Cox, Verizon Duke It Out
Feb. 18--A bill that appears headed for approval in Richmond will bring new competition for television service to Hampton Roads.
Verizon has battled the state's cable companies for years over creating a system that will make it easier for the phone company and other firms to sell television service. Virginia legislators have reached a compromise that will allow Verizon to offer cable TV service on the Peninsula.
"This has been a hard-fought compromise, and at the end of the day, consumers will benefit," said Thom Prevette, spokesman for Cox Communications in Hampton Roads.
Verizon is stringing fiber optics lines in Newport News, York County and South Hampton Roads to provide high-speed Internet and television service. Verizon would add to competition from satellite television firms and a planned wireless service from Utah-based U.S. Digital TV.
Assuming the changes go through, Verizon will take on Cox in Hampton Roads. Where Verizon is selling digital television service in Northern Virginia, Cox's digital prices are $4 cheaper than Hampton Roads. Cox is offering special deals there, especially to people who want to switch.
"You would be astounded at the deal you can get," for not switching in Fairfax County, said Robert Woltz, president of Verizon-Virginia.
The main reason the law may be changed is to make it easier to get a cable franchise, where a locality lets a company sell television service under certain conditions. Verizon was frustrated by a process in which getting a franchise could take up to a year.
Under the new process, negotiations won't last longer than 45 days. Then the locality has four months to enact an ordinance, which is largely already spelled out in the bill, that sets the rules.
But the groups that represent local governments in the state were shut out of the legislative deal, paving the way for possible conflict. The localities are concerned about losing some power, including mandates for cable companies to fund and provide channels for public service.
Although studies show cable rates are lower in areas with multiple wire-based cable companies, price isn't the only advantage. Consumers who want digital cable in Fairfax can opt for Verizon or Cox, and the companies have different high definition channels and an array of options for packages of digital movie, sports and international channels.
Verizon will use its new fiber network in Newport News to start offering Internet faster than cable speeds as early as April. But to sell television over that network, Verizon must get money from corporate headquarters to make expensive upgrades at local switching stations.
If the bill is passed to make obtaining a franchise agreement quicker, Woltz said he can make a business case that the investment will be worthwhile. Some Wall Street analysts consider Verizon's expensive fiber build-out risky, so getting television franchises quickly is key.
"What makes it an enormous risk is if you can't turn it into cash-paying customers," said Woltz.
Existing companies, such as Cox, worried that Verizon would have an easier set of rules to play by if the law were changed. To allay the fears, the bill allows the existing cable company to leave its franchise and get the same one as the new competitor.
This provision bothered Virginia's two main local government organizations, which believe letting a cable company out of its contract would be unconstitutional. The issue may need to be decided in court.
Many franchises currently require the local cable company to fund studios and equipment for public access channels. If a new competitor comes in, Cox wanted to ensure that the new entrant contributed to the cost of the programming.
The local government groups say the bill will result in a formula that will force localities to pick up more of the cost of operating the studios, but the companies disagree.
"In certain instances, the cities would actually be making more," said Prevette.
Cable companies such as Cox Communications have protested that Verizon wanted to compete without serving an entire locality, as Cox is required to. Cable firms argued that competitors would just serve the most profitable customers in wealthy and densely populated areas.
The compromise bill requires Verizon to promise to sell to a certain percentage of a locality's residents within three years of starting service, 65 percent within seven years and 80 percent within 10 years.
Local governments say the bill will limit the number of public access channels they can force companies to carry. But localities still can require up to seven public access channels under the compromise. And cable firms pass these channels' costs to consumers. If localities fight for the right to demand more channels, consumers will pick up the tab.
In the past, cable franchises were a valuable commodity that allowed localities to make lots of demands for extras like public access funding and wiring schools and public buildings. The companies acquiesced, even though the requests often exceeded what localities were allowed to legally ask for, said Woltz.
In the new cable television paradigm in Virginia, companies will fight each other hard for consumers. That means local governments' importance for regulatory oversight takes a back seat to the marketplace's pressures to please customers, said Prevette.
"The localities rightfully understand they're not going to get as much stuff from cable providers in the future," said Woltz.
The battle that will now unfold will be over selling packages of discounted phone, high-speed Internet and digital television service. Cox has been tremendously successful with this model and stolen Verizon's phone customers. Now Verizon plans to strike back.
"They're so successful because they're the only ones that can put together those packages to date," said Woltz.
And as Verizon angles for Cox's Hampton Roads' customers, expect Cox to strike back, said Prevette.
COMPETITION
Besides price, the companies compete in other ways in Northern Virginia. Each firm offers some advantage over the other for adding packages for pay channels like HBO, high-definition and international programming.
VERIZON RATES IN FAIRFAX COUNTY
Digital $39.95
Box Rental $3.95
Total $43.90
COX RATES IN FAIRFAX COUNTY
Basic Service $41.99
Digital $10.95
Box Rental $3.50
Total $56.44
The Verizon and Cox packages don't have exactly the same package of channels, but both companies carry nearly 200 similar channels for these prices.
THE PLAYING FIELD
Verizon wants to get into the cable television business. But cable companies must sign contracts with local governments that take up to a year to negotiate. Verizon said that takes too long.
Cable companies feared the state would change the law so Verizon could sell television service without meeting requirements Cox Communications has, such as serving an entire city or county. A compromise will make it easier for Verizon to get a franchise, while protecting the existing cable companies. But local governments will lose some power.
http://www.redorbit.com/news/techno...on_duke_it_out/index.html?source=r_technology
Feb. 18--A bill that appears headed for approval in Richmond will bring new competition for television service to Hampton Roads.
Verizon has battled the state's cable companies for years over creating a system that will make it easier for the phone company and other firms to sell television service. Virginia legislators have reached a compromise that will allow Verizon to offer cable TV service on the Peninsula.
"This has been a hard-fought compromise, and at the end of the day, consumers will benefit," said Thom Prevette, spokesman for Cox Communications in Hampton Roads.
Verizon is stringing fiber optics lines in Newport News, York County and South Hampton Roads to provide high-speed Internet and television service. Verizon would add to competition from satellite television firms and a planned wireless service from Utah-based U.S. Digital TV.
Assuming the changes go through, Verizon will take on Cox in Hampton Roads. Where Verizon is selling digital television service in Northern Virginia, Cox's digital prices are $4 cheaper than Hampton Roads. Cox is offering special deals there, especially to people who want to switch.
"You would be astounded at the deal you can get," for not switching in Fairfax County, said Robert Woltz, president of Verizon-Virginia.
The main reason the law may be changed is to make it easier to get a cable franchise, where a locality lets a company sell television service under certain conditions. Verizon was frustrated by a process in which getting a franchise could take up to a year.
Under the new process, negotiations won't last longer than 45 days. Then the locality has four months to enact an ordinance, which is largely already spelled out in the bill, that sets the rules.
But the groups that represent local governments in the state were shut out of the legislative deal, paving the way for possible conflict. The localities are concerned about losing some power, including mandates for cable companies to fund and provide channels for public service.
Although studies show cable rates are lower in areas with multiple wire-based cable companies, price isn't the only advantage. Consumers who want digital cable in Fairfax can opt for Verizon or Cox, and the companies have different high definition channels and an array of options for packages of digital movie, sports and international channels.
Verizon will use its new fiber network in Newport News to start offering Internet faster than cable speeds as early as April. But to sell television over that network, Verizon must get money from corporate headquarters to make expensive upgrades at local switching stations.
If the bill is passed to make obtaining a franchise agreement quicker, Woltz said he can make a business case that the investment will be worthwhile. Some Wall Street analysts consider Verizon's expensive fiber build-out risky, so getting television franchises quickly is key.
"What makes it an enormous risk is if you can't turn it into cash-paying customers," said Woltz.
Existing companies, such as Cox, worried that Verizon would have an easier set of rules to play by if the law were changed. To allay the fears, the bill allows the existing cable company to leave its franchise and get the same one as the new competitor.
This provision bothered Virginia's two main local government organizations, which believe letting a cable company out of its contract would be unconstitutional. The issue may need to be decided in court.
Many franchises currently require the local cable company to fund studios and equipment for public access channels. If a new competitor comes in, Cox wanted to ensure that the new entrant contributed to the cost of the programming.
The local government groups say the bill will result in a formula that will force localities to pick up more of the cost of operating the studios, but the companies disagree.
"In certain instances, the cities would actually be making more," said Prevette.
Cable companies such as Cox Communications have protested that Verizon wanted to compete without serving an entire locality, as Cox is required to. Cable firms argued that competitors would just serve the most profitable customers in wealthy and densely populated areas.
The compromise bill requires Verizon to promise to sell to a certain percentage of a locality's residents within three years of starting service, 65 percent within seven years and 80 percent within 10 years.
Local governments say the bill will limit the number of public access channels they can force companies to carry. But localities still can require up to seven public access channels under the compromise. And cable firms pass these channels' costs to consumers. If localities fight for the right to demand more channels, consumers will pick up the tab.
In the past, cable franchises were a valuable commodity that allowed localities to make lots of demands for extras like public access funding and wiring schools and public buildings. The companies acquiesced, even though the requests often exceeded what localities were allowed to legally ask for, said Woltz.
In the new cable television paradigm in Virginia, companies will fight each other hard for consumers. That means local governments' importance for regulatory oversight takes a back seat to the marketplace's pressures to please customers, said Prevette.
"The localities rightfully understand they're not going to get as much stuff from cable providers in the future," said Woltz.
The battle that will now unfold will be over selling packages of discounted phone, high-speed Internet and digital television service. Cox has been tremendously successful with this model and stolen Verizon's phone customers. Now Verizon plans to strike back.
"They're so successful because they're the only ones that can put together those packages to date," said Woltz.
And as Verizon angles for Cox's Hampton Roads' customers, expect Cox to strike back, said Prevette.
COMPETITION
Besides price, the companies compete in other ways in Northern Virginia. Each firm offers some advantage over the other for adding packages for pay channels like HBO, high-definition and international programming.
VERIZON RATES IN FAIRFAX COUNTY
Digital $39.95
Box Rental $3.95
Total $43.90
COX RATES IN FAIRFAX COUNTY
Basic Service $41.99
Digital $10.95
Box Rental $3.50
Total $56.44
The Verizon and Cox packages don't have exactly the same package of channels, but both companies carry nearly 200 similar channels for these prices.
THE PLAYING FIELD
Verizon wants to get into the cable television business. But cable companies must sign contracts with local governments that take up to a year to negotiate. Verizon said that takes too long.
Cable companies feared the state would change the law so Verizon could sell television service without meeting requirements Cox Communications has, such as serving an entire city or county. A compromise will make it easier for Verizon to get a franchise, while protecting the existing cable companies. But local governments will lose some power.
http://www.redorbit.com/news/techno...on_duke_it_out/index.html?source=r_technology
