Verizon May Ignite Online Pay-TV Competition With Web Offering




Verizon Communications Inc. (VZ), the
second-largest U.S. telephone company, may set off competition
among pay-television providers with a new Internet video
service, said Janney Montgomery Scott LLC.

The service from Verizon, based in New York, could be a
milestone because it would mark the first time a cable or other
pay-TV provider moved to sell its content outside its regional
footprint, said Tony Wible, a Janney analyst. The move may
prompt cable operators, such as Comcast Corp. (CMCSA) or Time Warner
Cable Inc. (TWC), to take similar steps, he said.

“We see this as a catalyst” for other companies, Wible
wrote in a research note today.

Verizon is set to offer an online video service using
Internet Protocol technology that will compete with Netflix Inc. (NFLX)
and cable-television companies, Wible wrote. Verizon had 3.98
million customers for its FiOS TV service as of September.

Verizon hasn’t announced the online video service and
Deidre Hart, a spokeswoman for the company, declined to comment.
Reuters reported that Verizon would offer a service to compete
with Netflix today, citing people briefed on the plan.

Verizon rose 0.7 percent to $38.32 at the close in New York
and has gained 7.1 percent this year. Netflix fell 2.8 percent
to $68.14 and has dropped 61 percent this year.

A move by Verizon into video may prompt cable and telephone
companies to charge broadband customers based on the amount of
data they use, what’s known in the industry as usage-based
billing, Wible said. That would allow pay-TV providers to build
up new revenue streams even if they lose customers for their
television services, he said. It may hurt Netflix since its
service would effectively become more expensive, he said.

Pay-TV providers that move quickly into each other’s
territories could benefit, Wible said.

“The first movers may have an edge in the market,” he said.

To contact the reporter on this story:
Scott Moritz in New York at
smoritz6@bloomberg.net

To contact the editor responsible for this story:
Peter Elstrom at
pelstrom@bloomberg.net

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Article source: http://www.bloomberg.com/news/2011-12-06/verizon-may-ignite-online-pay-tv-competition-with-web-offering.html

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