Cutting Into Big Apple

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Earlier this year, Verizon
Communications said it had
stopped seeking new markets
for FiOS TV — a move seen by
some as a pullback on its video

But the FiOS guys continue to
hammer away in New York and
other markets the telco has already
entered, given requirements
under franchise agreements to hit
specific network-buildout targets.

In the Big Apple, the fiber-tothe-
premises network has passed
the halfway mark in coming to the
city’s 8 million residents. FiOS now
passes around 1.8 million homes
and businesses, or 58% of the
roughly 3.1 million households in
New York City. That’s up from about
775,000 households when Verizon
launched FiOS TV in July 2008.

Overall, Verizon is ahead of the
obligation to pass 54% of premises
by the end of this year under
its citywide franchise agreement.

“Clearly, here in New York City,
we’re going full steam,” said
Paul Sullivan, Verizon’s vice
president of operations for the
region. Verizon is on track to
have all premises in New York’s
five boroughs connected to FiOS
by the end of June 2014, as required
under the 2008 franchise
agreement, Sullivan claimed.

The number of New Yorkers who
have switched to FiOS isn’t publicly
available, as Verizon doesn’t
disclose subscriber numbers for individual
markets. Across all territories,
FiOS TV had a penetration rate
of 25.9% as of June 30 (3.2 million of
12.4 million eligible premises).

But whatever the telco’s success
to date in New York, the FiOS
bouquet of services — which include
a 130-plus-channel HD
lineup and download speeds of
50 Megabits per
second — along
with the accompanying
thrust have forced
the incumbent
MSOs to respond.

The competition
from FiOS also
had a bearing in the
preliminary 10-year
franchise renewals
Time Warner Cable
and Cablevision
Systems recently
reached with the
city, which among
other things would
establish customer-
service requirements
similar to
those for mandated
for FiOS TV (see
“Cord-Cutters In
the City?”, Sept. 20,
2010, page 2).

For Verizon, though, FiOS’s expansion
will get trickier as it increasingly
looks to hook up
apartment buildings and other
multiple-dwelling units, or MDUs,
which require negotiating with individual
property owners or co-op
boards. The low-hanging fruit for
FiOS in the city was Staten Island,
which — with its more suburban
profi le of single-family homes — is
virtually 100% built out.

About 2 million of the 3.1 million
residences in the city are MDUs.
Verizon’s franchise specifies that it
pass 51% of all multidwelling units
by the end of 2010, and the telco
says it is ahead of plan.

The job of marketing to the MDU
segment falls to Eric Cevis, vice
president of the telco’s Enhanced
Communities group, who oversees
a staff of about 35 in New York
out of 300 on his team nationwide.

Landing deals with individual
properties can be a timeconsuming
process. “At times,
[building owners] already have
an MSO [marketing] agreement
in place, and they’re sometimes
getting paid fees for those deals,”
Cevis said. “So we have to sit
down and negotiate deal terms
with them … sometimes you have
to wait until those deals expire.”

The Federal Communications
Commission banned exclusive access
agreements between operators
and MDUs two years ago, after
Verizon petitioned for the change
to gain entry to buildings cable
operators had locked up. But Cevis
and his team recently began to offer
a “value program,” which gives
property owners discounts of 20%
or more off retail pricing if they
exclusively bundle FiOS TV and/
or Internet services for residents in
their property fees or rent.

Over time, Verizon has refined
the equipment and techniques it
uses to connect apartment buildings.
For example, the telco and
its suppliers have developed custom
moldings for concealing fiberoptic
cabling in apartments and
hallways to not disturb the “aesthetics”
of the building, Cevis said.

Verizon also now installs much
smaller “desktop” optical network
terminals from Motorola and Alcatel-
Lucent, which are about the
size of a wireless home router, instead
of the bulky ONTs that were
typically installed in apartment
closets or laundry rooms.

“Every inch of space in a Manhattan
apartment is valuable,”
Sullivan said.