The Never-Ending Cable-Telco War Heats Up

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Verizon and the cable industry are going after each other in intense fashion on the technology, marketing and legal fronts.


The latest salvo was launched Monday. Comcast, Time Warner Cable and Bright House Networks filed a suit against the telco, claiming violations of two sections of the Communications Act. The complaint stems from the way customers move from one provider to another. When a company signs a customer, the new provider files documentation to set up the switch. The cable operators claim Verizon is inappropriately using this data to reach out to convince customers to cancel the switch.


That's not the only reason that Verizon and cable companies will be paying lawyers to fight with each other. Verizon has filed a suit against Charter for infringing eight VoIP patents. Last month, the telco sued Cox in a similar vane. Silicon Alley Insider points out that at least some of the patents cover the same technology as those Verizon successfully sued Vonage for infringing. The piece also notes that the cable industry's voice services all are based on PacketCable technology developed by Cable Television Laboratories Inc. (CableLabs). Thus, successfully proving that one cable company infringed the patent will be bad news for all the operators.


This commentary at Michigan Telephone, VoIP and Broadband Blog suggests that the telco may not have as easy a time as it did against Vonage. The cable industry simply is a more formidable foe than the standalone VoIP provider. The writer's point that the cable companies will stick together does not even mention the fact that they use the same technology and that all would be grievously hurt if one lost in court. The writer also points out that the cable industry may fare better in the legal system than before the FCC, which he says has favored telcos in recent years.


The action is heated simply because there is so much at stake. The battle to provide services to the small community of Haverhill, Mass., of course won't tip the scales too far in favor of Verizon or Comcast. But it is a good illustration of the hand-to-hand combat that is ongoing across the United States. In Haverhill, this Eagle Tribune story says, Comcast has been the franchise-holder for a decade. The agreement has five months to run, and the city is negotiating a new deal. However, the city is also talking about inviting in Verizon, which serves the neighboring communities of Metuchen and West Newbury. The story says Comcast serves 238 communities and Verizon has 1.6 million broadband customers in the Bay State.


Massachusetts also is the jumping off point for this Cable Digital News look at the overall cable versus telco dynamic. The story does a good job of dissecting the numbers. In 2007, recently released figures from the Massachusetts Department of Telecommunications and Cable (MDTC) show, Verizon added 66,561 FiOS television customers, bringing its total to 78,544. That's a big gain, but most of the pain apparently was felt by direct broadcast satellite (DBS) companies. Comcast lost only 4,586 video customers. The key fact: Comcast lost 28,762 video subscribers in regions where FiOS was available, but gained 24,176 where it was not.


The story says that the trend lines bode well for the cable industry for two reasons. On one hand, telco fiber projects such as FiOS and AT&T's U-Verse are rolling out slowly (they will be available to only 40 percent of the nation by the end of 2010). Telcos also are trading down, because the voice customers they are losing to cable are higher margin than the video customers they are taking away, according to investment band Sanford C. Bernstein & Co. Inc.