Skip to main content

Verizon Hangups

Verizon Communications Inc. could be forced to delay the first commercial rollout of its FiOS TV service in Texas because of a lack of programming agreements with dozens of major cable networks.

Verizon executives said they hope for a commercial launch of FiOS TV in Keller, Texas, by the end of September. But the telephone giant still hasn’t reached programming deals with such key suppliers as Fox Networks Group, The Walt Disney Co., MTV Networks, Scripps Networks, Home Box Office, Rainbow Media Holdings or Lifetime Television.

That means if Verizon moves ahead with plans for the commercial launch, it might have to offer consumers in Texas a programming package that wouldn’t contain some of the most popular cable networks, including ESPN, Nickelodeon, Fox News Channel, MTV: Music Television and Disney Channel.

Asked last week if Verizon would postpone the FiOS TV rollout in Texas without reaching carriage deals with Disney, Fox Cable Networks and MTVN, FiOS TV vice president of programming and marketing Terry Denson said, “I don’t know.”

“We are working as hard and fast as we can to complete those agreements prior to launch,” he added. “As to whether we would launch those services without an agreement, the answer is probably not. But that’s up to a mutual agreement between us and the content providers. Both sides are working together in good faith, and looking to get it done.”

Verizon has been making progress in obtaining local franchise agreements that would allow it to offer FiOS TV video services and compete against cable companies on an additional front.

The regional phone provider is close to scoring its first franchise in Long Island, N.Y., where Cablevision Systems Corp. is the incumbent. The town of Massapequa is scheduled to vote on a Verizon franchise on Sept. 26.


Obtaining programming agreements continues to be a difficult proposition for FiOS TV. To date, Verizon has reached carriage deals with mostly smaller cable networks, such as NFL Network, GSN, Blackbelt TV and Gospel Music Channel, along with a few larger programmers, including Discovery Communications Inc., Turner Broadcasting Inc., Showtime Networks, Starz Entertainment Group and Court TV.

One key issue that could delay deals with Fox Networks and Disney is retransmission consent agreements for TV stations owned by Fox Broadcasting Co. and Disney’s ABC Stations Group, a source at a major programming company said.

Other business factors, such as pricing, could also factor in.

Verizon belongs to the National Cable Television Cooperative, which allows it to acquire programming at rates offered to NCTC affiliates. That’s a relationship Verizon inherited from GTE Corp., which predecessor Bell Atlantic Corp. acquired in 1998.

An executive at one programming company that signed a carriage deal for FiOS TV said his networks reached a separate agreement with Verizon, which didn’t apply the NCTC rate.

Since cable programming deals are based on volume — license fees decrease based on the number of subscribers controlled by a distributor — Verizon will pay more for content for its early FiOS TV rollouts than major distributors such as Comcast Corp. and DirecTV Inc.

While Verizon might pay more per subscriber than large distributors, one source said the company could still obtain attractive rates for network license fees, as it will be bundling 160 channels in its core expanded-basic programming package. Ad-supported networks always want to be distributed as widely as possible.


Verizon’s Denson, who worked for ABC Sports, MTVN and Insight Communications Co. before joining Verizon in August 2004, was much in view last week, participating in a panel at the National Association for Multi-Ethnicity in Communications conference on Monday and at the Cable & Telecommunications Association for Marketing New York chapter breakfast Wednesday.

He said in an interview on Wednesday the key obstacle is the short window Verizon has had to line up deals with programmers. “I’ve been at this for about 12 months, and a typical deal cycle in the industry is 12 to 18 months. During the 12-month period we’ve had to learn a culture, create a strategy, make contacts, communicate our strategy to the content provider community, and then go into agreements. It’s a time-compression issue.”

Even though Verizon hasn’t reached programming deals with dozens of cable networks, marketing materials from the Keller rollout that surfaced recently contain hundreds of cable channels, including networks from Disney, Fox Cable and MTV Networks.

Verizon is also apparently accepting orders from Keller residents for the service. Sanford C. Bernstein & Co. analyst Craig Moffet told clients last week that one of his team members called a FiOS TV customer-service representative on Sept. 9 to order the service, and was offered an install for Sept. 13.

In White Plains, N.Y., Verizon is operating a FiOS store in the Westchester Mall. On a visit last week, a Multichannel News reporter found that the FiOS broadband Internet product is available to single-family homes in select areas of Westchester County. But a clerk indicated FiOS TV would not be available until the first quarter as Verizon works toward franchise agreements. There weren’t any marketing materials for FiOS TV in the retail outlet.

Verizon spokeswoman Sharon Cohen-Hagar declined to say last Thursday whether Verizon was accepting orders for the commercial rollout in Texas, or charging consumers for its TV product. “It’s a trial,” Hagar repeated several times.


The programming lineup Sanford Bernstein obtained — copies of which also surfaced on the Internet two weeks ago — show that Verizon is pursuing a similar programming lineup and pricing strategy to cable operators, including a plethora of free video-on-demand content.

The FiOS TV marketing materials pitch a 160-channel expanded basic lineup for $39.95 monthly, and a $12.95 analog basic-cable lineup which would include local over-the-air signals from broadcasters and The Weather Channel’s Weatherscan Local service.

Similar to the strategy of DirecTV Inc. and EchoStar Communications Corp., the FiOS TV lineup groups networks by genre, including entertainment; sports; news; information; women; shopping; home and leisure; pop culture; music; movies; family; children; people and culture; and religion and movies.

Five ESPN channels, FSN Southwest and Speed Channel are the only sports channels included in expanded basic.

For an additional $5.95 per month, subscribers would get a programming tier that includes Fox College Sports, Tennis Channel, NFL Network, Fuel, Outdoor Channel, The Sportsman Channel, Fox Soccer Channel, GolTV, TVG, Horse Racing TV, Mav TV, Blackbelt TV and G4.

For an additional $11.95 per month, subscribers can get a movie package that includes 26 channels from Starz Entertainment Group and Showtime Networks Inc.

Home Box Office, Cinemax and Playboy TV are each priced at $14.95 per month, and subscribers can also opt for to pay $24.95 monthly for HBO and Cinemax. Verizon hasn’t announced carriage deals with either HBO or Playboy.

FiOS TV also includes many free video-on-demand programming choices, including sports content from ESPN, ESPNU, ESPN Deportes, Fox Sports en Espanol, Fox Soccer Channel, Speed Channel and Fuel.

But Disney and ESPN Networks president of affiliate sales and marketing Sean Bratches said Verizon wouldn’t be able to offer free VOD content, since the company’s agreement with Disney for the trial in Keller is only for linear networks. Plus, Bratches said, Disney and ESPN still haven’t reached an agreement with Verizon that would allow the company to offer his networks to consumers for a commercial launch.


Fox Cable Networks expects to soon reach a deal with Verizon that would include carriage of all Fox cable networks, on-demand programming and retransmission consent for Fox-owned broadcast-TV stations nationwide, executive vice president of affiliate sales and marketing Lindsay Gardner said Friday. “We’re close to the finish line with Verizon,” Gardner added.

But if Fox doesn’t reach a deal with Verizon before the commercial launch, FiOS TV wouldn’t be able to offer Fox content. “Every distributor who carries our channels into people’s homes commercially is under contract,” Gardner said.

If Verizon is able to move forward with a commercial launch in Keller, the company will face competition from Charter Communications Inc., which has steeply discounted its programming packages in the market.

Charter is running a $49.99 monthly promotion until the end of the year that offers consumers basic cable, expanded basic, a digital programming tier, the choice of one premium channel, and a 384 Kbps high-speed cable-modem service.

Mike Reynolds contributed to this story.