Verizon’s rapidly growing fibre-optic TV service is starting to aggravate its cable competitors and has helped draw investors back to its stock — VZ is currently trading near its 52-week high. But is the NY-based telco selling ads based on phony subscriber numbers?
Long Island-based ad biz Digital Art Services is accusing Verizon (VZ) of fraud, saying the phone company used inflated subscriber numbers to set ad rates, WSJ reports ($). According to the suit filed yesterday in the U.S. District Court for the Southern District of New York, Verizon’s alleged number-pumping meant that ad purchasers were paying for customers that don’t exist. The suit says some 30% of Verizon’s 116,000 NY-area Q2 TV subscribers were “pending,” meaning their TV service had not yet been installed. Digital Art Services purchased almost $1 million of advertising on Verizon’s service earlier this year, relying on that subscriber data. Verizon spokesman Eric Rabe rejected the accusation, telling the Journal that the suit “is a garden-variety business dispute initiated by a customer who wants to be released from a contract they agreed to.”
We’ll let the lawyers sort this out, but we’ll note that this shouldn’t dent Verizon’s most important goal: signing up as many customers as possible to its new fibre-optic TV, high-speed Internet, and phone services. Cable companies like Comcast (CMCSA) have poached millions of phone companies’ customers in the last few years with cheap, digital phone service, and telcos like Verizon and AT&T (T) must move quickly to stop the bleeding. Last month, we projected that Verizon and AT&T are on pace to sign up their millionth fibre TV subscriber sometime this quarter. We’ll have a better idea of their progress when they report Q3 results later this month.