Last month, Verizon started offering cable television over its all-fiber optic network for the first time in New York City. Verizon's FiOS-TV launch presents a direct challenge to Time Warner and Cablevision, the current cable television providers for the five boroughs. That is welcome news for New Yorkers who have long complained about high prices and poor customer service. But will New Yorkers benefit as these titans clash over the most lucrative cable market in the country?
Recently, Verizon has been losing ground in the battle for high-speed internet, with most new subscribers opting for cable from Time Warner and Cablevision over Verizon's DSL. FiOS, though, not only allows Verizon to provide faster speeds than cable, it finally lets the company offer the same combination of services as its two competitors: Internet, phone and video. Since video is the new offering, that is where Time Warner and Cablevision are focusing their responses.
Time Warner Strikes Back
Time Warner's Harriet Novet, vice president of public affairs for the New York City region, expressed confidence that the company's customers will remain loyal. "Verizon is not the first competitor in the New York market," she said, perhaps referring to satellite TV companies. "Competitive options have always existed in New York, and Time Warner has always been prepared."
To keep its customers, Time Warner has introduced new features such as Video Caller ID (available to those have both TV and digital phone service only) and Start Over, which allows customers to restart a show and watch it from the beginning at any point of the program. That new service, though, is not yet available citywide and does not work with all channels.
Regardless of the success of its new features, Time Warner does offer one service that clearly stands out for many New Yorkers: NY1. The only 24-hour dedicated local news channel that covers the entire city, New York 1 is only offered on Time Warner Cable. Cablevision offers its own News 12 service that focuses on Brooklyn and Bronx.
Verizon FiOS does not offer any similar channel in New York - yet. "We have a news channel that has been launched in the suburban Washington D.C. area, and we're reviewing whether we plan to do that in other markets," Verizon spokesperson John Bonomo said. Verizon FiOS also has a widgets feature that allows viewers to get weather information for their location. Still, for loyal Time Warner customers and New Yorkers who need their news, this is no replacement for NY1.
Will Speed Sell?
Verizon may be new to the TV market, but it has experience providing Internet. FiOS Internet, with its dramatically higher speeds, puts Verizon at a clear advantage over the cable providers in this area. Standard FiOS Internet service (at $57.99 a month) is 20 megabits per second (Mbps) for downloads and 5 Mbps for uploads. FiOS also has three other tiers of Internet service for those who want to spend more money for a faster connection. The top tier provides up to 50 Mbps download and up to 20 Mbps upload for $144.99 per month. (If you'd like to get a sense of what the difference in these speeds means, watch this video.)
Time Warner's Road Runner's top-speed service in the city is its Turbo service that has speeds up to 15 Mbps download and up to 0.768 Mbps upload for $55.90 a month, though that won't be available to the entire city until the end of the year. Customers using Time Warner's standard service (10 Mbps download for $45.95) get a magical-sounding feature called Powerboost that "sends a burst of speed when customers download large files," according to Novet. This temporary burst in speed helps customers download large files more quickly.
The technology to improve broadband speeds over existing cable lines is available, but Time Warner and Cablevision do not seem to be in a rush to deploy it. DOCSIS (Data Over Cable Service Interface Specification) 3.0 would allow for faster speeds across cable - up to 160 Mbps by some accounts. It enables symmetrical connections, which means that upload and download connection speeds are equally fast. That's especially useful for VoIP phone calling, telephone service over the Internet that allows customers to make cheaper domestic and international calls, and other applications that require fast speeds back and forth. DOCSIS 3.0 could help Time Warner and Cablevision compete with FiOS on speed, and the cable giant Comcast has already begun implementing it in its markets.
Novet was mum on the prospects for DOCSIS 3.0 in New York, saying only, "It is an emerging technology. We're working very hard on it." But news reports suggest the company will test it this year and possibly try to deploy it in 2009 or 2010 in markets, like New York, where it faces competition from FiOS.
Cablevision, too, seems to be dawdling on DOCSIS 3.0. In a recent conference call with investors, Tom Rutledge, the chief operating officer, said that the technology will not be commercially deployable until the end of the year and didn't specify where the company would begin launching the upgrades. On Long Island, Cablevision offers free wireless service in certain areas to their subscribers, but there is no indication that the company plans to try that in New York City.
Taking it to the Airwaves
Rather than compete on quality, both cable companies have launched ad campaigns to try to take some of the thunder out of Verizon's lightning. The more aggressive Time Warner put a graphic on its Website that has a picture of comedian Mike O'Mally with the text, "FiOS is a new word, but it's still the same old phone company. Why suffer potentially slow, messy installations? Time Warner Cable's digital cable gives you fiber optics without hassle."
The ads proved more than just an annoyance for Verizon, which filed a lawsuit against Time Warner charging the company had made false statements about Verizon's FiOS service. Verizon took issue with two statements made in a 60-second spot. In the ad an actor playing a customer tells a Verizon representative that Time Warner has "been using fiber optics for over a decade." Then the customer asks the representative, "Just to get TV from you, don't I need a satellite dish?" Time Warner edited the spot to remove the state about Verizon customers needing a satellite dish for FiOS service. (They don't.) In its current version, though, the ad still claims that Time Warner has been using fiber optics for years.
In a very limited, technical sense this is true. "All communication companies have some fiber optics, somewhere in their network," said Bonomo of Verizon. But, he added, FiOS is "100 percent fiber optics from our central offices directly to your home," while the cable companies use the old coaxial lines to wire customers' homes and bring service to them.
Time Warner's ad campaign capitalizes on its position as the incumbent. All it has to do is convince customers that Verizon's service is the same as Time Warner's and people lose the motivation to switch.
In another effort to fend off Verizon's invasion, Time Warner is pushing a "Price Lock Guarantee," which offers discounts of about 10 to 12 percent for customers who sign up for three-year contracts. Three years is a long time for Verizon investors to wait for a return.
In general, the financial facts work in the cable companies' favor. Verizon is under pressure from investors to generate income from its multi-billion dollar investment in a fully fiber optic network. Meanwhile, Time Warner and Cablevision can milk their existing, albeit weaker infrastructure.
Verizon, meanwhile, is taking steps of its own. The company launched its entry into television in New York City with an impressive 100 high definition channels. Not all of the HD channels are free - 54 are available with standard service for a basic rate of $47.99 a month that also includes a selection of high-definition videos on demand. The additional 46 HD channel are available with subscriptions to extra sports or premium movie packages. Still, it is a big selection compared to Time Warner, which currently offers 45 high-definition channels on its Digital Starter Pak service ($51.95 a month) in Staten Island, Brooklyn, and Queens (60 total with the extra subscriptions) and just 30 in Manhattan (going up to 37 with the additional purchases). Time Warner has also introduced a new high definition version of its video on demand service in some parts of the city.
Cablevision, which has been going head to head with FiOS on Long Island since 2006, has been steadily increasing its high-definition channel options. The company announced the addition of 15 more ahead of the FiOS New York launch, but that still only brings its offerings to a total of 60 channels, well behind Verizon.
Time Warner chief operating officer Landel Hobbs recently acknowledged his company's need to increase high-definition options, saying that the current priority in New York is to offer it "in vast numbers." The company is promising 100 high definition channels by December, according to Novet, just enough to catch up to Verizon. But Verizon isn't resting. Newsday, which is owned by Cablevision, reported in July that Verizon's target is 150 channels by the end of the year.
Overall, more high definition channels may not seem like much of a benefit to cable customers whose complaints tend to focus on price and service. During its negotiations with the city, Verizon managed to get the penalty for missing a service appointment reduced from a free installation or entire month of service to just a $25 credit. This raises concerns that Verizon will sink to the level of its competitors rather than raise the bar. Time Warner, which still faces the old, larger penalty for missing an appointment, has responded by shortening the scheduled window for service appointments from four hours to two hours.
From the looks of things, the competition from a single new entrant into the market will spur only minor improvements. High-end customers will have access to higher speeds and more high definition channels. The average customer might have to agree to a long-term contract to see any savings on price. And any cell phone customer can tell you what long-term contracts mean for customer service.
The real test for Verizon's impact on cable service in New York will come this fall as the city begins negotiations with Time Warner and Cablevision for new franchise agreements. Will Time Warner and Cablevision commit to stricter customer service standards? Will the administration require them to provide their high definition and video on demand services to community and government channels? As the companies continue to slug it out, we need a referee to make sure consumers get real improvements, not confusing commercials and flashy doodads.
Joshua Breitbart and Kristofer RÂˇos run the Digital Expansion Initiative at People's Production House. Â