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Why Verizon OnCue Won’t Really Change TV

FiOS TVWhen Verizon emerged as a potential buyer for OnCue, Intel’s abandoned IPTV project, back in November, the consensus opinion seemed to be that Verizon would drop any plans to launch an over-the-top Internet TV service and instead use the technology developed by Intel to improve its existing FiOS TV service, which currently has 5.2 million subscribers in the USA and is one of the few pay TV services that’s actually gaining customers.

This Bloomberg report, however, might suggest otherwise:

Verizon, the second-largest U.S. communications company, will use OnCue to extend its pay-TV offering beyond the geographic footprint of its FiOS fiber-optic service. That could shake up pay TV, by bringing more competition to cable companies that dominate territories, as well as satellite companies with wide coverage that lack the interactive capability of the Web.

Why would this service work for Verizon when it wouldn’t for Intel? Because technology was never Intel’s biggest barrier to entry; it was the chip maker’s inability to make any carriage deals with TV networks. Verizon already has those carriage deals in place, and they could theoretically extend those deals into this IPTV service.

How much impact would a Verizon-backed IPTV service have on the pay TV market? On the surface, Verizon could offer a welcome second option for apartment dwellers, who aren’t allowed to install satellite dishes and are stuck paying cable monopolies for TV. Competition generally lowers prices, which is why cable companies prefer to lobby for laws that restrict broadband options rather than compete with other companies on price or service — something that Congress might force them to do for IPTV.

What’s important here, though, is what a Verizon IPTV service won’t do — it won’t break up the cable bundle.

Instead, Verizon would merely extend its current FiOS TV service into new markets using Intel’s streaming technology. Currently, Verizon’s cheapest TV package, Select HD, costs $49.99 a month for 145 channels, with no sports channels included. The next-lowest package, Prime HD, includes some sports channels and costs $64.99 a month, but you’ll need to kick in another $10 to get a package with NFL Network in it.

Oh, by the way, those prices are only for the first year and require a two-year contract.

At those prices, does this IPTV service still sound like a good deal? Or does it sound like more of the same? For this, you can thank the networks, who continue to reject any notion of breaking up the cable bundle. 21st Century Fox COO Chase Carey recently called a la carte cable “a farce” and insisted, “The bundle is still a great proposition for the consumer when you compare it to the a world of $5 lattes and cell phone bills.” Hey, you can get a whole month of ESPN for the price of one venti frappuccino! What a deal!

Unless, of course, you don’t watch sports and would rather not waste your money on channels you’ll never watch. Maybe you’d rather spend that money on something you’ll actually use — like that frappuccino, for example.

Verizon might make a few waves by launching an over-the-top IPTV service. It might even lower some your TV bills in the short term. It won’t, however, offer you anything significantly different from what you’re already getting, which means you’ll still get stuck footing the bill for a lot of channels you don’t watch to get the ones you do. Again, the issue here isn’t the technology, but the networks. As long as they refuse to sell sports channels separately from the rest of the cable bundle, everybody who buys in will have to pay for things they’ll never use. You’d rather have the coffee, wouldn’t you?

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