Flies With Honey: How Network Operators Plan To Keep Their Audience

Verizon FIOS announced plans today to upgrade the speeds they offer residential customers (although keeping with tradition, the feature greeted registered users as a splash page which, when clicked on, lead to a dead page. Note to FIOS: you put up the splash page last, after you’ve got the other pages working. Sort of like a door.)

Websites missteps aside, what’s really significant about that announcement is that it’s just another step in the network operators plan to stop users from cutting cords.

Because Verizon’s pricing makes it more expensive to get high-speed Internet service as a stand-alone product versus as part of a bundle that includes TV and phone service. (FierceCable has the price of a 50/20 service only as $140/month. I pay less than that for 50/20 internet plus the comes-with-HBO-and-Showtime TV package and phone service. I remember when I was signing up that it wound up being cheaper to get a landline phone thrown in.) 

That’s how they lure you in.

You want all that bandwidth to watch movies and play games and download videos and everything else you do to be able to cut the cord. And they will give it to you. But only if you keep the cord. The network operators aren’t dumb. They know that by controlling the pipes (as previously noted, something like 94% of FIOS subscribers have both TV and internet with the service.) And part of controlling the pipes means controlling the pricing and manipulating it in a way that makes cord-cutting the more expensive option.

That’s why we’re not likely to see any sort of internet-only MSO coming from anyone other than an existing provider. The rumor mill on that is just plain baffling: say Facebook did want to launch their own socially enabled, internet based MSO. And they will only charge me $25/month for it. Great. Only where am I getting the internet connection from?

Oh right, FIOS. And they’re going to charge me big bucks if I drop my TV service to go with Facebook. So what am I going to do?

Well, if I’m really into the Facebook service, I’ll get it as an add-on, same as Netflix or HuluPlus. There may be some overlap between my services, but I may decide that it’s worth it just to get the cool extra features Facebook is offering on their TV service.

Which is exactly how I expect the eventual roll-out of these web-only networks to go: early adopters will get them as an addition to their current service and focus on what’s cool and different, not what’s identical. You know how people will tell you “I don’t really watch TV anymore, I only watch Netflix.”

Bazinga!

The Convergence Conundrum

 

Verizon's FIOS TV service announced a rate hike this week, which coincides with their announcement at The Cable Show that they were going to be rolling out a mobile video app called Viewdini, which searches through content from Netflix, Comcast, Time Warner and others (but not FIOS, interestingly enough. At least not yet.) The app allows you to look for a particular show or movie, find it and then stream it to your mobile device. This comes on the heels of the telco's recently confirmation that they are done with FIOS build-out for now, and are concentrating instead on fill-in: gaining additional customers in areas where they already have a presence.

All of which leads industry insiders to wonder: is Verizon looking to sell FIOS?

While the service is widely regarded as the Neiman Marcus of cable service, with new fiber optic cable and truly “blazing fast” internet, it’s been very, very expensive for Verizon to build: it can take the better part of a day to wire a single house and the company has literally spent billions on building out their infrastructure.

So who would buy it?

Two distinct possibilities are Apple and Google, each of whom would relish the opportunity to own the network and its 2.2 million upscale subscribers. (FIOS is concentrated in Charles Murray’s Belmonts: the affluent residential neighborhoods of the Northeast.)

For Apple it would be an easy way to introduce the mythical Apple TV on a well-regarded network that’s already built out to over 2 million subscribers.s On the other hand, 2 million isn’t a very big number for Apple, who may or may not want to get into the network operator game. (Check out “An Apple TV Will Be Just Like The iPhone" for some theories on that.) Plus the Steve Jobs’ run Apple never really liked anything it didn’t build itself and there’s no reason to think that trend won’t continue. Add on the fact that, as currently configured, FIOS is very Apple-unfriendly (Its FlexView streaming VOD service still doesn’t work on a Mac or iOS device and the iOS apps are clearly an afterthought) and it's unlikely Apple will go anywhere near it.

Google may be a more likely option than Apple, as they have committed to the network operator race and are already building out their own network in Kansas City, with an eye to setting up their own pay-TV system. Google can also push the Android platform via FIOS, which, as I mentioned previously, is anything but Mac friendly. But Google's Kansas City project is also an indication that they've got their own idea on what the TV delivery system of the future should look like, and billions of  Benjamins to back that up. So chances are good they'll take a pass as well.

That leaves on more option, the one I think is most likely. That is that Verizon will keep FIOS as a boutique brand, one whose well-to-do users are more than willing to pay a premium for high-cap or unlimited bandwidth and premium content.

As The Convergence presses onwards and TV delivery becomes exclusively web-based, bandwidth caps will become both an economic necessity and the norm. In that scenario, affluent, price-resistant FIOS users are exactly the kind of customers Verizon would want. Not necessarily early adopter, but in no way ready to cut the cord.

At least not for economic reasons.

The Assault Continues: Four New Consumer-Centric Video Technologies

It wasn’t too hard to predict that once every permutation of text-based social media had been explored, would-be entrepreneurs would shift their attention to video. And while “social TV” has become an all-purpose buzzword these days, this spring has seen a couple of notable consumer-centric introductions

First off are the competing social video services Viddy and SocialCam. Both of which take the cute-puppy-video meme to the next level. While users are encouraged to upload their own video and share it with their Facebook friends, the primary use of both sites seems to be sharing new cute puppy videos on Facebook.

That's because both apps use “frictionless sharing” - updating your Facebook timeline every time you watch a video through the service. Once "Janet Smith just watched "Beaglemania!" on SocialCam" starts populating your news feed, it encourages your friends to sign up so they can watch too. This cycle-- both Viddy and Social Cam rate high on Facebook’s SuperSecret Algorithm-- has helped both apps skyrocket to over a million users in next to no time.

But despite all the claims that these are video versions of Instagram, that seems to be stretching it: Viddy and Social Cam make it easy to socialize the same YouTube videos people have been watching all along without taking any action to share them: if you watch the video, you’ve shared and promoted it. Creation, which is Instagram's forté, is not much of a factor.

This cycle has its limits though, as The Guardian, The Washington Post and other pioneers of frictionless sharing have found out. People don’t want every story they look at pushed out on Facebook (particularly if all they’ve done is click on the headline and decided it wasn't worth reading farther.) While it is possible to remove stories from your timeline, it’s even easier to stop using those sites to access the news.

This is the likely fate of Viddy and Social Cam - they will see a bit more growth followed by significant drop off as people decide they would rather not have their video viewing habits be public knowledge. (Especially since the apps unintentionally tally up the amount of time they’ve wasted watching sneezing kitties.)

And while Viddy and SocialCam have been getting the bulk of the press, two very interesting TV-based startups have flown in under the radar. The first is Nimble.TV, a cloud-based app with Slingbox like functionality that is still in beta. The notion of the product has been raising eyebrows as it seems to fulfill the idea of TV Everywhere.

Nimble is working directly with (unspecified) pay TV providers to launch the service which allows subscribers to receive a streaming broadcast of their pay-TV service to whatever device they want, wherever they want, a cloud-based DVR,  and unspecified "social recommendation tools."

In the initial test phases, Nimble will only offer access to a few dozen stations, not the full lineup. By working through the providers, rather than against them, Nimble is hoping to avoid legal hassles over retransmission. But since just about every provider is working on its own proprietary TV Everywhere solution, avoiding lawsuits is likely just a pipe dream.

The best Nimble can hope for is to be acquired by a provider in search of an easy win (possibly a satellite or smaller cable service provider.) For consumers, their success would be a win, as the demand for TV Everywhere has grown much faster than its actual availability. A successful third party solution might force the hand of both the network operators and the network executives who are holding up the process.

The final product of note is Skitter, a startup that promises Aereo-like access to free broadcast stations. For a fee.

The company launched its service in Portland, Oregon earlier this year and is planning to expand to additional markets. And while Skitter has the same business idea as Aereo-- offer access to broadcast TV to potential cable cutters-- their business model is markedly different. While Aereo is attempting to get around the legal issues of retransmission by claiming that they are selling access to HD antennas (rather than the shows broadcast via said antennas) Skitter operates with second and third tier telco operators and is only available in regions where those telcos operate.

Unlike Aereo, which is only available on tablet and smartphones, Skitter can be watched on your TV via a private Roku channel or through a Western Digital box. While the Roku interface is pretty basic, the WD box offers a snazzy EPG. Like Nimble, Skitter is likely to wind up as an acquisition: there are only so many second and third tier telcos.

The success of services like Skitter and Nimble, however, put pressure on the television industry to adapt its model to changing viewer habits and expectations. That may not have any immediate effect: the industry has too many masters to please and too many moving parts.

For now.

Little by little these changes will gather steam and become too big a force for the industry to ignore.