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FiOS Fees: Ticking Up Again

11/21/2007 7:44 AM

A few weeks before Super Bowl XLII, Verizon will boost the price of its main programming package by $5 per month for new subscribers, to $47.99. This comes a year after it raised the per-month fee on the package by $3.

Yep, that outpaces inflation. But "competitive" video providers were supposed to drive rates down. At least, that’s what telcos told regulators

In a filing with the FCC last year requesting a waiver to the so-called integrated set-top ban, Verizon cited a January 2006 study by Bank of America that said cable companies offered "significant price decreases" on services in response to the telco’s entry in Keller, Texas; Herndon, Va.; and Temple Terrace, Fla. Verizon executives said deals from incumbent operators in those markets were up to 50% off regular prices.

But a report earlier this year by the Texas chapter of the National Association of Telecommunications Officers and Advisers found rates for a basic tier of cable service have actually increased in that state over the last two years in markets where there are two or more competitors.

The NATOA report did find Verizon’s entry as a video competitor provided a lower-cost alternative for basic and expanded-basic video services. 

However, after Verizon’s nationwide 12% rate increase for the FiOS Premier package in January 2008, the differences between cable and FiOS TV rates will have narrowed considerably. If they haven’t evaporated altogether.

As Sanford Bernstein’s Craig Moffett noted in a research note yesterday, Verizon’s price increase "should serve as a reminder (in regulatory circles) that the forces driving price increases are not limited to a ‘lack of competition.’"

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