Verizon, the US telco, has announced its intention to purchase the assets of Intel Media, the chip giant's as yet unlaunched over the top (OTT) pay TV platform, branded OnCue, for an undisclosed amount. Intel Media announced the service in February 2013 with the intention of a Q4 launch. However, Intel's leadership brought with it a change in focus: where former CEO Paul Otellini had a vision of silicon and services (including Intel Media and the MacAfee security software suite) his successor Brian Krzanich has refocused the company on Intel's core business, chips.
As it buys Intel Media's assets and team Verizon is getting a fully functional OTT service that, according to those who have seen the service, includes some real innovations for the user experience. Verizon has announced that it plans to use the OnCue assets to boost its FiOS pay TV offer and has already alluded to the next-gen user interface and multi-screen capability that the Intel Media team developed. However, in some respects the most interesting part is the way that this frees up Verizon to extend its TV offer outside its fiber network potentially to its remaining 2.9m DSL customers (equivalent to around a third of its total fixed line broadband subscribers), over LTE, and potentially nationwide in a full OTT offer. IHS believes that a service expansion that remains on Verizon's network rather than a full OTT offer could represent the quickest win for the telco as TV channel distribution deals are often tied to the distribution network and remaining 'on net' should be relatively low friction.
An on net offer also has the potential to address a key competitive need for the telco as bundled TV packages have proven to be a core marketing tool in the US broadband and pay TV business. The large regional incumbent telcos have seen appreciable erosion of their DSL and fixed line voice subscriber base as consumers have switched to multi-play offer from cable operators which combine pay TV with high speed internet and voice. AT&T and Verizon have both addressed this need by offering bundles which combine their internet and telephony services with satellite operators' TV product. Buying onCue addresses this need head-on and will allow Verizon to deploy a TV experience that is, at least in terms of the user interface, one step beyond what's widely available in the US market.