'Triple play' getting harder to pull off
After blah quarter, Verizon takes its game to New York
NEW YORK (Fortune) -- After striking out with its triple play in the second quarter, Verizon will be swinging even harder for the fences as it brings TV to Manhattan.
Prior to releasing a middling earnings report Monday, Verizon (VZ, Fortune 500) announced its plan to sell a bundle of TV, Net and phone services for $95 in New York. The plan boasts 54 channels of high definition programming and Internet speeds of 20 megabits a second. The promotion aims directly at incumbent cable shop Time Warner Cable (TWC), and offers more HD for $15 less a month less.
Analysts say the move should help spark growth in Verizon's TV and broadband units. But it also turns up the heat in a costly churning caldron of customer defections as cable, phone and satellite players try to outdo one another with better packages.
While New York is a potentially lucrative market, Verizon won't score much of an immediate windfall. As Collins Stewart analyst Tom Eagan points out, wiring apartment buildings requires neotiations with property managers and co-op boards. That said, Eagan sees Verizon's heavy marketing and available 100 HD channels as a threat to Time Warner Cable. (Fortune.com parent Time Warner is, until a spin off set for later this year, the majority owner of TWC.)
The move to the Big Apple comes as Verizon delivers mixed results for the second quarter. The No.2 wireless player added 1.5 million net new subscribers in the quarter, better than its arch rival AT&T (T, Fortune 500), which added 1.3 million. But the wireline side was a big drag on business. The company lost 920,000 phone lines, representing an 11.4% drop from year-ago levels.
The bigger disappointment, however was in Verizon's fiber optic venture called FiOS, which is the basis for its triple play offering. The expensive expansion effort generated only 187,000 new data subscribers and 176,000 new TV customers in the quarter. Analysts had expected 235,000 new Internet customers and 230,000 on the video side. Verizon blamed the slump on the end of its HD-TV giveaway for new customers.
Whatever the cause, the weak numbers underscore one of the larger concerns in the communications sector-- namely that the bruising game triple-play providers are playing is going on while the economy slows.
With AT&T coming up light in broadband growth and now with Verizon's tepid results, Collins Stewart's Eagan is "concerned about lackluster data results across the sector." The next stop for the slowdown tour will likely be when Comcast reports earnings Wednesday.
Eagan estimates Comcast (CMCSA, Fortune 500) will report 289,000 new cable modem customers in the second quarter, a big drop from the 429,000 added in the first quarter. 
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