Thursday, January 29, 2009

Telcos Fight For Survival

Today's Wall Street Journal poses the question, which strategy will succeed, Verizon or AT&T, as they reshape their future. Both telcos would agree that the landline phone business is declining. Younger consumers especially are choosing their wireless device as their primary phone, and not even bothering to take a hardwire line. But the article sees each pushing a different strategy for success. For Verizon, the buzz is FiOS and competing in the cable space; For AT&T, it's pushing the partnership with Apple and the iPhone, and a less aggressive stake in its cable platform, U-verse. So who is more likely to succeed? "Industry observers say it is too early to tell which strategy will pay more dividends. While AT&T has taken a conservative tack, Verizon's FiOS gambit has always been more of a risk financially because it will take time to generate healthy margins on the video business."

For my 2 cents, I like the direction that Verizon has taken. For one, the iPhone success is short term; the iPhone exclusive deal will one day expire and for now Blackberry devices provides a good experience. For some, an iPod device can provide the bells and whistles without the calls. And for me, Verizon's signal and connectivity makes it the superior cellular service.

I like the Verizon strategy because their connectivity is both wireless and wired. They will have the advantage to build synergies off the two platforms and interconnect them in new ways. Ultimately, the connection to the home will provide multiple opportunities to monetize content. By connecting to the customer wherever they are, by any device, TV, PC, cell phone, Verizon is poised to be the glue that manages our communication, information, and entertainment needs. As FiOS reaches scale, it will be able to aggregate its customers and understand their consumption patterns.

In fact, I believe that the next stage for Verizon is to own content. Today Cablevision and Time Warner use their local news operations, News 12 and NY1, to keep consumers on their platform. As Verizon acquires a network or website, it would be able to build a compelling interactive experience that can be merchandised across its wireless and wired platforms. Cable has yet to add a working wireless platform to its triple play model. With content and cable, data, phone and wireless platforms, Verizon has the opportunity to leap ahead of AT&T and the cable operator.

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