizon FiOS has already passed about 25% of possible NYC living units, and the company plans to pass 98% of Staten Island and 58% of Manhattan with FiOS by the end of 2008.

• Market Impact: Low on the national digital home services market in the near-term, because Verizon can immediately sell to only about 750,000 potential NYC subscribers that have homes passed by the FiOS footprint at the end of Q2 2008. For the long term, this will have a moderate impact, because if Verizon achieves its projected 30% market share in NYC with FiOS TV, it will add over one million FiOS TV subscribers, increasing its importance as a national video provider.

Recommended Competitor Actions

• Since FiOS is only available in about 20% of NYC and about one-third of Cablevision’s footprint, Cablevision can boast about its existing Optimum Online service in the near term. The company's standard Optimum Online service provides up to 15 Mbps/2 Mbps speeds, and those speeds go up to 30 Mbps/2 Mbps with Optimum Online Boost, making its service many multiples faster than the current generations of Verizon’s DSL, which are limited to a maximum speed of “up to” 6 Mbps to 8 Mbps.

• Cablevision needs to continue extending its current triple play promotions, or, better yet, make the discounts permanent. Cablevision's 1.59 million VoIP subscribers have shown the kind of inroads its bundles can make against the incumbent telephone company.

• Since much of Cablevision’s video success is based on its triple play sales, Cablevision needs to upgrade its NYC broadband network from DOCSIS 2.0 to a DOCSIS 3.0 infrastructure to keep up with Verizon’s superior FiOS broadband speeds of up to 50 Mbps downstream.

• Both Cablevision and TWC need to add more HD channels to their video packages to counter the 100 HD channels available now and the 150 HD channels Verizon plans to offer by the end of 2008.

• Time Warner Cable needs to proceed with its planned digital upgrade to recover the bandwidth it needs for more HD channels and a DOCSIS 3.0 deployment in NYC. TWC also needs to deploy DOCSIS 3.0 to offer faster broadband speeds to compete with FiOS Internet speeds.

• TWC should immediately lower its $114.95 All-in-One Triple Play Package monthly price in NYC and lower its price on All-in-One Triple Play Package w/ Road Runner Premium (now at $129.95 a month) because both plans have inferior features (with slower Internet, fewer digital and HD channels, and extra charges for voice mail) and are more expensive compared to the Verizon $94.99 FiOS offer.

CLIENTS ONLY

Competitive Positives and Concerns

Recommended Vendor Actions

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