A New ‘Life Cycle’ for FiOS TV

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FiOS TV will celebrate its
fifth birthday in 2010 having
notched at least 3 million
subscribers — and Verizon
Communications isn’t done
taking share from cable by any
means.

Terry Denson, Verizon’s vice
president of content strategy
and acquisition, said FiOS is
now in “a different life cycle”
than it was in the startup
years. That means the telco has
adjusted its pricing, packaging
and marketing of the service,
changes Denson conceded
“can be difficult” for partners.
“We continue to grow at a terrific rate but we’re managing
the business differently now,”
he said.

Denson, formerly Insight
Communications’ vice president
of programming before
joining the telco in 2004,
spoke with Multichannel News
technology editor Todd Spangler
last week.

MCN: FiOS TV is now as big as
Cablevision Systems. How does
that scale change your discussions
with programmers?

Terry Denson:
I think the scale
really goes toward long-term
vitality. Even though we are in
a value-based business, what’s
more important to content providers
and consumers is that
we have a vital business. I think
that’s the first thing I think of.

The second part of the scale is
really the competitive overlap. By
way of example, a disproportionate
amount of our build is in Comcast’s
footprint. Obviously, because Cablevision
is a single-market MSO,
we have a significant overlap with
them. And likewise with Bright
House [Networks] in Tampa. It’s
about the competitive overlap on a
market-by-market basis.

MCN: Verizon has received press
attention recently for slowing
down the FiOS buildout. [The
telco currently expects to add
around 1 million homes passed
in 2010 instead of the prior
target of 3 million; FiOS passed
15.4 million premises at the end
of last year.]

TD:
‘Slowdown’ doesn’t seem
like the right word. It does not
feel slower to me. … One thing for
sure is that we have made commitments
early on for a number
of homes passed. And we’re going
to meet that commitment [of
18 million homes].

From a tactical
perspective, we
believe it’s better
to fill out the
market and get
the market efficiencies
instead
of continuing to
expand rapidly into additional
markets. It’s been clear to me we
do not have the full opportunity
to maximize the marketing, so we
need to fill that out.

MCN: Dish Network and DirecTV
have been fighting over HD
channel counts. Do customers
care about tonnage?
TD:
Well certainly, access to content
will continue to be important
for a long time. The question
is, Is there still an effective
marketing message to be had by
one-upping, two-upping, threeupping
the competition on HD?
When I first got to Verizon, the
question I would get internally
was, ‘How will
we get people to
switch?, My answer
is: There’s
no silver bullet
in this business.
The individual
motivation for
a particular household is going
to differ. So if you don’t have as
much HD content as you could,
you’re going to leave some customers
on the sidelines.

MCN: How important is 3DTV,
then? Are people going to
switch providers based on
whether they can get the first
World Cup game [from ESPN] in
3D?

TD:
Ultimately, there will be
a 3D market, and it will arrive
I believe quicker than most
people anticipate. Certainly
it’s being driven right now by
the consumer-electronics industry
… They need to sell more
sets and get people to spend a bit
more money but also keep the
prices attractive.

You have a market-stimulation
concept … as opposed to a
traditional subscriber-acquisition
construct. As that flows
down the food chain to the [video]
distributors, there will be a
perception about who will have
the most compelling offering. So
we believe it is important to participate
early on, in a meaningful,
sustainable way.

MCN: So we’ll see 3DTV from
Verizon in 2010?

TD:
You most definitely will see
this from Verizon in 2010… Our
standard is winning the perception
of brand superiority, so we’ll
do [3DTV] based on that. As opposed
to, if you’re cable… saying
you can’t serve more than 1%
of a demographic because you
don’t have the bandwidth.

MCN: On TV Everywhere, you
have launched HBO Go and Epix.
Is this delivering what people
want?

TD:
For us, we have had a tremendous
experience with Epix
specifically, and our growth rate
is exceeding expectations … For
some [subscribers] Epix represents
the deepest amount of HD
movie content available — more
than 150 HD movies available at
any given time on demand.

MCN: Where does your TV
Everywhere trial with Turner
[Broadcasting System, for TNT
and TBS] stand right now?

TD:
So we have been in a multiple-
market test for some time.
We expect the full commercial
launch in the near future. We feel
good about our whole authentication
strategy. For us, it’s not ‘TV
Everywhere.’ That was nomenclature
created by someone else.
For us, it’s authenticated content.
We’ve been offering authenticated
content since launch, whether
it’s Starz Play, Yankees on broadband,
HBO Go or Epix.

In some, ways we think TV
Everywhere is a little late to the
party — but the good stuff often
happens later in the party.

MCN: FiOS TV now offers
YouTube. Was there demand for
that?

TD:
I think from a customer perspective
… we look to identify
near-term aspirations. That’s
why if you have a network, the
right network, you don’t have to
wait to introduce that.

If you look at YouTube, we believe
that’s indicative of where
things are going. People are asking
for YouTube on their television—
not in flocks and droves, but
it’s a mid-term aspiration. You get
it into the market early so you’re
the leader, not playing catch-up.

MCN: When you started at Verizon,
FiOS was in startup mode.
How have things changed?

TD:
The good thing here is Verizon
has really developed a core
competency in video content
distribution. That’s important
because that really serves as the
foundation for next-generation
services.

If you don’t have a strong foundation
it’s difficult to develop
leadership in next-generation services.
What you’re seeing is Verizon
launching innovative services, interactive
widgets, Internet TV and
radio, which transcend the multichannel
market.

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