Verizon, AT&T Dominate TelcoTV
Both get keynotes, but Verizon lets a surprise slip.
Verizon might drop a bomb on the rest of the communications industry next year. Maybe. It's still thinking.
At a keynote address at TelcoTV, during the last question he fielded at the concluding Q&A session, the last thing Verizon senior vice president of consumer product management Eric Bruno said immediately before thanking the audience and leaving the stage was an offhand-sounding comment that Verizon might start offering Home Control nationally.
Home Control is a service the company introduced late last month. FiOS subscribers can buy and outfit their homes with security cameras, electronic door locks, lighting controllers, thermostat controllers and other IP-connected devices. These devices are all accessible through FiOS TV and broadband connections, enabling subscribers to activate or manage these products by remote. The devices come from a number of companies, and the service is built on the approach to home networking devised by Motorola 4Home.
Verizon serves about one-third of the country, Bruno observed. "But we need to evaluate what we can do outside our territory.
"We made a business decision to do Home Control only with FiOS," Bruno continued. "But the way we built it, we made sure it was broadband-agnostic. We can do it next year throughout the country. We haven't made that decision yet."
Remember how MVPDs felt when they discovered their broadband subscribers were using their own broadband pipes to go get video elsewhere, from the likes of Netflix and Hulu? That was bad enough, inspiring concerns about over-the-top (OTT) video and cord-cutting that three years later still haven't completely gone away.
Now here is one of the biggest service providers in the country publicly considering selling its broadband-based services to its competitors' customers using its competitors' own pipes.
People have been talking privately about the possibility for years, wondering if anyone would try it. Broadband subscribers have always had the freedom to access any service available through their broadband connections. Under those circumstances, why wouldn't competitors try to leverage each other's broadband networks? With broadband, the geographic constraints of an operating territory or a cable franchise area are, at bottom, merely niceties.
Verizon will tell you that this is nothing new, that it's been selling an online security suite and an online gaming package out-of-territory for some time, and that's true. But those are widely available services of a type that consumers can get from any number of other companies. A Verizon spokesman said Verizon has successfully sold those products out-of-territory, but the company had no breakdown of sales in-territory versus out-of-territory.
The difference is that home control is an essentially new market that many expect will have tremendous potential for greatly increasing broadband service revenue. That potential for significant growth is important in a situation where other elements of the bundle – video and voice – seem to now be limited to opportunities likely to provide only incremental growth.
For Verizon, the questions it must consider are similar to those that military strategists ask when they consider a first strike against an opponent:
- Am I justified?
- Am I willing to risk retaliation?
- Is the risk of retaliation greater or less than the risk of an opponent attacking first?
Keep in mind that Comcast has been testing a similar product offering in about a half-dozen U.S. markets based on technology developed by iControl, in which it is an investor.
The nice thing about the communications industry is that no matter what the answers are, nothing gets destroyed. The only issue is how strenuous the competition gets.
AT&T: A NUMBERS GAME
Out of territory? AT&T has passed nearly 30 million homes with U-verse, and that's a big enough playground for Jeff Weber, the company's vice president of video product and strategy. (Verizon is approaching 18 million with FiOS and plans to stop right about there.)
"I've got so much opportunity," Weber told CED. "It's all about penetration with 30 million homes."
Just before the show, AT&T introduced a new Wi-Fi router for distributing television signals through U-verse TV subscribers' homes. Built by Cisco, the Wi-Fi n router plugs into the existing Wi-Fi g router. The viewer can then put their TV anywhere in signal range, plug in a Wi-Fi receiver and is good to go.
The concept is similar to the Televation box Motorola announced and that Comcast was showing with a private label at The Cable Show last summer. At TelcoTV, Actiontec was showing a similar product; the company is going to sell its Wi-Fi router through retail channels, but it also said it has several telcos and MSOs evaluating it.
Weber said the original idea for the new Wi-Fi router was to give AT&T installers an easier option for connecting TVs for customers who wanted multi-room deployments, and it's been working great for that. But customers immediately began to move TVs to different spots in the same room, away from the TV cable outlet, or move TVs temporarily, to places such as the patio, the kitchen or a guest room.
"We do HD, PIPs, multi-view – it's really solid," he reported.
What it doesn't do, he acknowledged, is support mobile devices – smartphones or tablets.
People still fear that cord-cutting may yet develop into a phenomenon, but the evidence is that it isn’t happening much. The worry now is that with increasingly easy access to OTT content, compounded by a foundering economy, the bigger problems will be “cord-shaving” – downgrading service – and that young people will never plug in the cord in the first place.
Adi Kishore, an analyst with Heavy Reading, reported that about 5.8 percent of the respondents to a survey have canceled their pay-TV service. The average subscriber, however, sticks with their MVPD for at least five years. There are a lot of reasons for churn, but price is one of the most prominent – it’s the reason cited for a full third of churning customers. Only 3 percent of those who’ve churned recently said they are relying entirely on OTT.
Colin Dixon, an analyst with The Diffusion Group (TDG), noted that surveys reveal a tremendous interest in saving money. About half of TDG survey respondents say they’re unhappy with what they’re paying for TV.
Dixon believes there’s a tremendous opportunity to help customers cut their bills by offering them a package of traditional channels and OTT. Specifically, he thinks delivering OTT via broadband can be an excellent play, especially for the service providers likely to be attending TelcoTV.
Dixon was one of several TelcoTV panelists who speculated that IPTV vendors might be able to prosper with a blended service.
The issue is how to make money with a blended service. Suggestions ranged from simply charging an extra $5 a month to assure OTT QoE to cutting revenue-sharing deals.