Cable operators have high hopes for advanced services, but a pair of telephone companies reminded them this week that they don't have the luxury of operating in a vacuum.Verizon ( VZ) said Monday that it is expanding a combined telephone and video service package to Florida and Texas, bringing the bundle to a total of eight states. Separately, AT&T ( T) said it would introduce a voice-over-Internet-protocol-based phone service to customers in New Jersey, the first step of a planned nationwide VoIP rollout. The two plans erect another hurdle in front of big cable operators such as Time Warner ( TWX), Comcast ( CMCSA) and Cablevision ( CVC), which are intent on bolstering their slow-growing core cable franchises with a growing array of services. Verizon's offer -- in conjunction with the DirecTV ( DTV) home satellite service -- represents yet another source of competition for cable's core multichannel video business, which has been showing minimal growth over the past few years. Meanwhile AT&T's product, which requires a high-speed Internet connection, adds an established, name-brand competitor to the telephone service that major cable operators are in various stages of rolling out. It thus poses one more threat to one of the several revenue streams that operators are looking to to counter the anemic basic business.
The degree of threat that the telecom-satellite bundles pose to cable, however, is under debate. In theory, combining multichannel video from a satellite service with telephone service and high-speed Internet access from a local telephone company directly challenges the video-Internet-telephony "triple-play" bundle that operators such as Cox ( COX) (using older telelphone technology) say increases per-household revenue and cuts customer defections. Cable operators, however, say that the reality never lives up to the theory, since it's harder for two companies to coordinate the marketing, technology and customer service functions necessary to create a seamless offering. Verizon, in its announcement Monday, said customers would initally receive bundling discounts in separate Verizon and DirecTV bills. The companies hope to combine their billing on Verizon bills later this year. Verizon says its bundled price for unlimited calling (locally, regionally and nationally), Internet access and a single DirecTV set-top box beats by $5 to $20 a month the prices of similar packages from major cable companies.