Verizon to Enter Pay Television Market with Fiber-Optic Upgrade

Strategic Insights -

Verizon Communications Inc. will soon begin offering pay television services to compete with cable and satellite providers, seeking to capitalize on its fiber-optic network upgrade reaching 3 million customers' homes by the end of next year. Company executives predict an all-digital package with a core of unnamed news, entertainment, and sports channels, competing with cable prices and offering a more interactive television-watching experience. The move comes as the phone company's core telephone and high-speed Internet access businesses face relentless competition from wireless and cable companies.

Key Takeaways:

  • Verizon will invest over $1 billion in a massive fiber-optic network upgrade, reaching 3 million customers' homes by the end of next year.
  • The new service will include a core of unnamed news, entertainment, and sports channels competitive with cable, with the potential for far more high-definition channels.
  • Verizon aims to offer a more interactive television-watching experience, with a la carte channel options and customizable packages.
  • Company officials predict the price will compete with the average $45 to $60 for midrange cable packages.
  • Verizon has begun amassing cable executive talent, including Terry Denson, a former vice president of programming for Insight Communications.
  • The expansion is likely to be closely followed by SBC Communications Inc., the second-largest US phone company, which has also announced plans to enter the pay television market.

Statistics:

  • 3 million: Number of customers' homes expected to be reached by Verizon's fiber-optic network upgrade by the end of next year.
  • $1 billion: Cost of Verizon's massive fiber-optic network upgrade.
  • 15 megabits: Speed of Internet access to be delivered by the new network, five times as fast as most cable modems and 300 times as fast as dial-up.
  • 3.25 million: Number of broadband Internet subscribers currently marked by Verizon.
  • $45 to $60: Average price range of midrange cable packages.
  • 80%: Percentage of Americans getting some kind of pay television.
  • 10%: Estimated market share Verizon may be able to grab, according to Gartner Dataquest media analyst Patti Reali.

Sources:

  • The Boston Globe, "Verizon Plans TV Service, Amid Concerns over Ability to Compete," Nov. 22, 2004.
  • Knight Ridder/Tribune Business News, "Verizon Plans to Venture into Pay TV," Nov. 2004.
  • Forrester Research, "Media and Entertainment: The Future is Interactive," 2004.
  • Gartner Dataquest, "Media and Entertainment Research," 2004.
  • Forrester Research, "Media and Entertainment Research," 2004.