Interviews with Digital Media Thought Leaders
What Should Verizon Do?
Podcast Audio | Posted by Phil Leigh on February 5, 2009
If you would like to learn how Verizon can better compete with the CATV industry in Third Generation Television, this audio program is for you.
Verizon is attempting to compete against the CATV industry with a futile “me too” offering. Specifically, their focus is on a “Triple Play” of (1) telephony, (2) video and (3) Internet access services. Yet motivating the consumer to abandon an incumbent service for a new one requires that the alternative be demonstratively superior. For example, Flash memory replaced disc drives in iPods because solid-state chips make the unit far more rugged. That’s significant to consumers who are prone to dropping the devices. Verizon’s claim that its deployed fiber (FiOS) makes its Triple Play service better than the Cable operator’s is moot, at best. If it were demonstrably superior the company would not be investing the huge amounts of marketing dollars that it feels compelled to spend. (I trust the stock analysts have learned whether or not Verizon is capitalizing such expenses!) For example in the Tampa market Verizon overburdens the Post Office with junk mailings on FiOS monthly. It also has a telephone solicitor call my home every couple of months or so.
Verizon’s fiber facilities would be a better weapon if targeted at Cable’s weak spot, to wit broadband Internet Access. The CATV industry does not want subscribers to have truly fast Internet since it would encourage them to watch more Internet Video and less television. Furthermore, it might stimulate them to discover ways of getting Internet Video on the TV screen thereby reducing subscriber reliance upon conventional CATV service.
Although the Government donated the Internet backbone to Verizon (predecessor BBN) and AT&T about 20 years ago, the United States now ranks 15th in broadband access among EEOC countries. Yet Verizon’s FiOS deployment enables the company to offer broadband speeds that could take our country to the head of the list.
More importantly, potential FiOS Internet access capacity could not be matched by the CATV industry for two reasons. First, Cable companies have too much invested in their existing business models to make changes. Although they could deploy the DOCSIS high speed alternative, they’ll be reluctant and their unwillingness will lead them down the path of the record labels and metropolitan newspapers. Second, they don’t have fiber and are reluctant to spend their own (as opposed to the taxpayer’s) money to install it.
In contrast, Verizon could offer Internet speeds of 100 megabits-per-second or more at a premium price. Consumers will pay the higher price because it is better for Internet Video and other applications such as Internet Telephony (e.g. Skype). In this scenario, Triple Play features are replaced by applications that the consumer selects to “run” over the Internet. As such it provides unlimited versatility for the consumer to adopt future applications when desired. Consequently, it builds ever-greater dependence upon the high speed Internet access provider, to wit Verizon.
This is Third Generation Television.
To learn more about Third Generation Television, click here where you can purchase a copy or our research report or download a free Synopsis and Table-of-Contents.
Categories: Podcast Audio
Tags: digital-media, Digital-Video, Future-of-Television, Internet-video, podcast, TV
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Excellent post Phil. As you said, we are converging towards everything being on the internet, where consumers are then tied to their high-speed provider.
The current situation that cable providers are in is the same situation that big music is in… it makes better economic sense to sue/hamstring their own customers and slow down the rate of adaption, then to switch over.
These companies know that the cost to deliver their own next-generation system that brings customers into the fully internet based lifestyle will be costly. Additionally, alternative forms of monetization will need to be created and tested by these companies… which costs even more money.
Therefore, perversely, because it makes better economic sense to slow progress down due to archaic laws, regulations, and systems, the carriers will continue down this road as long as possible.
The system is broken when hamstringing technological and economic progress makes a company better long-term profit.