Cox Bracing for Verizon

Oct 3, 2005  •  Post A Comment

Cox Communications is firing up a full suite of advanced services to introduce to its 260,000 Northern Virginia subscribers in November as it prepares to fend off Verizon’s entry into the market next year.

That’s the practical evidence of the operator’s belief that video-on-demand and interactive television are critical to its ability to thwart competition. In fact, Cox is so serious about the telco threat, it refers to its Northern Virginia system as ground zero in its pending battle with Verizon.

The incumbent plans to introduce both VOD and interactive TV services to Northern Virginia, in addition to the triple play of services already rolled out there-voice, video and data.

Cox expects Northern Virginia to be the first Verizon video entry within the Cox footprint, said David Pugliese, VP of marketing for Cox. “We are committed to establishing a fortress around our customers by providing them the best products and services with the best overall experience,” he said.

Cox has deployed on-demand in about eight markets to date and interactive TV services in the Gulf Coast, but Northern Virginia will be the first Cox system with both services. What’s more, the operator has expanded its VOD lineup from primarily a movie and premium channel offering to one that is more expansive and now includes basic cable content such as A&E, Discovery, Discovery Kids, DIY Network, E!, Fine Living, Food Network, HGTV, History Channel and NFL On Demand.

“The state of the system is it’s ready to compete,” said Gary McCollum, VP and region manager for Cox Northern Virginia.

In addition to the basic cable network content, the Cox on-demand service includes movies on demand, adult content, premium content from HBO, Cinemax and Starz, and additional subscription on-demand content such as World Wrestling Entertainment, anime and what many consider the crown jewel for VOD, Howard Stern.

The Cox FreeZone portion of the VOD offering will also include local sports, advertising, real estate and government information. Mr. McCollum said he plans to offer classes in English as a second language via the on-demand service. “For those people working a second job, [in] the leisure of their home [they] can learn English,” he said. He intends to add local high school sports and interactive polling on local political issues.

Such local content is a competitive advantage that cable operators can leverage, said Braxton Jarratt, VP of marketing for VOD supplier Tandberg TV, which powers local on-demand content in several cable markets, including Cox in San Diego. “Cable is going to have the advantage for a long time,” he said. That’s because most cable systems already have in place local programming agreements with local entities, like sports teams and government, he said.

Cox is also looking to its ITV services as a differentiator. The ITV suite includes the ability to read and delete e-mail on the TV, access local weather, movie listings, horoscopes and soap opera recaps and the ability to view and pay Cox bills via the ITV interface.

Mr. McCollum said Northern Virginia is not only an important system because of the telco threat; it’s also a showcase market since it’s home to many politicians who work in the nation’s capital. Northern Virginia is also the growth engine for the state and the center of the state’s high-tech community.

“We can influence the way policy makers see cable,” Mr. McCollum said.

Verizon has the same opportunity on the telco side. It plans to introduce FiOS TV in the Northern Virginia area sometime next year when it has hammered out franchise agreements, said Sharon Cohen-Hagar, a Verizon spokeswoman. The telco has maintained that among its competitive advantages is the ability to offer an all-digital suite from the get-go with nearly all customers having access to advanced services like VOD, ITV and HD channels.

The telco has already inked deals with Discovery Networks, NBC Universal, Turner Broadcasting, A&E, Showtime and Starz. Earlier this month it signed a deal with GSN to carry the channel and to carry GSNI, the network’s new one-screen interactive service that lets viewers play along with more than 10,000 episodes of games and game shows via the remote control.

GSNI has been deployed in the Oceanic Time Warner market in Hawaii for more than a year and has done well for that cable system. The system saw a 10 percent increase above its normal weekly digital sales after a digital upgrade campaign earlier this year that included the GSN service, Oceanic said.

The telco-cable battle, which hasn’t technically even begun yet, is already looking a lot like the consumer packaged-goods business, where companies battle for a sliver more of market share, said Gary Arlen with Arlen Communications, a research firm specializing in interactive services. “Every time Jolly Green Giant comes up with something, Birds Eye is going to come up with something better, and vice versa,” he said.

Tough questions remain though: Will consumers care enough about the differences and will they spend enough time to learn about them, he said. The providers will need to communicate the advantages clearly from a marketing standpoint, because the services are complicated.

“Consumers may not give them a second chance. It is imperative each company does it right or it can blow the whole category. If e-mail on TV looks bad, it’s bad for everyone,” he said.