This is What Verizon’s Largest Marketing Campaign Buys

Last Thursday, I went down to Union Square in downtown New York City and ran into Verizon’s marketing juggernaut for its new Droid phone.

The new Motorola device, which was released today to the general public, is being supported by the single largest marketing campaign that Verizon has ever launched for a single device.

So what does all that money buy? Well, lots of glitzy TV commercials but also some cheesy live marketing events. As I got off the train at Union Square, I noticed a long line of about 75 people. The people were waiting to get the chance to play a game in which you could scoop up a Droid phone in one of those boardwalk games with the little hand-operated cranes. All that was missing was a carnival barker shouting into a megaphone with a monkey perched on his shoulder.

Verizon is clearly pulling out all the stops to turn the Droid into a hit. And so far, it seems to be working.

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Verizon Still Wants the iPhone (Despite those Droid Ads)

Despite a recent slew of negative ads dissing the Apple iPhone in support of Verizon’s new Android-based device, Verizon chairman and CEO Ivan G. Seidenberg told investors on its earnings call today that the company still covets the iPhone.

“This is a decision that is exclusively in Apple’s court,” said Seidenberg. “We obviously would be interested in any point in the future they thought it would make sense for them to have us as a partner. And so we’ll leave it with them on that score.”

This statement jives with my feeling that Verizon’s embrace of the Google Android operating system is just as much a negotiating tactic as a hedge against the iPhone.

Without the iPhone, a game-changing devices that is the world’s single hottest smart phone, Verizon is pursuing a sort of spread-your-bets strategy in which they offer a whole range of new devices, including most importantly a series of Blackberry handsets.

For example, Verizon this week is launching the Storm 2, an updated version of the first touchscreen Blackberry, which is getting much better reviews than the first one. And the Motorola Droid, a super-thin phone that uses Google’s Android operating system, will be unveiled on Wednesday.

“We have expanded our base of other devices,” explained Seidenberg. “So our view is to broaden the base of choice for customers and hopefully along the way, Apple as well as others will decide to jump on the bandwagon.”

Obama’s $8 Billion Broadband Stimulus: Opportunity or Risk for Big Telecom?

Check out the new video I shot about the $8 billion Obama broadband stimulus and what it means for the nation’s largest telecom companies such as AT&T, Verizon Communications and Qwest. I shot it in preparation for the big online Web video project launching in late April. Hopefully I can tell you more about this very soon. But in the meantime, please enjoy the video!

Secrets of Big Telco: Why They Are Not Lining Up for Obama’s Broadband Plan

Today, BusinessWeek published a story written by Arik Hesseldahl and I, “Big Telcos Drag Their Heels on Broadband Stimulus.”

It reveals for the first time why some of the major telecom companies are dragging their heels on asking for federal money, and includes text from a letter we obtained from industry trade group, USTelecom (see it below).

Here’s the top of the story:
Big Telcos Drag Their Heels on Broadband Stimulus
Telecom giants are concerned that Washington’s $8 billion plan to promote broadband access will force them to open their networks to other providers

As Washington prepares to dole out some $8 billion to promote the spread of broadband access, don’t expect Big Telco to rush to the front of the line.

Some of the largest U.S. telecom operators, including AT&T (T), Verizon Communications (VZ), and Qwest Communications International (Q), are dragging their heels on asking for federal money. Some may sit out early funding rounds entirely or ultimately ask for only a sliver of the total.

Telecom giants are concerned that once finalized, the program will include burdensome regulations that will force them to open their equipment to rivals or otherwise hamper their ability to manage broadband networks, according to three people familiar with the thinking of the big service providers.

BUSINESSWEEK OBTAINS LETTER
That sentiment was captured in a Mar. 16 letter sent by industry group USTelecom to the Commerce and Agriculture Depts. and the Federal Communications Commission. In the letter, which was obtained by BusinessWeek, the group urged government officials to not let the broadband stimulus get mired down in contentious policy debates. “The agencies should not try to impose other requirements on grantees as part of this process,” wrote USTelecom CEO Walter McCormick.

Click here to read the entire letter.

Broadband Battle: Verizon’s Fiber Strategy Working But Enterprise Disappoints

A quick thought on this morning’s earnings from Verizon. The most noteworthy news out of the announcement, besides the fact that Verizon’s business model is mostly holding up during the recession, is the strong performance of the company’s audacious fiber optic investment. Still, Wall Street seems to be focusing more on the negative data points, as its stock is down around $2, or 5%.

A few years ago, Verizon took a lot of heat from Wall Street for announcing it would invest more than $10 billion in upgrading its -network from copper lines to much faster fiber optic cables. Now, that investment looks like it is starting to pay off. Growth of its two fiber products, Internet access service and TV, is accelerating. Meanwhile, DSL service continues to fade like an 8-track player in the 1990s. Conclusion: American consumers want their broadband fast, and they want it now.

Verizon said its FiOS TV and Internet service, which competes with cable service providers, grew at its fastest pace ever. It reported 303,000 net new FiOS TV customers, compared with 226,000 in the fourth quarter 2007. The company had 1.9 million FiOS TV customers at year-end 2008, adding nearly 1 million FiOS TV customers since year-end 2007.

Verizon added 282,000 net new FiOS Internet customers, compared with 244,000 in the fourth quarter 2007. The company had nearly 2.5 million FiOS Internet customers at year-end 2008, adding nearly 1 million FiOS Internet customers since year-end 2007.

These two revenue streams are becoming meaningful. Broadband and video revenues from consumer customers totaled nearly $1.2 billion in the fourth quarter 2008 — representing year-over-year quarterly growth of 42.0 percent. This means Verizon is starting to pose more of a threat to the cable industry, which has had far more success poaching phone customers from the telcos to date.

The FiOS numbers also helped cushion the blow from sales declines at its enterprise business unit and slightly slower growth in subscribers at Verizon Wireless, owned by Verizon and Britain’s Vodafone Group Plc.

Most investors wanted to know how many Blackberry Storms the company sold but it declined to specify the number. Given that the company only signed up 1.4 million wireless customers in the fourth quarter (down from 2 million subscribers a year ago), I would take that as a sign that the launch was not a smashing success–certainly it doesn’t compare to the iPhone launch, which sold more than 2 million units. I have also heard anecdotal reports that Storm customers like the device less and less as they use it; most of the complaints are about its new touch screen.

Verizon’s enterprise unit, which serves corporate customers, saw its sales decline 2.2%, compared to Sanford Bernstein’s forecast of a 1% decline. In a research note this morning, Bernstein analyst and telecom bear Craig Moffett wrote that enterprise is “the most cyclically exposed part of the portfolio” and the poor performance suggests a “full-year ’09 decline that is significantly worse than our below-consensus (3.3%) forecast.

Still, Moffett gave Verizon’s earnings a “passing grade” and said that its overall results were “significantly better than what most companies can expect.”

Update: In a story in the Wall Street Journal today, Verizon President and chief operating officer Denny Strigl said the company sold 1 million units since the Storm was released in late November. This means Storm launch sales could approach iPhone launch sales, since the phone was introduced in the middle of the fourth quarter.

Verizon Wireless Unveils the Blackberry Storm

So RIM unveiled its new touchscreen phone yesterday and the reviews are coming out.

The bottom line: It’s no iPhone killer but it is a very good phone with an innovative new screen that gives users the sensation of pressing a button. The entire display is actually a giant button covered with a sheet of thin glass. WSJ Walt Mossberg was not totally impressed with the technology but he gave the phone a thumb’s up.

Other advantages: It does have a stronger battery than the iPhone, though. It has a higher resolution screen. And Storm’s camera is much better than the iPhone’s, at 3.2 megapixels, versus just 2 megapixels for the Apple device.

BW tech columnist Steve Wildstrom reviewed the phone. His bottom line:

“What’s my choice? I’m an e-mail guy, working in an environment that supports BlackBerry but not corporate mail on an iPhone, so it’s a no-brainer. But to get the best of both worlds, I also have an iPod touch, which isn’t a phone but runs most of those cool iPhone programs.”

Telecom Monday: Telcos Face the Credit Crunch and Moto’s New Android Phone

Today, BusinessWeek Online published two must-read stories. One, by my colleague Olga Kharif, breaking the news that troubled handset maker Motorola is hard at work developing its own Android-based device.

Writes Olga:
“Motorola has been showing spec sheets and images of the phone to carriers around the world in the past two months and is likely to introduce the handset in the U.S. sometime in the second quarter of 2009, according to people familiar with Motorola’s plans.”

The second story, written by me, explains why the telecom industry won’t be able to escape the wrath of the financial crisis.

Writes me:
“Although most analysts believe the damage won’t be nearly as bad as the last telecom bust—when hundreds of firms went bankrupt, including giant Worldcom—there is growing evidence that the financial crisis is going to depress the debt-heavy telecom industry. To start with, rising capital costs are likely to take a bite out of earnings. In addition, the softening economy will probably crimp demand for such telecom services as land lines, cell phones, and Internet connections.”

Are Cable Companies Taking Broadband Share from Telecom?

This morning, Comcast reported earnings, announcing an 8% increase in second quarter profits and an 11% rise in revenue. The stock is up more than 5% today.

While the nation’s largest cable operator lost basic video subscribers in the quarter, the losses were in line or better than what analysts had expected. Notably, Comcast, also the country’s second largest Internet service provider, showed that it was taking broadband market share from rival phone companies, which reported much weaker broadband gains.

Sanford Bernstein cable bull Craig Moffett estimated in a research note that “Comcast’s 278,000 broadband net additions alone represent 75% of the broadband market reported thus far…. Cable’s huge physical plant advantage–higher capacity and lower cost–is winning the day.”

By contrast, Verizon reported on Monday that it lost 133,000 DSL subscribers, while gaining 187,000 new customers for its fiber optic FiOS Internet service–yielding a net gain of 54,000 customers.

Check out Bernstein’s research note here.

What to Expect from the New iPhone

In this week’s Digital Dish, BW’s tech team discusses Verizon’s $28 billion Alltel bid, Carl Icahn’s manuevers to push Yahoo into Microsoft’s arms, and the demise of eBay auctions. On the sunny side: Apple’s new iPhones.