CABLE SPEEDS CLOSE IN ON FiOS

While Verizon Communications continues its efforts to add video service to its FiOS fiber-to-the-premises offering, some cable companies are cranking up broadband speeds in markets where FiOS is offered.

Less than three months after Verizon launched FiOS in Leesburg, Va., (in downstream speeds of 5 Mb/s, 15 Mb/s and 30 Mb/s), Adelphia Communications announced a new 16 Mb/s broadband service there, offered at no extra charge to customers of its existing 6 Mb/s top-tier service. The new service will be $59.95 per month, $10 more than Verizon's 15 Mb/s service, but Adelphia will discount that price for subscribers of its video services — bigger discounts for pricier video packages. Glen Lock, product manager for Adelphia's broadband services, made no secret of the fact that the new higher speed was a competitive response to FiOS. Cox Communications introduced its own 15 Mb/s service in the region in May.

In Oyster Bay, N.Y., where Verizon launched FiOS in mid-April, Cablevision announced in late June a trial of a 50 Mb/s commercial data service using equipment from Narad Networks. Though the trial wasn't aimed at residential consumers, it ultimately could target the 4.4 million homes on the company's New York area network, Cablevision said. Meanwhile, it might also serve as a foil for any future Verizon plans to extend FiOS to businesses in Oyster Bay. Verizon introduced FiOS business services in California, Florida and Texas in late May and will “move East with these products later this year,” a Verizon spokesman said.

In the near term, however, analysts say consumers might not see much practical difference between a 10 Mb/s cable broadband service, like that currently offered by Cablevision, and Verizon's 15 Mb/s.

“It may have faster response times for gamers, but how fast can you twitch?” asked Brian Washburn, analyst for Current Analysis.

“We're really just getting into a marketing bullet game,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group. “Just a bullet in the marketing to say, ‘We've got the fastest speed.’ Above 3 Mb/s, can anybody really see the difference? Are there really consumer applications at those speeds?”

However, even if the extra speed is extraneous, the marketing move may be sound, Leichtman said. Cable companies have long defined their broadband as the fastest, after all, and they would prefer to keep that message intact, he said.

Consumers targeted by Verizon for FiOS service consider price and reliability as well as speed, a Verizon spokesman said. And claims of multimegabit speeds may mean even less to consumers who aren't already broadband subscribers.

“There are over 35 million broadband subscribers in America,” Leichtman said. “That goes way beyond the early adopters. The larger battle is for the next 35 million, and they don't necessarily need the higher speeds.”

Perhaps with that market in mind, SBC Communications last month kicked off a wave of broadband summer price promotions. After it began offering DSL to new customers at only $14.95 per month for the first year, Cox Communications and Comcast countered with three-month introductory trial offers of $24.95 and $14.95 per month, respectively, for broadband in SBC's San Francisco Bay area markets.

Outside of such introductory promotions, Leichtman believes that broadband providers need not lower their prices to compete, just as Washburn argues that cable competitors need not necessarily escalate their speeds. But that could change as Verizon adds video to FiOS and steps up its sales of the service, he said. “[Cablevision's] 10 Mb/s service is doing everything that [it] needs to do today,” Washburn said. “When FiOS starts to really rear its head in the market, maybe Cablevision will need to rethink what it's doing.”

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