Consumer group: Video competition working in Texas

A new consumer group, claiming independence from industry funding, says its research shows consumers are benefiting from Verizon’s entry into the Texas video market, even if they don’t subscribe to its service.

Stephen Pociask, president of the American Consumer Institute, a relatively new group, said consumers who switch to Verizon’s FiOS TV from local cable offerings are benefiting from lower prices, but so are those who threaten to switch and don’t. In addition, he said, Verizon’s fiber-to-the-premises buildout and new broadband services are growing the overall market. The overall message, he said, is that competition works and will save consumers billions.

Pociask said his group is independent and is not funded by the telephone companies.

“We did this survey because we wanted to see whether or not we would really see the benefits of competition quickly to determine if maybe there is something to this idea of speeding entry,” he said. “We wanted to look at a place where competition is just forming to see if consumers really know what is happening.”

The survey showed that Verizon’s entry grew the overall market, as 23% of its customers were not existing cable or satellite users, Pociask said. In addition, the arrival of competition drove down overall prices, benefiting those who threatened to switch and didn’t.

Half of the consumers who switched service providers saved $22.60 per month on their service while consumers who stayed with their existing service provider saved $26.83 per month, according to the American Consumer Institute research.

“Verizon’s customers tended to buy more digital stuff--they bought broadband, telephone service, digital video recorders--overall, they bought more,” Pociask said. “So they saved money on their service but spent it on more services.”

The overall loser in the market share war was satellite service, he added.

“The wireline pie really is growing--that should alleviate the fears the municipalities have the competition will put franchise fees in jeopardy,” Pociask said. “That was one of the big shocks.”

The survey turned up two consumers who switched to Verizon’s FiOS TV and then switched back, a sign of very early churn considering the FiOS TV service was launched last fall in Keller, Texas, and expanded into six other Texas communities in December.

The survey covered 883 residents of three Texas communities that received the service within the last six months.

The American Consumer Institute is self-funded and explores consumer issues in addition to telecom matter such as consumer safety, food and drug recalls and health issues.

The results of the survey are available at www.theamericanconsumer.org.