FiOS versus cable: Perception, reality and money mix together

A shoestring, not fiber or coaxial cable, separates Verizon's FiOS and cable. Cable has always claimed it operates on a shoestring budget so the fact that Verizon has more money to build a network is why Verizon is picking apart cable's video base. 

Whether because of its entrepreneurial heritage or its greed or its arrogance, the cable industry has always been seen as stingy when giving one ounce more of anything--technology, service or respect-without picking consumer pockets. Direct broadcast satellite took advantage of this cable tendency to grow and thrive in the United States by simply offering more television. Now it's what's letting FiOS, again, at its foundation only a better television service, grow and flourish. 

Cable always had a tough time selling its position as the homeless waif traipsing along the information superhighway with a shopping cart full of voice, video and data bundles just because every cable bill goes up every year. As with satellite, the industry knew FiOS was coming, and just as with satellite, cable is now wringing its hands while wringing dollars out of existing plant. 

"When you say the cable guys blew it (with satellite), maybe so, but until they were threatened I don't think they could have gotten the money (to upgrade plant)," said Steve Effros, president of Effros Communications. "That's a realistic part of the problem that we always have."

Effros, one of the few cable industry voices willing to talk on the record about FiOS, was president of CATA, the Cable Telecommunications Association, representing small-to-mid-sized cable operators when satellite cut inroads into cable's suburban bastions. Today, CATA is merged with the National Cable Telecommunications Association (NCTA) and Effros is an industry observer and NCTA senior advisor. He's also a Verizon FiOS subscriber because he's a techie who likes to try whatever's new, even if it competes with his first love. 

FiOS, he said, "is very nice but it's cable television. I love it, but at the end of the day how do you afford to do what they're doing?" Effros asked. "Telephone companies have more money than anybody else so they have a good head start. Nobody else could do it the way they're doing it because no bank would loan it to you." 

He's got a point, said Vince Vittore, principal analyst for The Yankee Group. 

"It's problematic from a financial standpoint. Verizon was skewered on Wall Street ... when they announced FiOS. Can you imagine what's going to happen when the cable industry comes out and says it wants to spend billions of dollars after it spent billions to upgrade its systems (to hybrid fiber/coax)? I think they're going to do it but they're going to do it in a more selective way." 

A cable industry executive, speaking on background, agreed that cable will, indeed, do something to match the bandwidth Verizon's pouring into consumer homes "in a surgical manner, but we're many, many years from seeing service demand that's going to warrant any types of future stuff that's many orders of magnitude higher than what demand is today." 

For now cable is doing what it can with what it has to deliver more bandwidth; adding switched digital to its networks; bonding channels with DOCSIS 3.0 and evolving to MPEG-4 compression. For now, it's probably enough. For tomorrow ...

This article is continued...

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