Verizon CEO: Cord-Cutting Will Threaten Cable TV

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Verizon Communications chairman and CEO Ivan Seidenberg said he sees parallels between the onset of declining cable TV subscriptions and consumers cutting their phone company landlines, speaking at an investors conference Thursday.

"Cable is probably starting to experience what we experienced five to six years ago [in voice service], which is the low end is disappearing into other alternatives," said Seidenberg, speaking at the Goldman Sachs Communacopia conference in New York. "The first thing when that happens is, you deny it. I know the drill. I've been there."

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Added Seidenberg, "Young people are pretty smart. They're not going to pay for something you don't have to pay for. You've got to watch the market... Over-the-top is going to be a pretty big issue for cable."

For the time being, Verizon itself is still adding FiOS TV customers although at a slower pace than in previous years. Seidenberg said FiOS TV for the third quarter is tracking to be better than the second quarter of 2010, when the company had 174,000 net adds on video subscribers.

However, Seidenberg said, all players in the pay-TV business are going to get "disintermediated over the next several years. It's going to take a little time."

Of the telco's approximately 3.5 million FiOS TV customers, "we think we're not going to keep them all the way the old cable model kept them, so we're looking at lots of different alternatives to make sure we participate in how to monetize over-the-top across range of platforms, which we're working on," he said.

Meanwhile, Verizon Wireless -- the telco's joint venture with Vodafone -- will follow AT&T's path into usage-based billing for wireless data services sometime in the next four to six months, Seidenberg said.

"Our view on that is that we didn't have to be first," he said.

AT&T in June eliminated the flat-rate, all-you-can-eat data plan it previously required for customers with iPhones and other smartphones. AT&T now offers two tiers of wireless data service: DataPlus, capped at 200 Megabytes per month for $15; and DataPro, with 2 Gigabytes per month for $25.

Verizon Wireless' usage-based tiers and bundles will be different than AT&T's, Seidenberg indicated. "I don't think we want to match our pricing with what's going on today... but we do agree with tiered pricing, and we do think we have to monetize the investments we make."

Meanwhile, Seidenberg said he didn't believe Verizon Wireless had an "iPhone deficit" in terms of losing business to AT&T because of its competitor's exclusive deal with Apple for the popular device. Verizon Wireless is planning to build on the success it has seen with the Motorola Droid phone, he added, and the carrier expects to see numerous devices available to run on 4G networks.

At another point in the discussion, Seidenberg acknowledged that cable's DOCSIS has trumped telcos' digital subscriber line services: "DSL is losing out to cable."

Seidenberg is expected to retire sometime in 2011. Earlier this week, Verizon's board appointed Lowell McAdam, currently CEO of Verizon Wireless, to be the telco's president and COO, positioning him succeed Seidenberg. 

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