NEW YORK (Reuters) - Verizon Communications will let customers try its FiOS Internet and television service for a month without charging them fees for early contract termination if they switch off the service after that.
It aims to lure away more customers from cable and satellite rivals with the offer, which includes the option of paying month-by-month but with the assurance that the price would not go up for a full year.
The risk is that if new customers all start to leave after a month, Verizon would lose a lot of money as it spends roughly $1,350 to install FiOS at a new customer’s home.
But if most customers decide to stay, the new offer may put pressure on cable rivals such as Comcast Corp and Cablevision Systems Corp and satellite rivals DirecTV and DISH Network Corp to adjust their terms.
While try-out periods are widespread among US wireless service providers, the elimination of termination fees is less common in the pay-TV market where customers typically have to sign contracts to lock in a specific monthly rate.
Matt Davis, research firm IDC said the move was part of “a growing trend” for television and telecom providers to add more flexibility to their service terms.
“Verizon’s reacting to that trend, trying to stay slightly ahead of it,” he said.
Both AT&T Inc and Verizon, the biggest US telephone companies, have been adding TV services to their offerings in recent years, to help them compete better with cable operators, which have long sold telephone services.
Current Analysis analyst Larry Hettick said he sees Verizon keeping a “substantially large” number of customers who sign up under the new rules, making it likely rivals will react.
“There’s so much tit-for-tat in the cable TV business, anything that changes for one provider may bring pressure on the others,” Hettick said.
Verizon, which has tested the offer in Florida, is kicking it off on Monday across its FiOS coverage region, which currently has a potential 12 million customers for television services and 12.6 million for Internet services.
Hettick said there is some risk Verizon is left in the lurch by customers, which could potentially leave for cable operators a month after signing up for Verizon. But he said the offer showed that it is confident it will keep customers.
Verizon started offering its FiOS Internet service in August 2004 and started selling FiOS TV about a year later.
Since then its TV service has won a roughly 25 percent market share in the areas where it operates and FiOS Internet has a roughly 29 percent share, Verizon spokesman William Kula said.
Kula said he believes that once customers have a chance to try out FiOS “they’ll stick with (it) for the long haul.”
He sees current uncertainty around the economy making the offer particularly attractive for anxious customers who are worried about surprise price rises or early termination fees.
Reporting by Sinead Carew; Editing by Tim Dobbyn