Saturday, December 17, 2005

Verizon FIOS TV Franchise Status Report

Since late September of 2005, Verizon has been rolling out FIOS TV to communities across the US. Verizon's own website has press releases on them.

This includes such DC-area jurisdictions as Fairfax County (est. 351,000 households) and Herndon, VA (est. 22,000 households).

So where's Montgomery County on the list? MC has many potential customers (324,000 households, median income $84K/family) and roughly half the county is wired with Verizon fiber already. Sounds like a golden opportunity, yes?

You'd Think So

When I first reported on the Verizon franchise process, I hypothesized that the signing of a franchise would take roughly 6 months. This was based on my experience watching the county sign two deals with Comcast and two with Starpower/RCN - and the reality that Verizon had a large investment of fiber in the ground already and was raring to go. I actually said "Look for passage by the end of the year. Actual implementation is anyone's guess." What I meant by that was the papers would be signed by December 31, 2005 and that we'd get actual service some time after that. The actual deployment would depend in large part to where you lived in the county. Some neighborhoods have fiber already. Some won't have it for a year, possibly more.

However, at successive MFP meetings, the Cable Office reported progress on the franchise was proceeding slower than expected. And I could tell that was true. We should've had council hearings (we have not) and public hearings (we have not) even before the council hearings. During a CCAC meeting just two days ago, Cable Office staff described some of the difficulties they were encountering. Rather than repeat the trivia, I will read between the lines - Verizon is NOT interested in a quick rollout of FIOS TV in MC.

I can only speculate what the problem is but it's likely a combination of several things:
  • loss of local top Verizon executives in Montgomery County. Now the county has to deal with Verizon executives in Chicago who don't readily drop round for discussions. (Curiously, this week's Potomac Almanac reported on the Montgomery County Executive's Ball. Nominally, a benefit for the arts and humanities, the Ball is more suitably described as a thinly disguised excuse to do some politicking in support of MC Executive Duncan's run for the Maryland governorship. In attendance - Don Heath, who until last month was in charge of Verizon's MD/DC FIOS project. Hmm.)

  • wariness from Verizon being raked over the coals by MC on the fiber install problems (discussed here earlier).

  • Verizon lawyers are, after all, pretty busy and there are plenty of opportunities to sign franchises elsewhere.

  • Verizon is waiting for Congress to make a decision on the future of cable regulation.
The last point bears deserves further explanation. There are at least three bills pending in Congress that would change the way cable companies (and Verizon currently qualifies as such) are franchised. The bills range from franchising at the state-level to no franchising at all. Needless to say, Verizon is presumably thinking that it's not worth the effort to create a local MC franchise if it's all going to be for naught in a few months.

So why is Verizon signing franchises in other localities? These other localities are much smaller or simpler than Montgomery County. MC is big, complex, has some unusual requirements and most importantly, has some very savvy people that would be creating the franchise. So while Verizon may be quick to jump all over small communities such as Keller TX, their efforts with MC won't be as easily rewarded.

So what does this mean? The telecommunications field is in a huge state of flux - and may well be for years! But one thing is clear, all transmission mechanisms are converging. Phone, video, internet, ... and so on, are all in a sense the same thing (packets). Currently regulations treat them all separately with wildly differing laws and, while historically understandable, make little sense to continue and get ever more baroque. As a simple example, why should a company accept onerous cable TV regulations if they can turn around deliver video over the unregulated internet? Or burdensome phone regulations in the presence of unregulated VoIP?

The franchise rationale is just as conflicted. While franchises create an unfair playing field in the TV domain (after all, satellite TV providers don't need franchises), franchises do provide a regulatory mechanism which can have valid benefits (trust me, you don't want an ungrounded connection to the cable system). And there are similar arguments and trade-offs for franchising at a local level vs national level.

The bottom line is that Congress has a very tough problem on their hands. (And knowing how Congress works, there's no reason to believe they will come up with simpler and more sensible regulations. But that's for another discussion.) And I am not holding my breath for a rapid resolution, particularly with so many alternatives being pushed at the same time.

For this reason, I believe Verizon is making a major mistake by delaying a franchise in MC. Six months can turn to a year or two rather quickly. Verizon is missing the opportunity to catch ex-Comcast customers before they move to satellite. Or phone customers before they move to any of the hundreds of VoIP providers.

It is ironic that Verizon even today is spending handsomely on advertising describing how their efforts will pay off for the citizens of MC. Between all the full page ads that the Gazette is carrying for both Comcast and Verizon each week, the Gazette owners must be very happy. Of course, I've given up tracking Comcast's ads and promotions. For Verizon FIOS, I have personally received 18 full-color flyers in 5 different designs, one UPS mailing, and one personal visit from a team of salespeople (who were so ill-prepared that they managed to find a time to visit my home when I wasn't present and then left no message that they had been there). Oh, and I've had a man sitting in a "FIOS car" parked on my street for a day. The car was bedecked in FIOS colors (which I actually think make a pretty good logo - see, I'm not totally negative!) but the occupant was unable to answer any questions about the service. ("I'm just paid to sit here all day. I've got my Starbucks and my crossword puzzle - I'm happy.") although he did confess that at his own home, he was unable to get FIOS. His provider? Comcast.

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