Verizon makes tiny dent in TV rollout

Boston Business Journal - July 6, 2007

by Todd Wallack

Boston Business Journa

Verizon Communications Inc., which began selling TV service in Massachusetts last year with great fanfare, still has a long way to go to overtake Comcast Corp., the state's largest cable TV provider.

Verizon (NYSE: VZ) had 11,983 video customers as of Dec. 31 -- about the same number as Shrewsbury's municipal cable operator and far less than rivals Comcast and RCN Corp., according to documents filed with state regulators. RCN Corp. had more than 63,000 subscribers and Comcast (Nasdaq: CMCSA) had 1.6 million.

The figures underscore the fact that despite all the attention Verizon's launch has garnered, it will take Verizon time to secure local franchises, build out its new fiber-optic network and lure customers away from cable and satellite providers. Indeed, Verizon's FIOS TV service is still only available to 280,000 of the state's 2.5 million households, up from about 200,000 at year-end. And it took cable providers decades to build their networks and customer bases. Verizon first launched video service in Woburn on Jan. 24, 2006, and has since rolled out the service to 43 other cities and towns in the state.

"There is nothing you wouldn't expect in the first year of a rollout,'' said Verizon spokesman Phil Santoro. He said Verizon has exceeded its internal expectations for sales in the state. The company hasn't publicly announced any targets for Massachusetts sales.

Comcast spokesman Jim Hughes, though, said the figures show Comcast is continuing to dominate the state's pay TV business.

"Verizon is playing catch-up while we continue to innovate and to grow our business here in Massachusetts,'' Hughes said.

Regardless, Comcast and other providers are watching Verizon closely. Verizon, the state's largest phone company, already has an enormous base of phone and Internet customers, a well-known brand name and enormous marketing muscle, which could help it expand quickly. Verizon is marketing its FIOS service through television, radio and print ads, as well as direct mail and door-to-door sales. Meanwhile, cable providers are trying to encroach on Verizon's traditional turf by offering phone service. And both cable and phone providers have long competed head-to-head by offering high-speed Internet service.

So far, Verizon has signed up fewer video customers in Massachusetts than in several other states it serves. According to the company's own figures, the firm had a penetration rate of 6 percent in Massachusetts as of year-end, compared to a penetration rate of 9 percent overall.

But Santoro said the figures are skewed because Verizon ramped up service earlier in many other states. Indeed, in most of the towns Verizon served last year in Massachusetts, it only started offering service in the second half of the year, giving it less time to sign up customers. Santoro also said it's important to factor in how much money Verizon is spending on marketing in Massachusetts compared to other states. But he refused to divulge those figures.

Verizon has fought to keep its local subscriber figures under wraps, refusing to tell reporters and asking the state to keep the numbers confidential; Verizon said it needs to keep the data secret to avoid tipping off competitors about its roll-out. But other cable providers opposed the request, saying the figures have long been public for other cable TV providers. And in a ruling last month, the state Department of Telecommunications and Cable rejected Verizon's request. DTC Commissioner Sharon Gillett pointed out that figures for individual towns were already publicly available from each municipality, and cable providers had a good idea where Verizon stood.

"Since the numbers are either generally known to the industry or easily acquired through appropriate means, the number of subscribers Verizon serves in a particular community is not a trade secret," Gillett said.

According to the state filings, Verizon signed up the largest number of customers in Woburn and Reading, where it has offered the service the longest. In Woburn, it had 1,355 customers. And it had 1,365 in Reading. By contrast, Verizon had only a handful of customers in towns like Natick and Littleton, where it just launched service in December.

Nationwide, Verizon said it had signed up nearly 500,000 FIOS TV customers in 11 states nationwide as of June 20. Verizon also signed up another 618,000 customers for DirecTV's satellite service by the end of March. Verizon declined to provide comparable figures for Massachusetts.

See a related article here about FiOS coming to Rockland, MA