Verizon's Fios Changes Billing, Contract Offerings

Cable Companies Will Need New Approach After Successful Attacks

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NEW YORK ( -- Big cable's tactic in the ad war against Verizon's Fios seems to have worked -- so well that they now have to abandon it.

Time Warner Cable, Comcast and Cox laid out hundreds of millions of advertising dollars claiming Fios charged deceptive monthly fees, levied costly cancellation charges and had restrictive yearly contracts. The incessant attacks were felt at Verizon, which has now made significant changes to its billing and contract offerings that have basically disarmed two years of competitive arguments from its cable rivals. Fios is touting the shift in an aggressive radio, print, online, direct mail and TV push (30- and 60-second spots) under the theme "100% fiber optics. Zero percent early termination fees."

Susan Retta, Verizon's VP-marketing, said the company needed to try out a new direction that would encourage consumer trial of the Fios product since so many of its competitors had successfully instilled the fear of trying something new with a long-term commitment.

"We wanted to take away the worry factor for some customers. We're really promoting the confidence we have around this product," she said. "There's a group of customers who are aware enough about Fios but not enough about why they should make a change. Some of the questions we heard were, 'Is it going to be worth a change?' 'Will it be worth it in two years?'"

Comcast, Cox, Charter and Time Warner have all challenged Fios' claims that Verizon's network was the only one that was 100% fiber-optic -- meaning higher speed and better picture quality.

The name-calling hasn't stopped Fios from adding customers, but it appears to have stunted its growth. In first-quarter 2010, Fios added 168,000 new TV customers, compared to 299,000 during the same period the year prior. And that's after an aggressive year of marketing outlays, with Fios spending $191.6 million on measured media in 2009 compared to Time Warner Cable's $158 million -- despite Fios representing only 3 million customers and Time Warner serving more than 14 million customers.

So what will Fios' competitors do next? They will look for advertising to put more focus on the comparative value of their services and the quality of their products.

"This is a tough business, and Verizon is learning that customers demand choice, value and service," said Time Warner Cable spokesman Alex Dudley. "Time Warner Cable gets that because we've been at it, on the ground, for a long time."

David Grabert, a spokesman for Cox Communications, which competes with Fios in New England and Virginia in particular, said, "Cox is a nimble competitor, and we will continue to approach the market with compelling offers and the best total value. Cox still has the most experience in building in all of our markets."

Despite Comcast being issued a "cease and desist" letter by Verizon over its 2009 "Don't Fall For Fios" campaign, Comcast spokeswoman Jennifer Khoury said the company's marketing has always emphasized the clarity of its TV signal, the quality of its high-definition content and its consistent speed. A 30-day trial period with a money-back guarantee -- instituted in 2008 -- will also be a focus. "Our belief is that once customers have the opportunity to compare to Fios or any other provider, they'll stick around," she said.

Verizon spokesman Bill Kula said the company will continue to monitor competitors' ads on a daily basis to determine whether they need to respond to any false or misleading claims or potential legal issues. "Some of our competitors are recognizing that this is a robust network that Verizon is building," he said.  

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