June 16 (Bloomberg) -- Verizon Communications Inc. is preparing to compete head-to-head with AT&T Inc. for residential phone, Internet and television service for the first time.

Verizon, the second-biggest U.S. phone company after AT&T, will extend its fiber-optic lines into neighborhoods covered by AT&T in the Dallas-Fort Worth area, a region the two companies share, Verizon spokesman Eric Rabe said today. New York-based Verizon may do the same in other parts of the U.S., he said.

While Verizon and San Antonio-based AT&T compete for business customers, they have avoided battling each other for residential service. Both companies are fending off cable providers such as Comcast Corp., which offer packages of TV, Internet and digital phone service.

``This is a logical thing for us,'' Rabe said in an interview. ``I wouldn't call this a major attack on AT&T or anything like that. This is just taking advantage of an opportunity to sell to the rest of the town.''

Verizon's fiber-optic lines can extend about six miles (9.7 kilometers) from facilities known as central offices. In some areas of Texas, those are close enough to AT&T territory that Verizon can install lines without building new facilities, Rabe said.

Verizon will cover about 60,000 homes in AT&T territory in the Dallas suburbs of Frisco and Allen, according to research firm One Touch Intelligence in Greenwood Village, Colorado, which analyzed the companies' regulatory filings for Texas. Rabe declined to say how many AT&T homes Verizon will reach.

`Thorny Questions'

``It raises all sorts of thorny questions,'' said Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York. He expects shares of AT&T and Verizon to perform inline with the broader market. ``It might be unilaterally in Verizon's interest to overbuild AT&T if it's confident AT&T's not going to do the same thing to them. If this turns into a tit-for-tat overbuilding war, everybody loses.''

More than 40 percent of customers in Texas covered by Verizon's fiber-optic network signed up for service, Chief Operating Officer Denny Strigl said last week at an investor conference. The company competes with Time Warner Cable Inc. and Charter Communications Inc. in the Dallas area.

Verizon's $23 billion fiber-optic network will reach at least 12 million U.S. households by the end of the year, and 18 million by 2010, Strigl said. Verizon may top those forecasts because it can install lines in apartment buildings, he said.

AT&T, meanwhile, is rolling out a service called U-verse, which relies on a mixture of fiber and traditional copper lines. AT&T spokesman Michael Coe said he didn't know which areas Verizon would target or whether AT&T sells U-verse service in those places.

``Competition is a good thing because it gives consumers more choices and more opportunity to free themselves from cable,'' Coe said today in an e-mailed statement.

Verizon fell $1.09, or 2.9 percent, to $36.24 at 4:02 p.m. in New York Stock Exchange composite trading. AT&T dropped 51 cents, or 1.4 percent, to $36.17.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net.

Last Updated: June 16, 2008 16:06 EDT