Verizon Introduced FiOS TV for Business with Aggressive Incentives and Package Pricing

| Jul 14, 2008 | Business Network Services - U.S. | Competitive Intelligence Report

| Analyst: David Hold

Current Perspective: Neutral
Vendor Importance: High
Market Impact: Low

Event Summary

July 10, 2008 -- Verizon launched FiOS TV for Business, a new subscription television service designed for small and medium-sized businesses, delivered over Verizon’s fiber-optic network. The new offering makes FiOS TV available to all types of small business venues, ranging from medical office waiting rooms to banks, building lobbies, restaurants, and taverns. Verizon FiOS TV for Business is immediately available in select areas of the 13 states where more than 1.2 million customers already subscribe to the residential version of the service.

Analytical Summary

• Current Perspective: Neutral on the launch of FiOS TV for Business, because the attractive pricing, combined with aggressive discounts for new customers and the large number of HD channels available, should help Verizon to gain market share at the expense of its cable and satellite TV rivals in the low end of the small business market. In addition, the ability to offer a full line-up of entertainment TV in combination with voice and high-speed Internet access will help the incumbent LEC to hold onto an existing base of small business customers that are being targeted by alternative providers. However, FiOS TV for Business is aimed at the very bottom of the business market, mainly bars, restaurants, and small businesses with customer waiting rooms, and will do nothing to establish the FiOS brand among larger business accounts.

• Vendor Importance: High to Verizon, since the addition of FiOS TV for Business is a natural extension of its residential service that requires little modification other than pricing and discount packages to make it appropriate for SMBs, yet will help the company penetrate a large market that historically has been the exclusive domain of cable and satellite TV providers. Since the cable operators are building up their small business services, launching business voice to complement their business broadband and TV offers, Verizon’s ability to add an entertainment TV component to its business voice and data services will help the company protect those two mass-market business services from that competition.

• Market Impact: Low on the national market for small-medium sized business (SMB) services, because FiOS TV for Business is targeted only at the very low end of this market, such as bars and restaurants as well as any type of small business that has a customer waiting room, including retail financial services and health care facilities. The ability to offer these businesses a package of voice, video, and data (Internet) services will help the company defend its incumbent business customer base from its cable TV rivals, and it could help Verizon to win back some accounts that had been lost to alternative providers.

Recommended Competitor Actions

• Competitors operating in the same markets as Verizon, such as Comcast, Cablevision, Cox, Time Warner, and Brighthouse, as well as the satellite services DirecTV and Dish Networks, need to evaluate their respective small business pricing and packages. In those markets where Verizon has built out its FiOS networks and obtained the necessary video franchise approvals, these companies should begin offering promotions for early renew of multi-year plans, to forestall customer turnover.

• CLECs in Verizon FiOS markets cannot compete with the video triple play packages, and they should not try. Instead, they can focus on those segments of the SMB market that need more sophisticated multi-line integrated access and VoIP services, using the appeal of smaller, more personalized customer service combined with attractive pricing as the primary differentiator from the incumbent operator.

Recommended End User / Customer Actions

• Very small retail businesses and health care organizations, and anyone that has a need to offer entertainment video to customers, should evaluate the new pricing and promotional discount plans for Verizon FiOS for Business TV if it is available in their area.

• Business customers in Verizon territory where FiOS has been deployed that subscribe to cable or satellite TV services should try to compare FiOS TV to see if the quality is really as good as the company claims before making a switch from an incumbent provider, whether cable or satellite-based.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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