Verizon’s HomeFusion Service Seen as Little Threat to Cable Operators
Cable operators face little threat from Verizon Wireless’s new LTE service in rural areas, cable officials said, downplaying the recent start of HomeFusion Broadband. They mainly view the new product as either a replacement for DSL or a rival to satellite broadband in areas that are unserved or underserved by other ISPs. The executives said cable’s broadband market share won’t likely be hurt much by HomeFusion Broadband.
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Verizon Wireless has introduced it in six markets: Birmingham, Ala.; Dallas; El Cajon, Calif.; Nashville, Tenn.; Roanoke, Va.; and Terre Haute, Ind. The company is offering three price tiers that range from $60 a month to $120 a month, plus a one-time equipment charge of $200 for the cylinder-shaped LTE antenna that attaches to the side of the home. Designed to go where DSL doesn’t, the service promises top download speeds of 5 Mbps to 12 Mbps and top upstream speeds of 2 Mbps to 5 Mbps. Plans call for Verizon Wireless to roll out HomeFusion nationwide over the rest of the year. Subscribers can connect up to four devices by wired links and up to 20 devices wirelessly using Wi-Fi.
Cable industry experts mostly shrugged off the competitive salvo from Verizon Wireless, when asked about it in interviews and at a conference last month. They dismissed HomeFusion as a relatively slow, limited and expensive service that won’t compete much with cable broadband, even in many rural and remote areas. “You're not going to have something that can compete with some steel like DOCSIS 3.0,” said Vice President Timothy Burke of Liberty Global, a large cable provider outside the U.S. that has used a “full” MVNO approach to enter the wireless market in Europe. “It’s not going to happen."
Verizon Wireless sees a promising nationwide market for HomeFusion and believes it’s positioned properly for that market, a spokeswoman said. “We clearly think there’s a set of customers who'll find this an attractive service,” she said. “We think it’s priced appropriately for the marketplace.” She stressed HomeFusion is designed mainly for households with no or few broadband options. “I used to live in Manhattan,” she said. “It’s probably not for me and my old neighbors in my 19-story building."
HomeFusion’s strict monthly data caps, ranging from 10 GB to 30 GB depending on the price tier, won’t make it very attractive to video-hungry subscribers who gobble up more than 50 GB of data per month, said Hillol Roy, a fellow at Interactive Broadband Consulting Group. At the highest end, he noted, HomeFusion offers 30 GB of data monthly for $120. Verizon has established a $10-per-gigabyte penalty for subscribers who go over the monthly data limit, though it has loosened that rule for the first two months of service. Burke and Roy spoke at a broadband technologies conference hosted by Light Reading in Denver.
Cable experts see little chance Verizon Wireless will try to extend HomeFusion to more populated urban areas where it would compete against faster cable modem service. Analyst Karen Brown of One Touch Intelligence said the carrier would be foolish to try to extend HomeFusion outside rural and remote markets. She said Verizon Wireless has predicted it will start using up all of its current LTE capacity sometime next year. “They'll probably run out in the high-density markets,” Brown said. “So this is not where they'll run a fixed wireless service. Verizon will be very strategic in how they market and sell this."
Forthcoming LTE Advanced technology won’t make a difference, cable officials said. “The wireline side will always be … faster in a fixed environment than a wireless service,” Brown said.
The launch of HomeFusion comes as Verizon and four of the six biggest U.S. cable operators -- Comcast, Time Warner Cable, Cox Communications and Bright House Networks -- seek approval of spectrum deals with Verizon Wireless. Under the pacts, notched in December, Verizon Wireless would pay about $3.9 billion for the AWS licenses owned by the four cable companies. Verizon Wireless and the four cable providers also agreed to start selling each others’ products. Critics have attacked the deals, now under review by the FCC and Justice Department, as anti-competitive. Verizon is reportedly weighing plans to introduce its own mobile video service by the end of the year. Taking advantage of the AWS spectrum acquired from the four cable companies, the proposed wireless service would make TV programming available on tablets, laptops, smartphones and other mobile devices outside the home as well as inside.