To roll out its new high-speed fiber-optic service FiOS in the Philadelphia area, Verizon lifted a page from AT&T’s old playbook—it reached out and invited the neighbors over for a block party.
 
More than 500 people came to Springmill, an adult community in Middletown, Delaware, to see a home-technology makeover sponsored by Verizon, get their faces painted, play Guitar Hero—and, of course, hear about how dropping cable for FiOS will enhance their lives.
 
The problem? Just because FiOS is a superior product in some respects, that doesn’t mean it’s going to trounce the cable companies. Not even close. Even when Verizon fully deploys FiOS, it’s estimated to only cover 15 percent of the nation, according to Craig Moffett, Sanford C. Bernstein & Co.’s senior U.S. telecom analyst.
 
“The numbers are overwhelmingly in favor of the cable companies,” Moffett said. “And the telcos, including Verizon, are peddling to catch up.”
 
Still, even Moffett admits that FiOS—where it’s available—is a sweet deal. The fiber line offers customers broadband speed of up to 50 megabits per second, and upstream speeds that are higher than cable, a plus for those customers who like to upload files to YouTube and send photos by email. Verizon says its employees are using speeds of 100 Mbps, although that speed is not for customers—yet.
 
But to get this fiber into the 10.5 million homes that are connected—and the millions more it’s aiming to touch—the company is investing $18 billion (about the gross national product of El Salvador) between now and 2010.
 
Major urban markets still aren’t on the FiOS map, except for Philadelphia and Boston. In New York City, Verizon is negotiating for a cable-franchise license for video, and it doesn’t expect to have the city fully wired for TV until 2014.
 
Instead, FiOS has focused its early rollouts on outlying suburbs—Tupperware territory—hence the block parties and pitches targeted at soccer moms.
 
AT&T is also part of the video chess match. But it’s U-verse service, which currently offers a maximum broadband speed of just 10 Mbps, isn’t going to fully blanket the country either. In fact, Moffett estimates U-verse will have a 25 percent reach—but only when fully deployed.
 
Verizon and AT&T may be the most aggressive at deploying their connections, but by 2010, “they’re going to be deployed in only half of their own respective operating territories,” Standard & Poor’s analyst Todd Rosenbluth says.
 

And that makes it easy for cable giants Time Warner and Comcast to continue stealing the telcos’ core voice customers at a pace of roughly 11 to every one video order they lost in the first quarter of 2008.
 
More to the point, cable companies are offering perks such as call-waiting, call forwarding, even unlimited long distance and local calls all for one flat fee—especially if rolled into a triple play of video, broadband, and voice.
 
While the phone companies are offering triple plays too—they have a long way to go before they can build a video business as big as cable’s. Plus, they’re adding on the least-profitable portion of these services because the margins on video are going down as the cost of programming goes up. Someone, it turns out, has to pay for ESPN’s $1.1 billion N.F.L. deal after all.
 
Also, cable is flirting with its own high-speed offering—like FiOS—tagged DOCSIS 3.0, which has hit speeds of 100 Mbps in tests, 20 times the speed of traditional broadband.
 
Time Warner Cable has run the service in small markets, and Cox Communications is preparing to launch DOCSIS in certain markets depending on the competitive need, according to David Grabert, Cox’s spokesperson. Translation? When FiOS comes calling, Cox customers can expect high-speed options of their own.
 
But what some say cable is really waiting for is WiMax; think WiFi in hyperdrive. It’s expected to change the way consumers think of mobility by letting them access the internet at high broadband speeds wherever they are.
 
Time Warner Cable, Comcast, Intel, and Google, among others, are clearly committed to the technology, announcing investments of collectively more than $3 billion in Sprint Nextel and Clearwire’s WiMax venture on Wednesday.
 
Still, WiMax is very much in the initial testing phase in the U.S, and the first service provider to deploy WiMax in Australia declared it a complete failure just last month, saying the signal could not reach into a structure beyond 1,300 feet from its base station.
 
So, after all the technological bells and whistles, the final leg could be won by the simple, low-tech act of playing nice. After all, there are few customers who haven’t had a phone-line crackle, a broadband light go dark, or a cable guy who just never shows up.
 
When a customer is lucky enough to reside where there’s competition for the home connection, a block party and some good customer service isn’t going to hurt.
 
That is, if the option is even there.