Will Verizon's new speed tiers, bundled options make cable jump?

Sean Buckley, FierceTelecomVerizon (NYSE: VZ) finally revealed the pricing for its new 300 Mbps FiOS speed tier and the increase of its existing speed tiers with its new Quantum Fiber to the Premises (FTTP) brand.

Under the new regime, Verizon doubled the download and upload speeds of its existing FiOS Internet speed tiers: 25/25 will increase to 50/25; 35/35 will climb to 75/35, and 50/20 will jump to 150/65. A new speed tier, 300/65, doubles the current 150/35 top tier. Meanwhile, it is leaving its existing introductory 15/5 Mbps tier as is.

"We're moving the 150 Mbps that was offered on a standalone basis to our bundle," Arturo Piccici, director of product management for Verizon. "When you go to our Best bundle you can get 150 Mbps for $20 more."

It's unlikely that they'll see a mass adoption right away for the 300 Mbps tier. But the telco is adamant that the new tiers are all about building a foundation for future needs that users may have as they consume data and add more devices. The likely adopter could be the subscriber who likes to play a lot of online real-time gaming and has a family that uses multiple devices to access streaming video and other online content simultaneously.  

For all of the excitement that's being created for these new offerings, they're not going to appeal to everyone. In considering the new tiers, FiOS consumers or those who might be thinking of switching from cable will likely look at three main factors:

  • Speed: Although the service is still asymmetrical, Verizon is hoping that the increased upstream speeds will give it some advantage in the markets where FiOS is available. By comparison, a number of the cable operators, including Comcast (Nasdaq: CMCSA) and Charter (Nasdaq: CHTR), offer 100 Mbps tiers over their DOCSIS networks. Charter's 105 Mbps, for example, is $199.95 per month with 3 Mbps upload speed. Jason Blackwell, Strategy Analytics' director of Service Provider Strategies, Digital Consumer Practice, said the appeal of the new service "will really depend on how important consumers feel a higher speed of broadband service is for them." One of FierceTelecom's readers thinks that "There aren't any significant applications for many residential customers above 100 megabits let alone 300."
  • Price: The new 50/25 Mbps tier costs $75, the 75/35 Mbps tier costs $85, and its 150/65 Mbps tier costs $95 a month. The 300 Mbps tier costs $205 a month. But for some subscribers, the devil is in the little details such as set top rental fees and related fees, which add to the total cost. Take Steve Donohue, editor of FierceCable and a FiOS quad-play subscriber. Donohue estimates that if he were to upgrade to the Quantum tier his monthly bill would increase to $400.
  • Availability: To get the 300 Mbps or the 150 Mbps a FiOS customer will have to be served by a GPON Optical Network Terminal (ONT) at their premises. Other existing customers who have a BPON ONT and qualify for the new GPON services will have to have a technician come to their home and install a GPON ONT. The reality, however, is that FiOS is far from ubiquitous, meaning that in markets where FiOS isn't available, cable operators will play up their own DOCSIS 3.0 capabilities to take away more of Verizon's DSL customer base.

With these issues in hand, what's cable doing to counter Verizon's move?

Already, it appears that Comcast, according to a forum post on Broadband DSL Reports, is going to up its 50 Mbps speed tier to 105 Mbps in its Northeast market.

However, other cable operators like Bright House Communications, one of Verizon's cable competitors in Florida, thinks the new 300 Mbps tier and the increase of the other tiers is irrelevant.  

"Research indicates that the vast majority of customers do not have Interest in these types of speeds for their homes, not to mention the potential expense," said Bright House spokesman Joe Durkin in a Tampa Bay Times article."Our network can deliver these speeds if we felt there was a residential market for it."

While it's clear that Verizon immediately gains bragging rights, cable operators in the near-term will likely continue to respond with their respective 50 and 100 Mbps DOCSIS plans but will up the speed bar to challenge the telco.--Sean