Verizon Communications, the second-largest phone company in the United States, entered a busy week with the unveiling Monday of a DVR that allows home users to view recorded programs on up to three TV sets simultaneously.

The New York City-based phone company is also facing a crucial test in its own backyard. The New York City Council met Monday to hear the phone company’s franchise request to offer pay TV service in perhaps the most lucrative area in the U.S.

Verizon will use the special features of fiber-optic technology to extend DVR capabilities to TV sets in the home that are not directly connected to the device and do not require special networking add-ons.

The DVR (digital video recorder) also doubles as a network hub so family members can view photos or listen to music stored on their PCs.

Home Media DVR, as it is called, costs $19.95 per month. Customers also need a $3.95-per-month standard-definition set-top box for each TV that will receive recorded video from the media hub.

DVR Battle

The DVR has become the new battleground for Verizon and its New York City rival, Cablevision Systems. In March Cablevision announced that it was testing a networked version of DVR technology.

With Cablevision’s DVR technology, the company’s subscribers would not need a DVR on their premises. Instead, they would receive DVR technology as a menu-driven service on their TV sets (see Cablevision Disconnects DVR).

In June a group of movie studios and TV networks filed a lawsuit against Cablevision challenging the network DVR service on “fair use” grounds, a copyright doctrine that spells out the scope of the legal use of copyrighted material (see Cablevision Defends DVR Plan).

Using Cablevision’s technology, subscribers would control the viewing or deleting of the copies of programs, in much the same way as they would by using hardware DVRs. Customers also will be able to record two programs simultaneously.

Since the debut of DVR technology seven years ago, 13.6 million households in the U.S. have a DVR, according to Forrester Research. The research firm expects DVRs to be present in 50 percent of U.S. homes within four years.

Franchise Choices

Verizon will not be present at Monday’s hearing of its pay-TV service application. But its cable rivals Cablevision and Time Warner will offer their view of what hoops the City Council should make Verizon jump through before it earns a franchise to offer pay-TV services in New York City.

Verizon is expected to answer the City Council queries at a later date. Shares of Verizon rose $0.19 to $34.26 in recent trading.

Verizon and AT&T have both petitioned the federal government to grant them national franchises to offer TV service, rather than force them to undertake the expensive and, they contend, unnecessary process of seeking franchises from thousands of municipalities around the country (see Verizon's TV Dilemma).

Bills in both the U.S. Senate and the U.S. House of Representatives will offer the phone companies national franchises and immediate entry into the pay-TV business for a franchise fee of about 5 percent of revenue for each municipality.

Contact the writer:CMedford@RedHerring.com