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Verizon FiOS: A New Dog Learns Old Tricks

Posted by: Stephen Wildstrom on June 01, 2009

V erizon communications hasn’t been at the business of delivering television to subscribers’ homes for very long, but it has already developed some of the worst habits of the incumbent cable companies. I’ve generally been happy with my Verizon FiOS service since switching from Comcast some months ago. In particular the quality of the high-definition TV signal that Verizon delivers is significantly better than Comcasts’.

This week, however, I got a sense of the extent to which Verizon has turned into a cable company. I finally got around to replacing an ancient analog TV in the kitchen with an inexpensive HD set. My one requirement for the TV wat that it have an HDMI input, which allows a single cable to deliver audio and video from the set top box. But when I went to hook up the new set to the Motorola box from Verizon, I discovered that it was a standard-definition box with neither HDMI nor component outputs.

My wife took up the chore of finding out how to exchange the box for an HD box. She immediately encountered a run-around worthy of any cable company: customer service reps who could not handle a simple request (including the location of the nearest Verizon outlet that could handle the exchange), calls the dropped while being transferred, the works. Then there was the bad news: The HD box would cost $10 a month, up from $6 for the standard definition one (I figure that Verizon will recover the actual extra cost in the first month.)

Former Federal Communications Commission Chairman Kevin Martin enjoyed busting cable companies' chops, but his FCC never made a serious effort to enforce a 1996 congressional mandate that cable operators facilitate a market for consumer-owned, retail set top boxes. It's long past time for the new FCC to end the tyranny of the cable company-owned box, and extend the requirement to Verizon and AT&T, which are now cable operators in all but name.

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Reader Comments

Dan Hays (PRTM Management Consultants)

June 2, 2009 02:54 PM

The set-top box issue is real, but it's a consumer problem as much as it is a cable/fiber/satellite television service provider problem. Typical set-top boxes can cost anywhere from $200-500, depending on features and technologies. Boxes featuring DVR (hard drives), HD (high-end graphics processors), and expansion slots/interfaces do cost more money, but most U.S. consumers have not shown a willingness to pay for them up front. As such, providers like Verizon are being forced to "rent" them, recouping the high costs via a combination of the rental fees and (even higher) monthly service revenues. The one box that is widely known to exist for open-market purchase and use with FiOS is the TiVo HD DVR, which can be purchased for around $250-300 but requires a TiVo subscription as well.

This issue is quite reminiscent of the same issue faced by the mobile phone service providers. A typical mobile phone costs $150-400 from the manufacturer, but retails for $29-$199 from the service provider as long as the subscriber signs up for a monthly service contract. You can buy mobile phones on the secondary market, but they often do not work with all networks and are significantly more expensive. Most Americans choose not to purchase them that way, while consumers in places like Europe, Australia, India, and other areas are more used to purchasing mobile devices on their own from retailers.

Changing this paradigm is likely to require not only increased openness by the service providers but also support from the sales channels and changes in consumer willingness to pay for the equipment up front.

Steve Wildstrom

June 2, 2009 03:08 PM

@Dan Hays--I for one would, happily pay upfront if I had the opportunity. My point, beyond the grumbling about terrible customer service in general, is that Congress mandated that MSOs separate conditional access from content 13 YEARS ago. It's long past time that this mandate were enforced (and extended to the telco TV services.)

Dan Hays (PRTM Management Consultants)

June 2, 2009 07:39 PM

Steve, you're certainly right - why pass the law if you don't intend to enforce it? Let's hope that the introduction of Verizon's FiOS and AT&T's U-Verse into the cable/telco TV market help to stimulate greater competition and cause the forces of capitalism come into play. That should get some more choices for set-top boxes, content, and more!

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