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Summary:

Verizon recently launched its FiOS TV and fiber-based broadband service in New York City, The New York Times is taking stock of the service, which seems to be doing well. Verizon’s $23 billion investment into FiOS wasn’t viewed kindly, and Wall Street viewed AT&T’s cheaper U-Verse […]

Verizon recently launched its FiOS TV and fiber-based broadband service in New York City, The New York Times is taking stock of the service, which seems to be doing well. Verizon’s $23 billion investment into FiOS wasn’t viewed kindly, and Wall Street viewed AT&T’s cheaper U-Verse plan as more practical and affordable.

Despite such early shellacking on Wall Street, the company’s decision to go with the more expensive fiber is proving to be smarter, even though it is still not clear if (and when) Verizon is going to start making big money on its bet.

“If I were an auto dealer and I wanted to give people a Maserati for the price of a Volkswagen, I’d have some seriously happy customers,” said Craig Moffett, an analyst with Sanford C. Bernstein. “My problem would be whether I could earn a decent return doing it.”

Moffet estimates that the company is going to lose about $6 billion on FiOS all told. Others feel that 20 percent buy-in from potential customers makes it profitable. Wall Street seems to have warmed up to the Verizon story, impressed perhaps by its recent growth, especially when stacked up against AT&T.

My view is that all U.S. phone companies are in trouble because of major shifts that are going on in the industry. Verizon, with FiOS, at least has an offering that addresses the needs of the future broadband users. Whether they make money on it, who knows.

At the end of second quarter 2008, Verizon had more than 2 million FiOS Internet users and 1.4 million FiOS television users. In comparison, AT&T has 549,000 subscribers for its TV service. Verizon is offering better speeds than AT&T and is very competitive with its local cable rivals such as Time Warner Cable and Cablevision. In comparison, AT&T so far offers regular DSL packages whose speeds are spanked silly by cable offerings.

Anecdotally (and acknowledging the fact that technology blogs are skewed in favor of early adopters), it seems Verizon FiOS subscribers are happier with their Internet connections. I have no gauge of people’s reactions to FiOS TV. In comparison, AT&T U-Verse seems to elicit a response that can be summed up in one word: meh!

What do you guys think? Take our poll and share your thoughts.

  1. Let’s see, the choices are–

    1) Deploy FiOS, keep customers from cable triple play, attract customers from cable or

    2) Do nothing, watch customer base bleed out.

    Supposedly, deploying fiber saves money over (aging, limited to deliver broadband) copper plant once you light the fiber.

    AT&T has taken a penny-wise, pound-foolish strategy with consumer broadband that is ultimately going leave them losing a good chunk of their customer base to cable operators (and maybe WiMAX, if ClearWire every gets off the ground…)

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    1. What isn’t mentioned here is that Uverse isn’t DSL. It will has much, much faster speeds than DSL. I’m an installer/repairman for AT&T and I assure you, it is far faster than AT&T standard DSL and any cable DSL I have used. The big problem for AT&T is that in so many areas, the old copper cables have been neglected for years. It seems the company who swears they are all about customer service believes that it’s techs should get X number of jobs done per day. Period. So, in an effort to clear the maximum number of jobs, the copper cable that the big wigs planned to use for the final 3k-5k feet to the customer is in sorry shape. So, it must be repaired and/or replaced to get the new Uverse offering up and running. The only problem? The big wigs don’t realize the shape their facilities are in thanks to middle management insisting that the techs scramble to get the work done. And to top it off, the copper cable required for Uverse to work is 40 or more years old. One entire section of the town I work in everyday has phone cable that was placed in 1947.

      If the big wigs could ever get middle management to pull their heads out of their rumps, Uverse could be the best Phone/TV/Internet option out there. However, that could be a big “if”.

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  2. @ Doug Mahoney

    Amen to that. I think Wall Street is notoriously clueless about making predictions. It is hard to say what the outcome is going to be, but frankly Verizon has chosen to walk down the right road.

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  3. Totally agree with this assessment. I live in North Jersey and have Cablevision’s Optimum Online. During the day, I can’t tell whether I have cable or dialup. It becomes that slow. At night, everything is relatively fast, but the daytime speeds are totally unacceptable.

    Verizon came through my neighborhood last year to lay down fiber and am seriously thinking about moving over.

    I can’t imagine what AT&T was thinking in terms of keeping DSL and waiting til the last minute. Seems rather foolish considering that Verizon has done a great job carpet bombing the area with advertisements about FIOS.

    And even if most people don’t keep a home phone, we still need a fast internet connection and not everyone’s cell phone works reliably in their home. Not to mention that wireless internet is a joke in terms of bandwidth.

    FIOS TV is incredible also! I have a friend who has the triple play version from Verizon and the picture and sound is amazing. No loss of quality at all and dare I say a better picture than cable?

    In the end, each person’s situation is going to be different. Wall Street was definitely short sighted in this regard. But then again, it’s always about the bottomline.

    Penny wise, pound foolish is right.

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  4. The cable companies don’t get it. They have slower connections, fewer TV channels, entry level routers AND cost more. If customers want bundled services, FiOS is the way to go. For customers who only want TV or phone, FiOS may not be for that crowd.

    I’ve had FiOS internet for 3+ years now and there is no comparison to cable. I’ve had FiOS TV for close to a year and it makes traditional cable look like garbage. Not to mention companies like Cablevision don’t even have many of the TV channels that FiOS has, like the NFL Network. The fact Cablevision keeps offering me hundreds of dollars to switch back to them, for a slower connection and higher price, shows they still don’t get it.

    As for AT&T’s U-verse service, that should not even be allowed to be compared to Verizon’s FiOS. Putting fiber-to-the-premises like FiOS does versus fiber-to-the-cabinet like AT&T means that while Verizon is spending billions more, they are future-proofing their business.

    Who doesn’t want to pay $99 a month for a 20MB connection, unlimited long-distance calls and TV service with one of the best lineups around? And I know it will shock most folks, as it did me, but Verizon’s technical support for FiOS is so good it’s scarry. It’s not like dealing with the phone company.

    Wall Street is always so focused on making their predictions in a bubble. They look at the offering or service on paper, run numbers and think they know the whole story. How about they actually go out and talk to customers of the service? Speak to the people who are actually paying for the service and get some real insight into the business and offering.

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    1. NJ Broadband Monday, April 26, 2010

      Given the course of time here in NJ, what the heck were you smoking? Left FIOS faster than there lousy service and billing.

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    2. For everyone stuck without Verizon. Friday, July 9, 2010

      I had the absolute pleasure to live in Tampa, Florida in a local service area that was served by Verizon for all of our needs. We had fios right to the outside service point, provided by Verizon right up to the box on the outside of our residence. Cable tv, wireless, and internet access as well as local telephone service bought and paid for a flat fee was nothing short of amazing for us. was an easy descision, as well as an easy installation that just brought myself as a business owner more service options and hsftd OPTIONS than i can ever hope for right now.

      i would just like to know what the current Fios hopeful packages offered by verizon for business customers in my area are and what the benefit over ATT would be.

      Everything that i try to do just ends up in a bad place with att saying that they dont offer Fios but they will offer a business speed of 6.0 Mbps, with a business account.

      I have already had a speed test done on my ADSL line by an att certified tech that upgraded as well as provided the top speed that i could hope to achieve over copper lines.

      After seeing his results and also after accepting ATT over old copper lines, the final results

      ended up at a miserable 2.5 Mbps Tops for my physical location, after Att corporate suggesting i upgrade my service to 6.0 Mbps Business Dsl, i cancelled any requests to do so after seeing that the maximum bandwidth we could expect was in fact 2.5 MBPS over old ATT copper lines. At the same time they were just more than willing to upgrade us to 6.0 MBPS business dsl, even though the best physical lines we could hope to get from them simply cannot support those speeds.

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  5. While comparing these three services I believe one issue got overlooked – marketing. What AT&T and cable companies do is wait until Verizon (at their own expense) educates everyone and their grandmothers on why high speed is important. It will be easier for them to deploy networks as late as possible to capture the audience that’s prepared and waiting. As of right now talking to most of the people who pay for cable (discount me) reveals they don’t have a slightest idea what the difference is. They can only see the difference in the Total line of their bill. Whoever gets the best number in that line – wins.

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  6. [...] the telco’s $23 billion bet, which after initially scrutiny, has won some respect (While Om thinks Verizon has laid the groundwork for the future, whether it makes any money is still up in the air). [...]

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  7. I wish we had a FIOS equivalent in SF. A few of my friends in NY have FIOS and it is just godly. Too bad AT&T has a stranglehold in the Bay Area, allowing it to offer its pathetic Internet service. I’ve been satisfied with Comcast’s service for the last few years, but it’s still a bit of a joke compared to FIOS, especially the upstream.

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  8. I agree with Vlad. Outside the small group of techies who read this blog, most people don’t care about anything beyond 1-2 Mbps, particularly since video on the internet is still not there yet, as there’s no HD or even SD and nobody’s making money. Given all this, the more cost-effective approach from AT&T makes more sense and will win out. Wall Street doesn’t know much about tech but they can crunch numbers and are usually right about basic stuff like this; it’s high-flying tech stuff where they lose their heads.

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  9. @Ajay It’s certainly not the majority, but I know a lot of Asian-Americans ages 40+ that care a lot about their Internet speeds because they keep in touch with relatives via VoIP. One of the households I mentioned in my previous post is headed up by an old Filipino-American couple that opted for FIOS because it made their VoIP calls sounds better.

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  10. Raymond: You’re right that there are a minority of people who use VoIP for international calls and don’t know anything about technology, so they mistakenly think that a difference between 1-3 Mbps and 5-10 Mbps makes a difference for audio calls that only take 40-80 Kbps. More likely there are other packet prioritization and latency issues that might affect sound quality between ISPs: it’s not a speed issue.

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