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Verizon Cableco tie up faces competition hurdles

By PETER WHITE

Published: 7 April, 2012

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It is a big jump to conclude from its Cableco deal in the US, that Verizon plans to get out of the fixed line business, but what has to become a possibility is that Verizon stops investing ceaselessly in fiber to the home, and instead calls it a day on new fixed line provision, and starts selling more and more services across its existing infrastructure and that of its partner cable companies.

This would make the USA a fixed line duopoly in terms of continued build out - Verizon would stick with what it has, AT&T would then be left to carry the telco torch against the combined might of the cable companies plus Verizon.

If AT&T wants to open up fiber in a new territory it would have to build it, whereas Verizon would borrow it from existing cable plant. It is this that is behind the fears US players, regulators and lawmakers have over the new plan.

We think this outcome is not quite realistic. Verizon could continue to build out its fiber, but at a rate that does not compromise its profitability, but we accept that once it has a considerable number of FiOS customers over cable or Cable has customers over FiOS lines, they will be tied at the hip, leaving only the voraciously aggressive AT&T to compete in a stagnating market.

This is not the outcome that any consumer group wants in the US, but the alternative might be worse.

If the cablecos cannot get an effective mobile operation going, so that they can compete on the full set of quad play services, then their efforts of the last 20 years will become subdued, and AT&T and Verizon can strangle them to death in a quad play pincer - charging almost nothing for fixed line services to win customer loyalty and then taking profits in cellular - as they do already.

We would not want the FCC's job in the US right now. Damned if you do and damned if you don't and as such we see this decision being drawn out and extended, to give all the parties time to think it through, and then limitations being placed on a deal that will ultimately go through to give the cableco spectrum to Verizon and MVNO deals for cable.

For a longer analysis go to www.rethinkresearch.biz where it is available for one week.

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