Verizon CEO Says Cable TV’s at Risk

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New York — Cable operators
are in denial about the
threat posed by Internet delivered
video, according
to Verizon Communications
chairman and CEO Ivan
Seidenberg, who says the
telco’s losses of millions of
phone-line customers help
him see the danger.

“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,” Seidenberg said, speaking at
the Goldman Sachs Communacopia conference here last
week. “The first thing when that happens is, you deny it. I
know the drill. I’ve been there.”

Verizon lost 466,000 residential phone lines in the second
quarter of 2010, with 17.4 million total residential
switched access lines in service as of June 30. At the end
of 2004, the telco had nearly twice that with 34.2 million
residential landlines.

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 video adds.

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,
he said, “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 a range
of platforms, which we’re working on.”

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.

Seidenberg, 63, is expected to retire sometime in 2011.
Last week, Verizon’s board appointed Lowell McAdam,
currently CEO of Verizon Wireless, to be the telco’s president
and chief operating officer, positioning him to succeed

Excerpts from Seidenberg’s session
at Communacopia:

Cord-cutting danger: “Young people are pretty smart. They’re
not going to pay for something you don’t have to pay for...
Over-the-top is going to be a pretty big issue for cable.”

Rising programming costs: “We all face the problem of 5%
and 10% content cost increases every year.”

Competing with cable broadband: “DSL is losing out to

Wireless usage-based pricing: “[We] do agree with tiered
pricing, and we do think we have to monetize the investments
we make.”