Verizon Sets Up Phone Booths to Give Access to the Internet

[Dave Farber <dave () farber net>]

Verizon Sets Up Phone Booths to Give Access to the Internet

May 14, 2003
By BARNABY J. FEDER




 

Verizon Communications yesterday introduced one of the
oldest items in its inventory - the humble phone booth - as
its newest weapon in the bitter competition to dominate the
broadband communications market of the future.

Verizon said that subscribers to its high-speed Internet
access service would be able to go online wirelessly at no
charge when they are near a Verizon phone booth in
Manhattan. 

Verizon said that 150 phone booths - from the Battery to
Columbia University - had already been equipped with
radio-signal technology, popularly known as Wi-Fi, to
enable mobile computer users who are within 300 feet of a
booth to connect to the Internet. About 1,000 booths
covering virtually all of Manhattan and a few spots in the
other boroughs will become Wi-Fi "hot spots" by the end of
the year, the company said.

The new service was announced yesterday along with a bundle
of price cuts and service enhancements for Verizon Online -
the company's D.S.L., or digital subscriber line, service -
which provides fast Internet access.

Verizon, the nation's largest phone company, has been
struggling to catch up with rivals in the high-speed
broadband market. So far, cable television companies have
signed up twice as many broadband customers as the phone
companies have. And among the phone companies, Verizon has
trailed SBC Communications.

Verizon loses money on Internet access services but
analysts have said that Verizon and other former Bell
companies have to offer competitive online service plans if
they are to hang on to their current customers and attract
new ones as competition increases in the traditional phone
business. 

Analysts said the changes announced yesterday added up to a
big improvement in Verizon's broadband offerings. But the
announcement came on a day when AT&T said it would begin
competing with Verizon to sell local phone service in
Virginia and Maryland, and Cablevision Systems announced
plans to sell phone service on Long Island, another Verizon
market, this fall over its cable network. The news sent
Verizon's share price down 11 cents, to $37.39.

"Things are only going to heat up further from here," said
John Hodulik, who follows telecommunications companies for
UBS Warburg. 

Important elements of Verizon's new broadband package had
already been promised, like free use of MSN 8.0, the latest
package of Internet programming and software support from
Microsoft. Others, like a significant price cut in Verizon
Online, had been leaked in recent news reports. Thus, the
most intriguing part of the service improvements is the new
wireless service, which will be available only in New York.


Verizon, which is based in New York, sells local service in
29 states. Over the long term, analysts said, Verizon could
use its hundreds of thousands of phone booths in major
cities from Boston to Honolulu to become one of the
nation's most extensive networks of hot spots for wireless
Internet connections.

Until now, Wi-Fi hot spots have been offered free in a few
public areas by cities like New York and San Francisco or
by individuals sharing their signal transmission equipment
- sometimes without realizing it - with anyone in the
neighborhood. Some companies have been trying to build
networks of hot spots in places like airports and Starbucks
coffee shops where visitors can log on, but have charged
relatively high prices for the service.

"This is the first attempt to mass market Wi-Fi in the
United States," said David Burstein, editor of D.S.L.
Prime, a newsletter that tracks Internet services.

Because the Wi-Fi service is being offered free with
Verizon Online, it will be difficult to determine how much
value consumers will assign to it. As a result, Verizon's
marketing experiment is not likely to answer the question
of whether Wi-Fi service can be profitable in its own
right. 

But Verizon's announcement was welcomed as a major boost by
Wayport, a leading start-up company in the fast-expanding
Wi-Fi industry. Wayport, which is based in Austin, Tex.,
has hot spots in 525 hotels and 12 airports, charging
consumers $19.95 a month, or $6.95 a day at airports.

Wayport's plan for profitability envisions forming
alliances with large phone companies like Verizon and AT&T
that might bundle Wayport into their own networks or sign
roaming agreements to share customers, said Daniel J.
Lowden, the company's vice president for marketing.

Wayport is already working on such an agreement with
Verizon's cellular phone business, Mr. Lowden said, and
Verizon's plunge into Wi-Fi as part of its D.S.L. strategy
is seen as an important endorsement of the technology.

Verizon, for its part, was cautious about its expansion
into the Wi-Fi market. "We're clearly at the bottom end of
the learning curve of what this will mean to the users,"
said Bruce Gordon, president of retail markets for Verizon.


Verizon said that while it expected to expand the Wi-Fi
offering to other major markets, like Washington, Boston
and Seattle, where it has many online customers, it would
not make a definite commitment until it had studied how the
service was used in Manhattan.

And Mr. Gordon denied speculation that Verizon was planning
to sell Wi-Fi access separately to computer users who are
not Verizon Online customers.

Verizon said that it cost roughly $5,000 to create a Wi-Fi
hot spot. But the company said it did not expect the Wi-Fi
investment or the price cuts to its D.S.L. service to hurt
earnings this year.

Verizon said that these costs would be offset by lower
churn rates - the number of customers who drop service each
year - and growth in the enrollment of new broadband
subscribers. Verizon, which finished last year with about
1.8 million broadband customers, has said it may need
nearly twice that many to begin making money from the
service. 

Verizon's new package roughly doubles the top access speed
for its D.S.L. service. That makes it comparable in many
cases to the broadband speeds offered by cable television
companies, at least for now.

But cable companies can boost their speeds. Indeed,
Comcast, one of Verizon's largest cable competitors,
already provides premium-priced service twice as fast as
Verizon's new top speed to a small number of business
customers. 

Verizon will cut prices to $34.95 a month for regular
subscribers and less than $30 for subscribers who also buy
Verizon's package of local and long-distance phone service.
That pricing structure gives Verizon a $5 to $10 price
advantage over the cable services and is comparable to
prices offered by SBC Communications, which reported 2.5
million D.S.L. subscribers at the end of the first quarter.


The price cuts are expected to increase the pressure on the
slower dial-up services, including the dominant players
like AOL and Earthlink. Just 16 million of the 60 million
American households online at the end of 2002 had broadband
service, but the industry has assumed the broadband share
will climb rapidly if the price declines.

http://www.nytimes.com/2003/05/14/technology/14NET.html?ex=1053899855&ei=1&e
n=1eb17e9db13bc224


---------------------------------

Get Home Delivery of The New York Times Newspaper. Imagine
reading The New York Times any time & anywhere you like!
Leisurely catch up on events & expand your horizons. Enjoy
now for 50% off Home Delivery! Click here:

http://www.nytimes.com/ads/nytcirc/index.html



HOW TO ADVERTISE
---------------------------------
For information on advertising in e-mail newsletters
or other creative advertising opportunities with The
New York Times on the Web, please contact
onlinesales () nytimes com or visit our online media
kit at http://www.nytimes.com/adinfo

For general information about NYTimes.com, write to
help () nytimes com.  

Copyright 2003 The New York Times Company


------ End of Forwarded Message

-------------------------------------
You are subscribed as interesting-people () lists elistx com
To manage your subscription, go to
  http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/