Verizon’s mobile-first TV moves could be scuppered by Cable WiFi

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Verizon is poised to launch a rather revolutionary TV service – initially on the back of its 103m mobile subscribers in the US, which already threatens the cablecos by taking the provider out of its fiber footprint; but perhaps even globally in future, if it is bold enough with a ‘mobile-first’ video strategy via network partnerships.

The US carrier’s recent network investments mean it is perfectly able to launch a nation-wide video service, not restricted by the geographic limits of its FiOS lines. This would be a serious blow to its rival cable competitors who are starting to see cord cutting to inter-net-based video services like Netflix. However, those cable providers have a big weapon with which to fight back – their superior investment in WiFi, which is also gaining poten-tial as a TV delivery system.

Verizon has been improving the capacity of its Content Delivery Network (CDN), using its recently purchased EdgeCast assets, adding 20 new points of presence (POPs) in major global cities including Helsinki, Jakarta, Sao Paulo, Stockholm and Warsaw, while also add-ing POPs in existing bases like London and Paris.

A CDN works by caching a copy of a file closer to the edge of the network and the end user rather than storing and accessing a single copy at the heart of a network. This network ar-chitecture reduces the bandwidth constraints on the central server and will help alleviate bottlenecks in the distribution path, improving the viewer’s experience.

In addition to EdgeCast, Verizon also purchased Intel’s OnCue project after the silicon gi-ant gave up on plans to launch a cloud TV service; and the services of upLynk, “whose ex-clusive technology streamlines the process of uploading and encoding video for live, linear and VoD content”.

We suspect that Verizon will combine a range of content assets – its existing FiOS deals plus any that the Intel purchase brought with it, as well as the rights it has acquired to the NFL, and the content from its Redbox Instant video service – to package and sell to its mo-bile customers and FiOS homes.

But what’s key to this strategy is fundamentally (and gradually) changing the way that TV subscriptions are bought and sold. Traditionally, a home is provided with a satellite dish, or a cable or fiber connection and TV is piped in for any occupant to consume – limited only by the number of set tops and TVs. In the past few years, TV operators have been providing TV Everywhere services to customers, allowing them to access the content they pay for outside of the home. Central to this is the smartphone, both as a viewing medium and more importantly as a means to identify a user and a valid subscription via the SIM card.

If mobile operators get on board (and this may be the largest stumbling block for Veri-zon), a user could ‘cast’ content from their phone to any screen in range – at home, or to share content with friends. The latter may be hard to get past rights holders, though if viewers can watch in any location, logically viewing figures, subscription revenues and advertising would increase.
The new LTE networks of AT&T and Verizon are capable of supporting video if they can guarantee that their customers are using sufficiently high end handsets, so in some areas, WiFi may be a better basis for mobile-first TV and video. However, in that respect, AT&T and Verizon are trailing woefully behind Comcast, which has been steadily accelerating the pace at which it upgrades home routers to homespots (WiFi gateways with both a public and private SSID). Comcast has already switched on 3m WiFi hotspots and homes-pots, compared to the cellcos’ 50,000, and will add another 5m this year. If anyone is em-powered to build a video service which relies on WiFi, it is Comcast, while AT&T and Verizon are forced to continue the expensive build-out of LTE and LTE-Advanced.

This means that Comcast is best placed to take the mobile-first approach to viewing – ironically on devices usually provided to consumers by Verizon and AT&T. That’s how poorly the two largest MNOs have forecast the demand for video. They hoped to do it all on their own networks and are being undercut by WiFi coverage. Cellular operators are wasting their opportunity to seize control of the TV market from cable operators. No amount of CDN investment makes up for the issues that cellular delivery of video content at scale will suffer in its current deployment. In the US at least, it looks like we’ll have to wait for Comcast to launch the first truly mobile-first service.

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Caroline has been analyzing and reporting in the hi-tech industries since 1986 and has a huge wealth of experience of technology trends and how they impact on business models. She started her career as a journalist, specializing in enterprise and carrier networks and in silicon technologies. She spent much of her journalistic career at VNU Business Publishing, then Europe’s largest producer of technology publications and information services . She was publishing director for the launch of VNU’s pan-European online content services, and then European editorial director. She then made the move from publishing into technology market analysis and consulting, and in 2002 co-founded Rethink Technology Research with Peter White. Rethink specializes in trends and business models for wireless, converged and quad play operators round the world and the technologies that support them. Caroline’s role is to head up the wireless side of the business, leading the creation of research, newsletters and consulting services focused on mobile platforms and operator models. In this role, she has become a highly recognized authority on 4G systems such as LTE and WiMAX, and a prolific speaker at industry events. Consulting and research clients come from major mobile operators, the wireless supply chain and financial institutions.