If you can’t beat them, buy them


Verizon is doing its very best to roll out IPTV services on its spanking new FIOS network. Its mega-billion dollar investment could come cropper, if the company fails to get franchisee licenses from various different municipalities. So far, local governments have not played ball, but Verizon might have found a way out, reports The Wall Street Journal. The plan is simple – if the company gets a statewide approval, instead of knocking on every muni’s door, it will pay them 3% of annual television revenues, rather than 2%. The program is being put to test in New Jersey first. I find this logic hard to argue with. More money in these tough times? Why not? But also worry that this could come out of consumer pockets somehow or the other! (Can anyone elaborate on this?)

This development comes a day after a nasty he-said-she-said battle between cable and phone operators at a public hearing in Edison, NJ. Franklin Lakes Mayor Thomas Donch says Verizon will not be able to offer a local children’s sports game broadcast, so why bother. “I’m all for competition,” said Donch, “but I’m not sure that all the concerns can be addressed in the state Legislature.” A county-by-county, muni-by-muni license scheme would ensure that Verizon cannot roll out its IPTV service till mid-2006, a scary development. Meanwhile, NY Public Service Commission voted 4-0 to reject a March request from the likes of Cablevision and local governments who contend that VZ cannot build the network unless it has all the licensess, reports The Albany Times


Martino Mingione

Oh, these Telco’s also botched another elementary business tactic. Namely, choosing the best jurisdictions to start their IPTV service in first. I have not seen written about in the blogosphere. If interested, you can read my thoughts on this topic at http://www.ReinventTV.com, search “business tactic” to find the articles.

Martino Mingione

I am not a supporter of the idea that each municipality can hold sway over licensing a television provider. However, I find it amateurish that neither Verizon or SBC prepared for this certain and enevitable outcome.

You may recall that when Comcast bought AT&T two years back, thousands of municipalities across the country had to approve each individual license transfer in order to make it legal. Even now Time Warner and Comcast have to work the license in each municipality in their Adelphia aquisition. It may be arcane, but it has been the rules for a long, long time.

As a simple matter of business plan execution, someone should have known that (1) local government officials are one monopolies that do not voluntarily surrender their power or jurisdiction; and (2) the local monopoly cable provider who has suffered under these rules for over two decades would not allow a new competitor a free ride.


I’ve actually dealt with deployment of the Verizon FIOS fiber service to some trial custoemrs here in southern California and let me tell you this. The service is NOT ready for prime time. Not even close. Verizon has some extreme hardware issues with the ethernet-to-fiber box that is used at the customer end. There are issues with this box that will cause the FIOS line to start sending out multi-megabits of garbage traffic and the only way to fix the problem currently is:

1. Plug your FIOS ethernet feed into a router first, not directly into your PC
2. Call up the Verizon FIOS techs to have them reset your line

And even then, I’ve seen some FIOS customers with bizzare problems like packets sized greater then 640 bytes get completely dropped to the floor and lost. Basically, Verizon is trying to roll this service out way sooner then it was ready to be in my opinion. I’m sure they will eventually iron these issues out but in the meantime I’d be wary of their ability to deliver on complex technical products like IPTV on top of the already not quite smooth running FIOS network.

Jesse Kopelman

Of course the money will come out of the consumers’ pockets. The franchise fees are already part of your cable bill. A statewide tax would just be another item. Look at your cell phone bill, mine is 20% taxes and fees. This is no pass through either, the fees the carrier collects are not necessarily correlated to the taxes assessed it or used to pay said taxes.

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