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Verizon Milestone Sends Warning Sign To Satellite Pay-TV Players

By | February 4, 2008

      [Satellite News 2-4-08] Verizon has surpassed 1 million customer barrier for its Fios IPTV service in the United States ramping up the pressure on its satellite and cable competitors.
          Verizon reached the milestone Jan. 28, adding nearly 800,000 subscribers since the end of 2006 when the telephone operator reported just more than 200,000 subscribers. Including satellite TV customers served in partnership with DirecTV, Verizon is nearing 2 million video customers.
          Verizon rival AT&T reported 231,000 customers for its U-verse IPTV service at the end of 2007, up from 126,000 at the end of the third quarter and giving the two U.S. based IPTV operators a total of nearly 1.3 million customers. Verizon initiated its Fios service in September 2005, while AT&T launched U-verse in December 2005
          “The Fios TV offering is a great mix of strong product and excellent value,” Jerrlyn Iwata, director of programming for Fios TV, told Satellite News.  “In less than 28 months, more than 1 million customers have chosen Verizon Fios TV, vaulting us into the Top 10 among cable providers in the” United States.
          According to Iwata, word of mouth has been a key behind Verizon’s success. “Word-of-mouth has been a tremendous and invaluable sales tool for us,” she said. “When consumers see Fios TV they want it, they get it, and they tell their friends about it.” In a Jan. 28 conference call to discuss Verizon’s financial performance, company executives said they expect to pass another 3 million homes with their fiber-to-the-premises network during 2008.
          Spencer Wang, a media equity analyst at Bear Stearns warned about this growing threat to satellite players in an August research note. “We believe that the rollout of RBOC [Regional Bell Operating Company] video is worse for DBS [direct broadcast satellite] operators than it is for cable operators as the RBOCs will be offering a bundled service offering that will be harder for DBS to defend against than it will be for cable operators to defend against,” he said. “Increased competition will likely put pressure on the four primary metrics that drive a DBS operator’s value: subscriber growth, [average revenue per user] growth, subscriber acquisition costs and churn.”
          Verizon plans to expand its high-definition (HD) offerings and place even more direct pressure on its satellite rivals in an area where they have the advantage over IPTV, said Iwata “There’s no doubt that satellite providers have raised awareness and interest in HD programming, but our customers expect us to lead in this category,”  she said. “We offer around 30 HD channels in most of our markets today and will continue to add HD channels this year, bringing us to 150 HD channels by year end.”

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