More Details on Verizon’s Initial Video Launch

Verizon officially launched its fiber-based TV service yesterday in Keller, Texas, with indications that it would quickly follow up with launches elsewhere in the Dallas-Ft. Worth metroplex.

“We’re very quickly going to announce plans to more deeply offer service here,” says Verizon’s President for Retail Markets Bob Ingalls, speaking at a press conference in Keller. By year’s end the company plans to launch the service in five other service regions as well, he says.

The expedited schedule in Texas follows recent enactment of a state law that replaces local cable franchises with a state-level license that applies to whatever territories a service provider names as its intended launch areas. “This new progressive legislation means more Texans will sooner have a choice for their in-home television needs,” says Steve Banta, president of Verizon’s Southwest region. Verizon’s telephone territory in Texas, acquired with the purchase of GTE in 2000, covers a large share of the communities outside Dallas and Ft. Worth.

Ingalls and other Verizon officials describe the company’s “FiOS TV” (Fiber Optic Service TV) as revolutionary, likening it to landmark developments in TV such as the introduction of color in 1946 and of cable TV in 1948. They stressed the quality benefits of all-fiber, all-digital delivery as the initial development that made this a historic occasion but also emphasized the fact they were moving as quickly as they deem practical to IPTV, starting with today’s launch of a video-on-demand service that utilizes the IPTV platform provided by Microsoft TV.

“We can migrate the entire service to IPTV when the market and the technology are ready,” Ingalls says. He notes that along with VoD the company is also using IPTV technology to provide the interactive programming guide for the entire service. This hybrid Foundation IPG from Microsoft is designed to support delivery of VoD in IP mode while accommodating the distribution of other programming in the broadcast mode used in cable.

Verizon’s use of Microsoft’s IPTV platform is the first time the technology has been used commercially in the U.S. SBC Communications is preparing to deliver an all-IPTV service using MSTV in 2006. That launch, originally announced for late 2005, has been pushed back as a number of technology issues have arisen to slow use of the platform over SBC’s hybrid fiber/DSL Lightspeed infrastructure.

Officials made clear Verizon will be an aggressive competitor, combining the all-fiber, all-digital marketing message with low pricing to draw customers away from cable and satellite. “Our expectation is that over the next few years, 20 percent penetration is achievable,” Ingalls says. He notes the company has already achieved 33 percent penetration of FiOS broadband data since it was launched last year in Keller, a community of 30,000 people.

The company’s primary TV service, an expanded basis consisting of more than 180 digital video and audio channels, is priced at $39.95, with a $5 discount if it’s taken with the voice and high-speed data bundle. This price doesn’t include the set-top rental fee, which is $3.95 for a standard TV terminal, but even with the set-top fee the a la carte rate is well below the prices typically charged by cable and satellite providers for comparable service, officials noted.

All told, counting premium, pay-per-view and niche services, Verizon’s initial offering includes more than 330 video and audio channels, including more than 20 channels of HDTV service and a VOD library presently consisting of more than 600 titles priced at $3.95 for new releases and $2.95 for older movies. Plans call for 1,800 or more VOD titles to be available by year’s end. Free and subscription VOD are part of the offering along with the per-title pay VOD.

Verizon is poised to offer service to all households passed by its fiber network as quickly as it can get franchises in those markets where local franchises remain a requirement. Legislation introduced in both houses of Congress this year would eliminate the local franchising requirement everywhere, allowing for much faster rollout.

“We’ll pass more than 3 million households and businesses with fiber by the end of this year,” Ingalls says. “We intend to offer TV service to all of those customers.”

Rapid extension of the service into new territories is facilitated through use of a highly centralized, fiber-based national distribution system that relies on two “super headends,” one based in Temple Terrace, Fla., the other in Bloomingfield, Ill., says Paul Tassinari, executive director for networking services at Verizon. “The two super headends provide us the redundancy we need to ensure that service is not interrupted by problems at one location or the other,” he said.

These super headends are connected by fiber to regional hubs where local programming is inserted into the video stream and where servers are stationed to support VoD distribution in each market. VoD titles are distributed to the local servers from the super headends, Tassinari says, adding that local hubs distribute all video out to central office locations for connection to the local fiber distribution plant. “We’ll have six regional hubs up and running in several states by the end of the year,” he notes.

While there’s a uniformity to service with variations in local programming, Ingalls says the company was not announcing a “national price” at this point, though he didn’t rule out the possibility the price used in Keller would be used elsewhere. He says the company now has licensed content from every major program provider, though there will be additional programming added over time.

The company is using its own installer force to set up the TV service, Ingalls notes. The company doesn’t charge for installing the optical network unit on the side of the house, and it has waived installation charges for up to three TV connections.

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