Though many executives fear that competition based primarily on price for video services is a mistake, Verizon Communications Inc. has upped the ante in its battle to land customers by offering its triple pay bundle for $99 a month for two years.
Cable giant Comcast Corp. laid the groundwork for alluring introductory pricing for its video-driven triple play bundle at $99 for the first year several months ago. Verizon, through an array of TV, direct mail and newspaper ads has done the cableco one better.
In sharp contrast, AT&T Inc. which has spent billions on infrastructure alone to deliver its U-verse video-driven bundle, has avoided long-duration fixed pricing for bundles, opting instead of offer deals and/or discounts on content and features.
Jeff Weber, vice-president of product and strategy for AT&T, has spoken out against what he views as the down side of focusing first and foremost on price competition for IPTV services.
But while service provider execs like Weber would rather see residential video services compete on features and functionality, to avoid the price-cutting mania of Internet access, both providers – incumbent and newer entrant alike - are leading with pricing.
It could be argued that customer acquisition for newer entrant Verizon could be best accomplished via price predictability for an extended period, especially given cable service rates have increased for many years, even with the onset of competition.
Industry analysts also have warned that focusing first and foremost on price is a dangerous game that could result in eventual service commoditization, making it far tougher for service providers such as telcos to reach an ROI on their network infrastructure expenditures.
Though the Verizon and Comcast pricing is more introductory than promotional in nature, both providers, and any others following their lead, will have to focus on substantial marketing assets and efforts on retaining these customers at the end of the term.
Trying to reacquire those lost during the year or two will be even tougher sledding, whether the competition is a newer entrant or a satellite-based service provider such as a DirecTV or DISH Network.
AT&T Inc. www.att.com
Comcast Corp. www.comcast.com
Verizon Communications Inc. www.verizon.com
