Fiber Cable Competition Proposed in Philadelphia

Published February 1, 2009

Verizon has taken aim at Comcast’s home town of Philadelphia with plans to deploy fiber optic service (FiOS) and FiOS TV throughout the city.

Verizon is the first major U.S. carrier to offer fiber optic service to individual homes or premises. Other service providers have fiber, but only from station to station, not to the home. FiOS provides telephone, Internet, and digital video services to subscribers who pay between $44.99 and $144.95 a month for plans that offer a range of upload and download speeds.

According to Verizon, it currently offers FiOS in some parts of 18 states and the District of Columbia. The company is hoping to secure a citywide video franchise in Philadelphia before the end of the year. It launched service in Chester, a Philadelphia suburb, in January. The city council in Chester unanimously approved the Verizon franchise in mid-December.

Verizon Blazes Trail

Securing the Philadelphia franchise, which requires approval by the city council, may not be easy.
“RCN, a cable company, tried to enter the Philadelphia market a number of years ago and was shot down,” said Scott Testa, a professor of marketing at St. Joseph’s University in Philadelphia, adding that RCN’s experience discouraged others from trying to follow suit. “Verizon is the first one in a long time to try to compete in the market.”

Verizon has the deep financial pockets necessary to compete with Comcast, Testa noted, and the presence of a competitor should benefit consumers by bringing lower prices and better service.

Price Remains Paramount

Granting Verizon a franchise would bring the city additional franchise revenues, Testa noted. Experience in other cities across the country has been that competition in cable markets results in higher levels of consumer spending, and thus more government revenue.

Testa said Verizon’s ability to pay franchise fees would show its viability as a competitor.

Jonathan L. Kramer, head of the Los Angeles, California-based Kramer Telecom Law Firm, PC, is more skeptical about Verizon’s prospects for winning customers away from Comcast. FiOS is a superior technology to cable, Kramer said, but that might not be enough to entice customers.

“Never forget that customers simply don’t care about technology,” Kramer said. “They care about offerings—and within that framework, about the prices for the offerings.”

Phil Britt ([email protected]) writes from South Holland, Illinois.