Whether Lucky or Smart, Verizon Makes Good Choices


In a significant piece of news, Verizon says it is getting out of the phone business. Actually, it says that in seven years it will move its circuit switched customers to VoIP. At CES last week in Las Vegas, the carrier's Chief Marketing Officer said that it will begin to offer VoIP to FiOS customers in coming months, beginning in Maryland. The last line of the story provides a potent reason why the company is making the switch: Verizon lost 3.7 million telephone lines between the third quarters of 2007 and 2008. Sounds like a good business to ditch.


Clearly, Verizon's FiOS strategy is bearing fruit. The platform war between the cable and telephone industries has been going on for decades. It seems that Verizon and the other telcos-at least those that are deploying cutting-edge fiber networks -- are in the ascendancy.


That's the message between the lines of this Ars Technica story. The writer takes a fairly skeptical approach to the news that cable operator Charter Communications has filed a lawsuit claiming that Verizon violates four patents in its FiOS fiber platform. The four patents, the story says, cover video-on-demand, dynamic pricing and data transmission.


The writer suggests that the suit is based on something other than an unquenchable yearning for justice. He makes a couple of points: Charter has not deployed the emerging Data Over Cable Service Interface Specification 3.0 (DOCSIS 3.0) in its network, which the writer implies makes it more likely to lob a lawsuit or two at its telco competitor. The other point he raises is simply that Charter hasn't filed suit against other cable companies. He notes the coincidence that those companies are not threatening Charter's customer base. The story has a nice graph comparing fast and "superfast" tiers of service offered by AT&T, Verizon, Comcast, Qwest and Charter.


Ars Technica's take on the suit-which was made, it is fair to say, with only superficial insight into the technical issue involved-clearly jibes with the prevailing common wisdom: Cable is running scared of FiOS and scrambling for a cohesive response. If cable operators are skittish, the latest Consumer Reports survey probably won't do much to settle their nerves. The organization said that respondents found FiOS and AT&T's U-verse "the most consistently satisfying providers for their Internet, television, and telephone services." This particular sentence-tapping cable as the new wannabes-is probably particularly galling:

In areas where telco-delivered service is not available, a highly-rated cable company is the next-best choice for many households.

The cable folks may be getting one piece of good news, however. Research firm Information Gatekeepers is reporting that Verizon and AT&T may be going after each other. Network World says that IGI says FiOS is expanding into areas served by AT&T in northern Texas. This could spark a nationwide showdown in which the two telco giants go after each other.


Fraticidal wars aside, the upward trajectory Verizon is enjoying is amply demonstrated in this piece. The telco, the writer says, is getting higher average revenue per user, slowing churn and reducing operating costs. The biggest factor is FiOS, which is proving the Verizon assumption that if service providers build more bandwidth, subscribers will find ways to fill it. The key, according to CEO Ivan Seidenberg, is that Verizon's broadband revenues are offsetting losses from its wire line phone network. That, of course, is what is enabling the company to get out of the copper-based circuit switched business. It's also an impressive display of proactive planning.