There’s some interesting data about Verizon’s FiOS TV growth stuck into Exhibit 3 of the lawsuit filed yesterday against Verizon Communications by small marketing-service firm Digital Art Services.

But how much of it is believable?

The lawsuit itself calls into question the veracity of those numbers: Digtal Art Services alleges that the telco reported bogus numbers for FiOS TV subscribers by including "pending" customers who haven’t yet actually been hooked up with service. 

In the New York/New Jersey market, the number of "pending" subscribers was substantial, according to Digital Art Service’s complaint — about 33% of the total. Citing a document puportedly obtained through Verizon’s ad sales partner, Viamedia, the suit says 38,059 of the 115,955 customers in the New York City metropolitan area as of the end of June were "pending," not "active," customers. 

FiOS TV customers can take up to 10 months to get service, according to the Digital Art Services suit. Ten months? ("Hi, we’ll be there to set up your fiber connection sometime between Oct. 15, and Aug. 15 of next year. Just sit tight!")

Verizon would not confirm whether the documents in the complaint reflect authentic company data, but it called the lawsuit "a garden variety business dispute with a company that wants to get out of a contract."

The suit, garden variety or not, includes a breakdown supposedly showing FiOS TV growth in nine key markets:

How many of these are phantom, sort-of-but-not-yet customers, and how many are real?

Clearly, there’s something fishy going on here, because Verizon publicly reported having 515,000 FiOS TV subs as of June 30. The total from the table above for June 11 comes to 541,138. 

It appears Verizon has gotten ahead of itself, if these documents are genuine. Here’s another question: How many "pending" customers churned away before the FiOS truck could show up?

[Update: Verizon director of media relations Sharon Cohen-Hagar sent me a statement that said, in part: "The TV subscriber numbers that we provide to Wall Street reflect actual, billable subscriber accounts, and do not include pending orders, as Digital Art alleges." She also said the lawsuit "represents nothing more than a misguided effort to use litigation tactics to obtain leverage" in a commercial dispute between Digital Art Services and Viamedia, Verizon’s local ad-sales contractor. ]

 

Verizon, hoping to kick life into its flagging digital subscriber line business, is offering a "lifetime" price option guaranteeing customers who commit to a two-year DSL contract that they’ll never pay more than their original monthly fee.

So let me get this straight: You’re promising not to charge me more, two years down the line, for what will by then be a woefully outdated broadband connection? How generous.

This offer is a clear sign of a technology on its way to obsolescence. As one cable wag rhetorically asked me: "So where’s Verizon’s rotary-dial-phone-service for life? How about horse-and-buggy service for life?"

I should point out that by mid-2009, you’re going to see cable operators hawking broadband services (using DOCSIS 3.0, a.k.a. "wideband") of upward of 50 megabits per second, or even 100 or 160 — whatever the market will be demanding. 

Verizon’s own FiOS Internet service too is capable of blowing past 50 megs into the triple digits, and FiOS will be a lot more broadly available by then, too. Won’t DSL at 3 Mbps seem positively quaint?

Verizon makes no bones about putting the emphasis heavily on FiOS, as the DSL business starts its long, slow fade. Verizon president Denny Strigl recently told Wall Street that "as FiOS scales up, we do expect to see a reduction in DSL volumes."

But see, it’s all in how you position it. Verizon’s "Lifetime Price Guarantee" for DSL — as low as $14.99 for 768-Kbps or $27.99 for 3-Mbps service – sounds way better than, "Lock Yourself Into a Dead-End Broadband Service Until at Least 2009!"

Verizon here is following the lead of another, uh, innovator: The U.S. Postal Service. The steward of snail mail in April began selling a "Forever Stamp," which lets Americans purchase first-class stamps at current prices (41 cents apiece today) and use them to mail one-ounce letters anytime in the future, even when postal rates go up. 

Hey, you could mail in your guaranteed-forever Verizon DSL bill with a Forever Stamp! I smell a hot joint-marketing opportunity.

One more tiny detail worth noting out of AT&T’s Q2 earnings announcement: It’s almost ready to let U-verse TV customers everywhere record an HD program while watching another one. 

"Our migration to offering a second HD stream will be complete in the third quarter," CFO Rick Lindner told analysts Wednesday. 

In the cable world, this feature is provided by a dual-tuner set-top. And, well, it’s not a new feature – Cox, for example, launched dual-tuner DVRs from SA in January 2003.

With DSL-based IPTV, recording two HDs at once (or watching one and recording another) requires 2X the bandwidth. It’s an engineering trick to squeeze two high-def signals into the DSL pipe.

AT&T’s marketing team claims U-verse is "Cooler Than Cable." But the lack of a second HD stream has been a distinct demerit for the fledgling IPTV service.

Lindner, by the way, also said AT&T’s whole-home DVR (playing back recordings from other set-tops) is now in trials and the telco expects to roll out that enhancement by the end of this year. 

Note that Verizon has offered this for two years. Apparently U-verse isn’t as cool as FiOS, either.

Apparently, behind Comcast’s 134% year-over-year growth in digital voice subscribers (from 4Q06-4Q07) was a bit of bad news for one of its main suppliers of cable voice modems, Arris.

How could a business that more than doubled in 12 months have a downside?

The torrid growth of Comcast’s voice services in 2006 and early 2007 was very good for Arris. But in the past two quarters, the operator has seen "an apparent leveling-out of their net subscriber growth," Arris CEO Bob Stanzione told Wall Street analysts on Thursday.

Arris also took a hit from Thomson, which Comcast added as a second supplier of eMTAs in the second half of the year. Stanzione didn’t refer to them by name, by the way – he just said "a second vendor entered into the mix."

Together, according to Arris, they’re the two primary factors depressing first quarter 2008 sales, which it forecast to be down as much as 18% from previous expectations.

After the call I asked Arris for more detail about how the growth rate of Comcast’s voice services was hurting eMTA sales, especially as the cabler touted growth in voice subs as a bright spot in its own earnings call on Thursday. Comcast president and COO Steve Burke noted that the company added 2.5 million digital voice customers in 2007, 61% more than it added in 2006.

"We hit our stride, and we’ve been adding approximately 600,000 new customers for each of the last four quarters," Burke said, adding that Comcast is now the fourth-largest residential phone company in the country with 4.4 million customers.

But the growth does appear to be "leveling off."

In response to my inquiry, Bruce McClelland, president of Arris’ Broadband Communications group, pointed out in an e-mail that after a peak of 673,000 net adds for digital voice in Q2 2007, "clearly they have hit a natural run-rate in the 600-650k range."

Indeed, the number of Comcast’s quarterly VoIP net adds, on a sequential basis, rose in the teens in the first half of last year, but then fell in the second.

Comcast Digital Voice

In Thousands

Source: Comcast financial reports

So, this plateau effect is causing a near-term issue for Arris.

But look at the big picture – Comcast is still adding voice subs at a healthy clip. And it sees a lot more room to grow, as only 10.4% of "homes passed" by digital voice were subscribers as of the end of 2007. The landline businesses of Verizon and AT&T continue to bleed customers (though by the same token, Comcast has been losing subs in its own core business, basic video).

"We continue to see strong growth in our [digital voice] service, and see no reason why we can’t double our business and achieve 20% to 25% penetration over the next couple of years," Burke said. Voice "is the cornerstone of our bundling efforts, and we believe we are still in the very early innings."

Imitation may be the sincerest form of flattery, but it’s not always easy.

Consider Time Warner Cable’s award-winning Start Over, a quasi-network-DVR service that replays shows within a specified window to which the distributor has negotiated rights. (And, importantly, preserves ad views by disabling fast-forward.)

It’s a cool feature with a high barrier to entry. Satellite operators, which don’t have headend-based VOD architectures, can’t do it. Cox has dabbled with the concept, offering a few shows with a similar VOD service in a few systems. 

Comcast thinks it’s a great idea, too, and has started developing its own version. The MSO was targeting the end of 2008 to turn it on (see ‘Start Over’ to Start On Comcast’s Systems). But this stuff is hard.

I had heard that Comcast was running into difficulties on the VOD ingest front with respect to its Start Over deployment. It’s no mean feat to pull in dozens of programming streams simultaneously, and then provide instant access to them to subscribers with pause and rewind capabilities.

But the technical challenges apparently extend to the client side, as well.

GuideWorks, the IPG development venture between Comcast and Macrovision, is building in support for Start Over features into the next major release of i-Guide for Motorola set-tops.

This version, A28, will enter beta testing in early next year before it’s ready for commercial deployment in the second half of 2009 (see Comcast’s Next Guide To Be Ready In Second Half of ‘09). The next i-Guide also will support switched digital video, another new technology that’s been relatively complex to deploy in multivendor environments, according to Macrovision execs.

Anything worth doing is worth doing well. There’s no doubt Comcast will get there. But the Start Over project reinforces the notion that "operationalizing" new features becomes a huge task when you’re talking about layering them on millions of set-tops boxes in many different systems.