Verizon’s TV Talk Chills Cable Relations

Mari Silbey —  September 18, 2013

Verizon FiOS TV CES 2011 3

Well this could put a damper on Verizon’s currently cozy relationship with the cable industry. According to the New York Post, Verizon – like so many companies – is in talks with “major programmers” about creating a national, Internet-based pay-TV service. The Post says that while Verizon has pursued access to particular shows in the past, it’s now exploring what it would take to acquire the content rights for a “full suite of channels.”

Verizon has theorized about offering FiOS TV as an app for years, but sadly has been slower to deliver a decent mobile app than several of the larger cable companies. The big question now is not whether Verizon will go down that road eventually (despite its cable alliance), but how and when someone, anyone brings an Internet-based TV service to market. I’m not talking about an option like Aereo, but a true, content-loaded, bring-your-own-device, pay-TV service.

Let’s take a look at some of the possibilities. Intel and Apple are “negotiating” with programmers, with Intel threatening to launch a service before the end of the year. Time Warner Cable has released apps for the Xbox, Roku, and select smart TVs. Cox is experimenting with Fan TV in California. Dish Networks’ Charlie Ergen has talked publicly about going over-the-top with TV service. And the list goes on.

The Internet TV era is definitely coming. Verizon knows it. The cable industry does too.

14 responses to Verizon’s TV Talk Chills Cable Relations

  1. The only trouble I see with this is the current state of bandwidth caps for residential broadband. I could probably blow through my 250GB cap with Charter real quick if all of our TV was IP.

  2. Yeah, I assume that’s what these guys are counting on… the studios are the cable TV providers are the ISPs. They got you coming and going.

  3. Cox has ended their experiment with Fanhattan

  4. “The Internet TV era is definitely coming. Verizon knows it. The cable industry does too.”

    My query every time I read about something like this:

    If we ignore all the (quite interesting) stakeholder commercial interests:

    Can you technically accomplish continuous individual-cast HD bandwidth to your entire audience without FTTH? Americans watch a lot of teevee.

  5. “the studios are the cable TV providers are the ISPs. They got you coming and going.”

    I fully agree with you that this is a problem.

    But I don’t think it’s the primary commercial stakeholder problem.

    IMHO, the primary problem is the monopoly most wireline providers have, along with their desire not to become dumb pipes. I thought the key line in the NYP article was:

    “CEO Lowell McAdam and his executive team also needs to figure out which branch of government controls oversight of broadband, sources said.”

    Given that most wireline providers are monopolies, in order to bring about an OTT virtual-MSO scenario that I think would be good public policy, you’d need at least the following kind of regulations:

    – Wireline net neutrality. (Something Verizon, of all folks, is currently challenging the FCC about in court.)

    – Regulation of the wild ‘n’ wooly world of networking peering.

    – Elimination of bandwidth caps. (That’s one of the reasons I’m always curious about my upthread technical query.)

    If you got all that kind of regulation in place, you could have nice OTT virtual MSO’s. The content companies would be willing to play, if the price was right. Comcast would be the last to come onboard, of course, but even they couldn’t stand NBCUniversal alone against all the other content companies.

    —–

    As far as the “the studios are the cable TV providers are the ISPs” thing goes, given that my analysis the wireline providers are the real obstacle here, the incestuous nature of cross-ownership impacts here really only in the form of Comcast.

    But, OTOH, given that one should not underestimate just how politically wired Comcast is, and given that regulatory regimes have to go through The District, maybe your incest theory punches harder than I’d originally thought…

  6. Chucky- I am waiting for the day that someone decides to apply formal guidelines, regulations, or even just some sense of common practice to network peering. Wild and woolly indeed.

  7. Alan, is there an article you saw about FlareTV/Fanhattan ending? The web page is still up, with enrollment pricing and whatnot.

    Chucky, at one of the private briefings Mari and I attended at CES (2010?), a Mircosoft Mediaroom VP conveyed to us that they believed they and AT&T Uverse could provide content nationwide with an equivalent or at least acceptable QOS. Obviously, they haven’t rolled with it… Perhaps due to the tech although licensing and regulation is probably the first challenge to solve.

  8. @Zatz – coworker has it. They proactively contacting him and said they were ending the service and would refund his money. This was at least a week ago.

  9. This could all end of costing as much as cable. I will never be as cheap as people want.
    IPTV doesn’t make a lot of economic sense.for some time to come.

  10. Most of the above comments are part of why I never quite bought into the “cable cutters” that just watch TV on-line. They still are paying the cableco (be it Comcast or Verizon) for internet pipeline. Honestly, IPTV sounds interesting in theory but could be more useful as a gateway device within the home than anything else, specially with MoCa and other in-home network topoligy.

  11. “Chucky- I am waiting for the day that someone decides to apply formal guidelines, regulations, or even just some sense of common practice to network peering. Wild and woolly indeed.”

    But given the monopoly status most wireline providers hold, only one out of those three options would work in practice: actual federal regulation.

    —–

    And what do make of my theory here, Mari?

    IMHO, the PQ of three OTT services runs: Amazon > HBO Go > Netflix.

    And my speculative theory as to why that is the way it is: Amazon pays heavily for peering, since they care about fulfillment, while Netflix doesn’t pay for peering, since they don’t care about PQ. Meanwhile, HBO Go doesn’t have to worry about peering since the participating MSO’s cache the content inside their networks. (And outside of peering, Amazon beats out HBO Go purely on the basis of sending out a higher bitrate stream.)

    Sound correct to you?

  12. “Chucky, at one of the private briefings Mari and I attended at CES (2010?), a Mircosoft Mediaroom VP conveyed to us that they believed they and AT&T Uverse could provide content nationwide with an equivalent or at least acceptable QOS.”

    Hmmm…

    I wonder if they intended a niche product, or a mass market product.

    I can imagine a niche product providing something around “acceptable QOS”, especially if we define that loosely, but I get confused if it was intended to be a mass market product. I just don’t get how it would work.

    I mean, I learned 15 years ago that individual-cast teevee just wouldn’t work on a mass scale until the last-mile issue could be solved, and that it couldn’t be solved absent FTTH. And I’m not sure what has changed in the last 15 years. Sure, compression/decompression has improved, but HD requires a lot more info than the 480i we had 15 years ago. And sure, coax providers have improved their networks with various applications of duct tape and PVC pipe, but have they really improved their last-mile by an order of magnitude or more?

    We’re living in a 2013 world where niche adoption of Netflix streaming alone seems to strain the internet during prime-time. In the absence of analysis to the contrary, I remain dubious about the ability to fulfill mass market individual-cast teevee absent Riding The Light…

  13. If the streaming NFL Sunday Ticket is any indication of what DirecTV can do, we are in trouble.

  14. Jeff Bewkes, (head of Time-Warner), shares my skepticism on whether or not mass-market OTT could technically work, given existing infrastructure:

    “I’m a little skeptical about whether that’s really going to happen and be done in a healthy way that can take the traffic that used to be on the interstate, which is what you are doing on your TV, and move it over,” said the TIme Warner chairman and chief executive, speaking at an investor conference being held by Goldman Sachs. He cited questions about “capacity” and “quality of service” as well as “questions of advertising measurement.”