The Case of Verizon vs. Time Warner Cable

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The squabble for cable TV, high-speed data, and telephone customers is reaching Hatfield and McCoy proportions. Last week, telephone company Verizon (NYSE: VZ) filed suit against Time Warner Cable (NYSE: TWC), claiming that the second-largest cable operator, of which Time Warner (NYSE: TWX) still owns the lion's share, had misrepresented Verizon's fiber-optic service in an ad.

The latest iteration of a Time Warner Cable advertisement that's been around for a while makes light of a Verizon salesperson and, according to the telco, makes several false claims about its FiOS service.

Time Warner Cable's ad implies:

• Verizon customers need a satellite dish for TV reception.
• It has been using fiber-optic technology longer than Verizon has.
• Verizon can't bundle a triple play of TV, Internet, and telephone service.
• FiOS-based TV isn't available in New York.

Time Warner says it's standing behind its claims, which appear to be accurate -- technically. The rub with Verizon's service lies in the world of franchising, not in technology. In Manhattan, for instance, where Time Warner provides most of the available cable service -- Cablevision (NYSE: CVC) and Comcast (Nasdaq: CMCSA) cover much of the rest of metropolitan New York -- the lack of a franchise license allows Verizon to offer only telephone and Internet service.

It's not permitted to offer TV, and so its bundling requires adding satellite TV from DIRECTV (NYSE: DTV). So technically, Manhattan triple-play bundling does require the addition of a satellite dish for Verizon customers.

As for the fiber optics, both carriers have used it for years in their networks but have started advertising it only recently.

I'm convinced that this latest dustup, like others that will inevitably follow, will ultimately be beneficial to customers and investors of both companies. They will likely light a fire under the traditionally glacial cable operators about adding new services and improving existing ones, like the long-awaited video-on-demand.

On that basis alone, and given our topsy-turvy, bent-on-destruction market, I continue to believe that, among the cable operators, both Comcast and Time Warner Cable merit attention from Foolish investors who happen to be blessed with a larger than usual quota of patience.

For related Foolishness:

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• Can You Hear Me Now, Cable Guys?
• This Is the Wrong Time to Sell Sirius