City dwellers have had little reason to pay attention to those ads in which Verizon and Comcast mock each other, but a proposed pact announced yesterday brings the cable television wars to Pittsburgh.
Long the domain of Comcast, the city may now see the rollout of Verizon's FiOS-TV, if the public Cable Communications Advisory Committee and City Council approve the deal. Allegheny County's biggest municipality would join about 70 smaller ones in which TV carried by fiber-optic lines competes with delivery via the airwaves, standard cable systems and satellite.
"The prices will come down," predicted City Information Systems Director Howard Stern, who led the yearlong process of sealing a deal. "Let the games begin."
Mr. Stern predicted that the first city deployments could occur in August or September. Councilman William Peduto, who has been involved in telecommunications issues for years, said a council vote might not happen until September, which might push deployment into the fall.
Verizon pledged to offer FiOS-TV in some neighborhoods shortly after final approvals are given, in half of the city within three years, and to all of its homes within six years, or face fines.
Comcast is expected to fight hard to keep its 93,000 city subscribers, and may have more pricing flexibility than its new city competitor.
"We compete every day for video, Internet and phone customers throughout our footprint, and continue to offer advanced products and services," Comcast spokesman Bob Grove said in a statement.
The Federal Communications Commission recently found that cable rates in communities with competition were, on average, 8 percent lower than rates in non-competitive areas.
But competition among Verizon, Comcast and other providers hasn't produced big price drops nationally. And even though satellite TV, which is available pretty much anywhere, consistently undercuts cable TV prices, outfits like DirecTV and Dish Network have had little effect on cable TV rates.
There's no reason for Comcast to make big price cuts at the outset, because Verizon's rollout will take a full six years. And even when FiOS is available across the city, residents may not see Comcast cut prices across the board. Instead, cable providers may offer deals on a case-by-case basis. If you call in threatening to cancel Comcast service in favor of Verizon, Comcast may offer to match the price. Or it might instead offer enhanced services -- free DVR, or a free cable package upgrade, or a free premium channel.
Providing extras, rather than cutting rates broadly, keeps the margins profitable and allows the cable operators to pay for their product.
"The cost of programming keeps going up," said Steve Effros, a consultant to the cable industry and former president of the Cable Telecommunications Association. "So long as we're paying multimillion-dollar salaries to baseball players, and as long as the cost of original product out of Hollywood keeps going up, the cable operators have to pay for it.
"You won't see price wars," he predicted.
One area where Pittsburghers might see some price reductions is in bundling. Verizon's arrival as a cable provider enables it to offer a suite of TV, telephone and high-speed Internet service, the way Comcast already does in the city. Comcast's Triple Play and Verizon's Triple Play both check in around $100, as long as the buyer agrees to lock in those rates for a year or two.
But those introductory savings can be short-lived, even in areas where Verizon, Comcast and others compete. Verizon announced last month that it was increasing its bundled rates in many of its markets from $99 to $109. Mike Ritter, the chief marketing officer for FiOS, told The New York Times that "the company was feeling good enough about its brand position that it could charge a premium price, even as it tried to steal customers from cable."
Whether prices wither or not, features may bloom.
"When people have choices, it forces all of the competitors in the market to start competing on more than price," said Verizon spokesman Lee Gierczynski.
Coming soon are innovative options such as programming digital video recorders and parental controls by cell phone, networking the TV with the home computer, and accessing Internet networking tools such as Facebook and Twitter through the TV.
FiOS Internet service is already available in parts of Banksville, Beechview, Bloomfield, Brookline, Carrick, East Hills, East Liberty, Friendship, Garfield, Highland Park, Homewood, Larimer, Lincoln-Lemington, Morningside, Overbrook, Point Breeze, Regent Square, Stanton Heights and Swisshelm Park, and it would be relatively easy to add FiOS-TV there, Mr. Gierczynski said.
If the city signs on, it gets 5 percent of the gross revenue -- the maximum allowed under federal law -- just as it gets from Comcast. Verizon will also provide dedicated fiber-optic lines between some city public safety facilities, $700,000 over five years to improve the city's in-house video hardware, and 45 cents from each monthly bill to go toward public, educational and governmental broadcasting.
Verizon will give the city five channels -- two for governmental use, and one for public access PCTV -- as much as the city gets from Comcast -- plus another on which public and private schools can broadcast programming and a fifth channel whose use hasn't yet been determined.
"Schools sometimes want to tout their successes," said Mr. Stern of the coming new channel. Now there's a place on the cable dial "if Peabody [High School] wants to televise its class plays."
The agreement obliges Verizon to meet customer service milestones, such as providing a credit any time there's an outage longer than 24 hours.
Mayor Luke Ravenstahl has long wanted cable competition, but talks were on hold while Verizon negotiated to get into the larger Philadelphia market.
Even though there's a proposed agreement, Pittsburgh's dance with Verizon isn't over. Cable attorney Dan Cohen, a former city councilman hired by the city to negotiate the Verizon deal, said the city is expecting a promise from Verizon to retain local jobs.
"I want competition in the Pittsburgh marketplace for cable," said Mr. Peduto. "I just want to make sure that Verizon wasn't giving a better deal to other cities than what Pittsburgh's getting."
Mr. Peduto's appointee to the 11-member Cable Communications Advisory Committee, Stephen MacIsaac of the digital education group Wireless Neighborhoods, has been researching other cities' deals. New York demands that local vendors get some of the deployment work. Washington, D.C., insists that more than half of new hires come from among its residents.
Council is expected to get legislation approving the pact today, and key members of the Cable Communications Advisory Committee will be briefed. The deal could come before that committee at its Monday meeting, and the panel could present its recommendations to council in August.
