A small Texas town is home to the first price shoot­out between Verizon's FiOS TV service and digital cable and satellite. Two providers in Keller, Texas, (pop. 8,000) already have guns blazing: Verizon is offering a full digital cable service for $39.95, and Charter is responding with digital cable and broadband access for only $50 a month. Shawn Strickland, Verizon director of FiOS TV product management, talked with B&C's Ken Kerschbaumer about the new service.
How's the rollout going?
Overall, we've been very happy. We haven't made rates public, but we've been pleasantly surprised at how receptive the market has been. We're targeting 20% penetration in about three years, and, based on what we've seen so far, we're pretty comfortable with those numbers.
Is getting traction as simple as offering more channels for less money, or do you have first to educate customers on what FiOS is?
We've found that, even if consumers don't understand how the system works, they think it's better because it's fiber. And we've seen that perception play through in our conversations with customers in Keller. So while the technology is a big asset to us, the challenge is being finicky enough to make sure the quality of the product matches the perception of what fiber can deliver.
Why don't you use your video-on-demand product as an “upsell” component of your TV package like most cable companies?
Consumers don't understand product distinctions based on technology [like analog or digital]. What they do understand are terms that are relevant to them. So, for example, above our standard program package, we only have two additional tiers: movies and sports. And we also created an analog package that is limited to local signals because that's where most of the viewing is. We view VOD not as a pull-through tool on digital but as an opportunity to generate transactional revenue, increase loyalty and introduce new products.
Cable and DBS companies are dominating the fight right now. Do you think Verizon would ever work with the cable industry as a partner?
It's certainly conceivable, although satellite is an important partner for us in areas where we don't have satellite. We do have some common policy and market objectives with cable that will ultimately bring us in alignment. But while there are areas of common ground, I don't think you'll see a telco welcomed into the cable fold anytime soon.
One of the hottest issues for distribution companies is digital must-carry requirements. Does Verizon have a must-carry policy in place?
We're working through those issues right now. We're trying to strike a balance between some of the more traditional positions around the carriage of broadcast stations and the advantages we have of a clean slate. So we look for opportunities to give more value to the broadcasters, realizing that very few of them have a single linear channel they want to distribute; there are on-demand assets and additional linear programs. And we think we can offer more carriage of those things.
How do you approach interactive services?
We use IPTV to deliver our VOD and any interactivity, like the interactive program guides. We basically have a broadband connection into every set-top box, and, on top of that, it's two-way broadband. We intend to use that capacity to expand the breadth of the content as well as to bring another level of real-time interactivity into the system. We can add to that capacity as the demand grows to offer more VOD and other services. And we don't have to take bandwidth from one of our other services to do that.