Verizon's Gutsy Bet
COVER STORY -- Business Week
AUGUST 4, 2003
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Now Verizon faces cable companies that are spoiling for a fight. The cable industry has spent more than $75 billion since 1995 to upgrade their networks for high-definition TV, fast Internet access, and telephone service. The phone companies "have to make sizable investments to catch up," says David N. Watson, executive vice-president for marketing at Comcast, the nation's largest cable operator. "And we won't be standing still." In fact, Comcast and the other cable companies are hell-bent on torpedoing Seidenberg's plans by destroying Verizon's profits before it can use them to get into the video business. Cable players are expected to nab 3.7 million phone lines nationwide by 2005, up from 2.2 million last year, according to market researcher Kagan World Media. That, along with competition from AT&T Corp. and wireless companies, caused Verizon to lose 3.7% of its local-phone lines in 2002.
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The commander will need all the warriors he can get. Within two years, the cable-TV companies are expected to be in the phone business big time. They already have 15% of the market in a handful of Verizon neighborhoods where they offer phone service. Cable companies like Comcast, Cablevision Systems, and Cox Communications are planning to expand their phone operations in 2004 using Internet technology that's cheaper and packed with features like inexpensive second and third phone lines. At the current pace, the cable companies will probably have 30% of the phone market over the next decade, says telecom analyst John Hodulik of UBS.
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