In a new report on phone companies’ broadband video efforts, Merrill Lynch said Verizon’s fiber to the home technology is superior to AT&T’s approach that extends fiber to neighborhood “nodes.”
But Verizon’s approach will cost the company $8,500 for every new video subscriber it acquires, the report said.
“We do not believe these economics will ultimately be sustainable,” analyst Jessica Reif Cohen wrote.
She also predicted telcos will acquire 5 percent of the video service market, or 5 million subscribers, by 2010. But she questioned whether telco investors will have the patience for such a costly investment.
Consumers may benefit, however, if telcos aggressively discount their services to compete with cable providers.
Bottom line, it’s a risky investment for telecommunication companies. Which is all the more reason for Seattle to be cautious before it enters a joint venture with a private company to provide fiber to the home and broadband video services in the city.