The battle between IPTV and cable providers is about to begin as this Wired article intones. —
The stage is set for a showdown between television networks and cable/satellite TV services, thanks to the internet. It won’t happen overnight, but your monthly cable or satellite bill could eventually be replaced by a monthly bill from Hulu, an online service that streams TV shows on demand.
For $10 a month, viewers will reportedly have access to a wider selection of shows than the free, ad-supported version Hulu currently offers. The service would work on PCs and specialized devices such as the iPad, videogame consoles and set-top boxes. The company plans to test a version of this “Hulu Plus” subscription, an expected development, with select users as early as this month to find out whether they’ll will bite, according to sources cited by the Wall Street Journal and All Things Digital.
In order for consumers to pay for a video service like that, it will need to be reasonably comprehensive. So it’s no accident that the same week Hulu’s subscription plans came to light, a Bloomberg report surfaced that the company is talking with CBS, Viacom and Time Warner’s television studio divisions to add their shows. That would be on top of a line-up that already includes “Fox, NBC Universal, ABC, ABC Family, Biography, Lionsgate, Endemol, MGM, MTV Networks, National Geographic, Digital Rights Group, Paramount, PBS, Sony Pictures Television, Warner Bros. and more,” including Wired.com.
There is one piece that I believe will not bode well —
Cable and satellite are classic middlemen. When the internet meets the middleman, the middleman tends to disappear — or at least be replaced by a thinner middleman. We’ve seen it with record stores, classified ad-dependent newspapers, video-rental stores, bookstores and any other business that delivers something that the internet can deliver more efficiently.
If you look at the Supply Chain Collapse that have gone before, in industries like retail, trucking, warehousing, etc, there is no such thing as a thinner middleman. There were only dead middlemen. There is a twist to this scenario however. For IPTV to work one has to have a fat pipe. That means Cable, FIOS, or WISP as a provider. So the carriers may not be dead but they certainly will be wounded. So how does this all play out –
The content choices are going to explode here very quickly. The beauty is you may only pay for what you want. Out of a million choices you may only subscribe to 40 channels for $15-30/mo or less. I can’t wait.
It also makes Verizon’s choice to go with a Cable-like pricing model the wrong move. They should have derived the FIOS pricing on the cost to deliver the pipe as a data only service. Just like they have done for the last 150 years. Like the knight in ‘Indiana Jones’ related — “He chose poorly.” Indeed they did.
Verizon has quietly scaled back its aggressive fiber deployment in favor of DSL over tired old twisty pair. The take rate for the company’s premium priced FiOS service has slowed. While I have not been able to find a break down by service, I’m certain the slowest products are pay TV and voice.
We have been repeatedly told that bigger pipes and direct fiber connections are impossible in America because of far flung population. Never mind the fact that the cost if installing a fiber or twisted pair loop to a residence are nearly identical. John Timmer of ARS Technica provides a current update contrasting fiber service in Hong Kong vs New York City. Both are extremely dense population centers. Both are outrageously expensive. Both have archaic laws regulating new construction and public utilities with plenty of red tape to slow the process. I’ll even bet the New York city fathers will insist that Hong Kong’s infrastructure is more primitive and its government more corrupt. So why is it that the average Hong Kong resident has a 100MBPS direct fiber connection available at a price lower than Verizon’s cheapest DSL offering? And how can it be that a great many New Yorkers can’t even get FiOS at any price?
Hong Kong Broadband Network announced the initial results of its “Awesome Speed. For Everyone.” sales, which offer a symmetric 100Mbps fiber connection for the hefty price of US$13 a month. In the two months it has been offering it, customer growth has tripled compared to the earlier months of 2009. Clearly, the company has found it relatively easy to roll out or purchase fiber in Hong Kong’s dense urban environment, and is attempting to recoup its investment in infrastructure by attracting lots of people to its service using low prices.
To get half that download speed (and one-fifth the upload) with Verizon costs $140 a month, assuming you bundle it with local phone service. It also requires a one-year commitment, and Verizon has recently raised the early termination fees so that anyone quitting ahead of that year will now owe the company $360. These would suggest that the company plans on recouping its costs through fewer customers that pay far more. (ARS Technica)
My belief is that the Verizon suits do not see access as a serious business. The entire FiOS business model is based on selling subscribers a “triple play”. More consumers want access without overpriced VoIP service and pay TV. If you only want access, Verizon’s suits think DSL is all you deserve. If we had real competition over the last mile (equal access to the copper infrastructure), Verizon would have to deploy fiber to have a shot at continuing to charge a premium price.
No matter how you spin them, numbers don’t lie. American consumers are paying the world’s highest prices in growing numbers to get Verizon’s FiOS service while V’s fixed line voice and DSL businesses are crashing. Moral to the story: people want a big, fat unrestricted pipe, and they will pay more for it even in hard times.
So why is it only a select few of Verizon’s customers can even get FiOS? There is no excuse for every urban / suburban market to not have access to fiber but one: A duopoly that has bought and paid for the federal government that regulates them.
Verizon said 282,000 homes added FiOS high-speed data in the fourth quarter, and almost 1 million added it in 2008 for a total of 2.5 million subscribers out of almost 10 million homes passed. Those additions helped make up for losses in Verizon’s DSL business, which lost 68,000 DSL-based connections in the most recent three-month period after losing 96,000 during the previous quarter.
Verizon’s consumers also continued to drop their landline telephones, but not as rapidly as some had feared. In the fourth quarter, Verizon lost 3 percent of landline subscribers, up slightly from the 2.8 percent loss in the same period last year. In 2008 Verizon lost 12.2 percent of its landlines leaving 20.96 million still connected; it lost 10.8 percent of them in 2007. (Gigaom)
A post Halloween tale from the Verizon Crypt of Woe. The tale involves naturally around the billing system. They can’t clear the previous owners services to have David service running when he moves in post closing. The FIOS billing extensions didn’t work when I was there and still doesn’t on the edges. –
The fact that Verizon can’t setup an order without the previous service actually stopped is pretty ridiculous. t doesn’t allow for any leeway, like in my case. But ok, not the end of the world, I’ll call on Friday morning and get everything setup for that weekend for installation. Friday morning rolls around, I speak to the same rep. Service has stopped, but it will take 24 hours to process, and since they’re closed on the weekend, I’ll have to wait until Monday. Ok, that sucks, but again, understandable situation.
Monday comes around, and this is where the insanity really starts to begins. I call to setup service, but I’m told that it cannot be done because something happened in the system and our order is not “flowing” through correctly…Ok…They tell me they’re working on it, and will let me know once it has been resolved so I can get everything setup.
I call every day for a week, I still get the same excuse. The previous owners order is not clearing out properly, which is not allowing my order to flow through the system properly. They have submitted a ticket to their IT team, and that was pretty much the only thing they could do. They listed the ticket and the order as urgent, and from a management level request.
The fact that it can take a week for an IT team at a multi-billion dollar company over a week to figure out how to clear an order out of a system is insane. I even mentioned the idea, why not just cancel our order, put a new one in, and maybe it will work. The rep tells me that will not do anything because the problem lies with the previous owners service.
Fari Ebrahimi, you are a piece of work. You birthed this baby and it is still a cripple. But then its not your problem anymore is it? You made sure you slide out from under this millstone before it crushed you.
Be positive David! At least VZ hasn’t tried to burn your house down!
From Wired comes a report that AT&T’s 2nd quarter new installation results have cratered. What I mean by cratered is a drop of 90%. Give a read –
Att AT&T posted its second-quarter report this morning, and boy, was it a doozy.
The company added a modest 46,000 broadband subscribers during the quarter, a screaming decline from 491,000 additions in the first-quarter 2008; and down sharply from the 400,000 subscribers added in the second quarter 2007.
We’re not sure what the problem is, but there are two possible explanations: Either people are less willing to pay more than $30 per month for broadband service; or people are less willing to pay AT&T for broadband service.
Well that’s troubling. It will be interesting to hear what Verizon’s results will be. My gut says a combination of factors are in play here. 1) AT&T has plumbed all of its existing LATA territories. 2) Rap on poor service and subpar speeds. 3) Inept marketing. 4) and Finally, the economic conditions. Look broadband as the Duopoly sells it is treated as a premium alternative to off the air broadcasting services. In that guise, in the consumers eyes it gets labeled ‘Entertainment’, not ‘Information’. So when the times are tight the luxuries are turned off. What is happening to Starbucks is probably going to happen to some segments of broadband as well.
Yes Dear Reader, we are back to the Third Pipe argument of selling the consumer plain dumb pipe. So long as you wrap yourself in the ‘Entertainment’ category you the provider run the risk of being kicked to the curb. Give us transport only options, no mail, websites, or other goofy services like ‘The Fan’. Residential data cable, we buy the modem, $15/month. FIOS speeds, same conditions, for $30/month. Oh I can hear the roars, but our staff levels! RIF them. You were going to do it anyway and lumber on with crippled services. Dispense with the Land of OZ mentality. It will only garner you more bad press.
On a related note. Readers if you know of a good provider in the Plano Texas area that provides a good price for T1 or SDSL at 768kbps I would like to hear from you!
Dear FCC and Congress: Tell me again how the marketplace has become competitive enough to dump local loop unbundling. Darth V’s FIOS product faces so little competition in either speed or price, that they’ve been able to incrementally bump prices on a regular schedule. The average big bundle FIOS customer pays around $150 for what can be had for $40 in Paris. Before we start hearing excuses, France has a more antiquated legacy infrastructure, more labor union control of business, higher taxes, higher salaries and a shorter work week.
Discussing this morning’s earnings, Verizon CFO Doreen Toben told investors, analysts and reporters on a conference call today that FiOS users can expect a new round of price hikes this quarter. “You may recall we increased prices for selected products in the first quarter last year,” said Toben while discussing FiOS (see transcript (pdf)). “We anticipate increasing prices once again in certain products and bundles in the second quarter this year.” Which FiOS products and bundles was not specified.
Verizon has consistently nudged up the price of FiOS broadband, especially for customers who refuse to sign up for long term contracts or add additional bundled services. Standalone broadband service jumped $5 in many markets last fall, while double and triple play bundles have consistently increased anywhere from $5 to $20 since FiOS was launched (depending on the product market). (Broadband Reports)