With close to 3 million consumers already signed up with cable-company-provided phone service and more defecting every day, AT&T, Verizon and Qwest are battling back with bare-knuckle marketing messages that call into question the reliability, customer service and even the safety of phone service from cable companies and upstarts.
"We are smacking back at the cable dogs with their lies, deception, defamation and distortions," Jim Smith, director-media relations at Verizon Communications, wrote in an e-mail to Advertising Age.
Ad attacks 911 service
AT&T, for example, is pointing out that dialing 911 in an emergency might be an issue with cable-provided phone service. An ad running in several markets within its 13-state footprint shows a call center where well-groomed operators tell unseen callers about the drawbacks of telephone service over the internet, also known as voice over internet protocol, or VoIP. Those drawbacks include the possibility that emergency workers will not know the location of the phone or that the phone will go dead if the power goes out because it depends on a computer connection.
The spot also contains a claim that once every 11 seconds a consumer switches back to AT&T.
Cable companies aren't taking such tactics lying down. Some are considering challenging the 11-second claim with the Better Business Bureau's National Advertising Division or even filing a lawsuit. Wendy Clark, VP-advertising at AT&T, said the claim is accurate and the company can substantiate it. But Marvin Davis, senior VP-marketing at Comcast, said, "There are far more customers leaving the established phone companies than are going the other way."
Aggressive Comcast ads
The AT&T ad follows a series of advertising attacks from Comcast. One spot from the operator, created by The Richards Group, Dallas, shows a consumer taking gigantic bills out of a mailbox and writing a check the size of a kitchen table. Another spot shows a person in a Robin Hood-style cap ambushing a passing phone-company truck with arrows.
It's "the beginning of a very nasty battle that will take another five to 10 years" to play out, said independent telecom analyst Jeff Kagan. Not to mention an expensive one. Deep-pocketed AT&T and Verizon Communications spent a total of $2.1 billion on measured media the first six months of this year, according to TNS Media Intelligence. Comcast, Cablevision and Time Warner Cable appear to be far outgunned-with measured media budgets of $119.9 million combined in the first six months of this year-but that figure does not reflect the hefty media weight available on their own cable networks.
There's a lot at stake now that telecommunications has become a buyer's market. The phone companies are losing share not just to VoIP but to consumers who cut the cord and rely on wireless phones. Mr. Kagan said he expects 20% of the nation's telephone customers to stick with traditional telecoms and another 20% to stay with cable companies; the remaining 60% will be in play.
VoIP growing rapidly
Ian Olgeirson, senior analyst at Kagan Research (no relation to Mr. Kagan), said telephone companies attacking internet phone service are on a "slippery slope, criticizing a technology they may be selling themselves." Of the 110 million U.S. households, he said, there were fewer than 2.6 million cable VoIP subscribers in 2005, but that number is expected to more than double to 6.5 million by end of this year.
In the meantime, opponents are squaring off. Qwest is running an ad featuring a mock game show that asks the question: "Who wants to spend more money?" On the East Coast, Verizon is running two anti-cable company campaigns. One attacks perceived cable weaknesses, such as poor customer service and rising bills.
The messages, from agency Draft FCB, have been altered to meet market needs: One focuses on reliability in Florida during hurricane season, said Tom Crowder, VP-marketing communications. The telecoms also have benefited from a viral video that emerged on YouTube in which a cable repairman sleeps on a customer's couch. Verizon said it wasn't behind that video.
There's no question phone-service alternatives are gaining momentum. Cablevision Systems Corp.'s internet phone product, Optimum Voice, has been backed by an ad campaign showing an actor playing a phone company executive who goes from floor to floor in a building asking for services already provided by the cable company. In each case, the answer is: "We're working on it." The company, which covers much of the metropolitan New York area and competes with AT&T and Verizon Communications, has more than 1 million customers, or about one-fourth of its market, according to a company spokesman.
Indeed, bundles appear to be rapidly gaining steam. A Telephia study covering the second quarter of 2006 found two of five U.S. households, or more than 31 million online homes, subscribe to bundled services from one provider. While the internet/TV bundle was the most popular, with 13 million households, more than 10 million households subscribed to an internet/phone combination. Additionally, 5 million households subscribed to the triple play of TV, phone and internet.