In our analysis, however, Verizon and AT&T would do better by concentrating on providing a truly high-speed ISP capability as compared to competing with the CATV industry with a “me too” product. Both companies have fiber facilities that the CATV operators cannot easily match. They could offer “South Korean” speeds of ISP access thereby dramatically enhancing the multimedia capabilities of their ISP subscribers.

If they offered 50 – 100 mb/s speeds they could likely get a premium monthly rate. Such access would permit consumers to use the Internet in ways that would obsolete conventional CATV and IP Telephony service. For example, subscribers could use Hulu.com and TV.com instead of CATV television. Similarly, they could use Skype instead of proprietary IP Telephony from the CATV operators. Skype even permits video calls which most IP Telephony services from the CATV operators don’t offer. They can get all of this on their TV screens merely by connecting a laptop computer to the TV.

It’s silly to attack the CATV industry with a “me too” product when you can offer something truly superior. Based upon the solicitations I am receiving for Verizon FiOS the company’s marketing expenses must be gigantic. I trust stock analysts have investigated whether the company is capitalizing such expenses.

This is Third Generation Television.

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