Cox Hears Verizon Now

Newly private cable company Cox Communications felt the ground tremble yesterday, and for once, it wasn't the jackhammers of local nemesis Verizon Communications (NYSE:VZ) knocking holes in its fiber-optic cable.

The jackhammers are still pounding away -- and the consumer protection agency in Fairfax County, Va., has collected 166 complaints about property damage to prove it. But the problems caused by Verizon's construction crews pale in comparison to Cox's latest woes.

Fairfax County is an ethnically diverse suburb of Washington, D.C., with one million inhabitants. By many measures, it's considered one of the nation's wealthiest areas. On Monday, the Fairfax County board of commissioners stripped Cox of its monopoly status in the local cable market by allowing Verizon to become a competitor.

For years, Cox has been the only game in town for cable. If you lived in Fairfax and wanted better-than-broadcast television, your options were Cox or satellite. So historically, Cox had its corporate flak guns trained squarely on dish-hawkers EchoStar (NASDAQ:DISH) and DirecTV (NYSE:DTV). It paid little mind to national cable rival Comcast (NASDAQ:CMCSA), which had its own monopoly in several surrounding counties, but only a toehold in one small town in Fairfax County. Cox paid even less mind to Verizon, which, being a phone company, didn't play on primetime.

In recent months, however, Cox has gone to war with Verizon, beginning with a preemptive strike into the telecom business. Cox has been undercutting Verizon on price by offering phone service bundled with cable TV and broadband Internet. Now Verizon is fighting back.

In a landmark deal for the company, Verizon has secured a 15-year non-exclusive (meaning Cox still gets to play, too) franchise to provide cable television in Fairfax County. Verizon does have pilot television projects running in a few towns scattered among California, Texas, Virginia, and Florida, but the entry into Fairfax County is its biggest break yet.

It's a huge opportunity for the telecom giant. Nationwide, only 4% of all communities enjoy effective competition for their television subscription dollars among rival cable companies. Voter-accountable county and city executives are eager to please their base by introducing price-hike-squelching competition. With the line between "cable company" and "phone company" beginning to blur, such competition may soon become a reality for more and more consumers.

Good news for the consumers. Good news for Verizon investors. Bad news for Cox -- but hey, since the company has gone private, that shouldn't trouble investors at all.

Fool contributor Rich Smith does not own shares in any company mentioned in this article.