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Excellent C\Net article on FiOS w/pictures.

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reporter's notebook WALTHAM, Mass.--Who would have ever thought that a phone company would be providing TV service?

Not me, but that's exactly what's happening in select parts of the country where Verizon Communications, one of the four remaining offspring of the Ma Bell phone companies, is now offering its new Fios TV service to combat the growing competitive threat of cable companies.

A visit to Verizon's main research and testing facility here offers a glimpse at how the phone giant sees the future of television. Tucked away in the woods off Interstate 95 in suburban Boston is a mock-up of a house where new features and applications for Verizon's Fios TV service are tested by engineers and shared with select groups of customers.

Fios TV runs over a new fiber-optic network that Verizon is building throughout its territory. Designed to be connected directly to people's homes, the service launched last month in Keller, Texas, and it's expected to be in at least three other cities by the end of the year, with more to follow in 2006.

An IP revolution
Because Verizon is initially using the same broadcast technology used by cable and satellite providers, Fios TV doesn't look much different from what's in the market today. But executives say this is just the beginning. With nearly limitless capacity on the network provided by the new fiber-optic infrastructure, Verizon will be able to offer more interactive features using the Internet Protocol. Some programming, such as the video-on-demand service, is already IP-enabled in the current version of the service. More IP-based services will be added in the future.

"IP is definitely the future, and once the network is in place it will allow us to do all sorts of things," said Bill Garrett, director of broadband services for Verizon. "Right now, we're at the point where we're still trying to figure out what people want. We wanted to give people a service they were comfortable with and could use."

The main benefit of IP is that it will allow TV viewers to interact with television programming in ways they've never been able to before. Not only does this mean allowing people to watch what they want when they want, but it also means enabling them to access more and different kinds of content while they're watching TV.

SBC Communications, which is running fiber only to the curb and not directly to homes, plans to go straight for IP-based TV when it launches its "U-Verse" service next year. SBC is using software developed by Microsoft. Carriers in other parts of the world, such as Bell Canada, Swisscom and Telecom Italia, also have been using Microsoft technology to build their IP TV networks. Verizon used Microsoft middleware to develop its program guide.

One of the new services currently being tested here is an interactive fantasy sports application that lets viewers compare statistics and keep track of points on their TVs while they're watching games. In designing the new service, Verizon has been careful not to overwhelm viewers with too much scrolling, button-clicking and reading on their screens.

"The first thing we learned from people we brought in here is that customers definitely want interactivity," said David Philbin, a senior member of Verizon's technical staff. "But they don't want to work for it. The second thing is that some content is best left to the PC."

For example, fantasy sports players don't want to scroll through pages of drafting information during a Sunday afternoon game. They just want to follow players, compare them to other teams and keep track of how many points they're getting.

Verizon believes that Web interaction won't end with fantasy sports leagues. People may want to integrate other Web-based content into their TV-viewing. In the kitchen, for example, someone watching Jamie Oliver's "The Naked Chef" on The Food Network may want to pull up the recipe on the TV screen as they cook along with the program.

Verizon also sees future TVs as more than just appliances for watching movies, sports and sitcoms. Remember the days when the family would gather in the living room to see Uncle Bob's vacation slides? Well forget the slide projector and setting up the screen. Verizon believes people will be sharing their photos on their television screens. The company is developing an application that automatically downloads and serves up pictures from incoming e-mails directly onto a TV set in the living room.

"People love to share pictures," Philbin said. "But no one wants to stand crowded around the PC in the home office to see them. They'd rather be on the couch."

The company is also testing an interactive gaming application that will allow users to access games hosted in the Verizon network over the Fios TV network and play them with other players throughout the region and even the world.

Whether any of these new features and products make it into the market is still unknown. Executives here said they're still discovering new ways to make the TV viewing experience more interactive.

Reality check
With roughly 80 percent of the U.S. population already subscribing to some form of paid TV service such as cable or satellite, the TV market will not be an easy one for Verizon to break into. The task seems even more daunting considering that it took satellite providers more than a decade to penetrate 12.5 percent of the market.

So how does Verizon expect to convince customers to abandon their cable and satellite services for Fios TV? A key piece of the strategy is servicing the customer.

With more attention to details, from the design of the remote control to simple and intuitive search screens to making technicians spend a little extra time setting up the service and showing customers how to use it, Verizon believes it can win customers over by making TV easy and comfortable.

"A lot of the reason why people move to satellite is they want better customer service," said Mercedes Cutler, group manager for Verizon's video broadband solutions. "So if we have to invest a little more up front to make sure we're providing the best service, we think it's worth it. If customers churn out of the video service, they might also churn out of their phone service and broadband service. So it's important to build that loyal relationship from the beginning."