Verizon Does Little To Dispel Regulatory Concerns

by Trefis Team
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Verizon (NYSE:VZ) is pitching a new kind of integrated wireless and wireline TV service that it plans to launch by the year end provided its spectrum deals with the cable companies get approved by the Federal Communications Commission (FCC). In a recent Wall Street Journal report, Verizon stated that its wireless video service would allow pay-TV subscribers to access some content à la carte on their mobile devices. [1] Verizon is seeking approvals from the FCC and the Department of Justice (DoJ) for about $4 billion in deals to buy spectrum licenses from cable companies such as Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC) and Cox Communications.

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Verizon hopes to show the FCC that the spectrum deals will benefit the consumers and improve their TV experience to an extent that it warrants an approval. But we don’t see that to be the case for many reasons.

Firstly because this move does nothing to address the bigger anti-competitive concerns that the FCC and critics have around carriers and cable companies working together too closely. Secondly, Verizon isn’t offering anything new, at least nothing so innovative that it will compel the FCC to approve the deal. Time Warner Cable and Comcast already provide apps that allow live and on-demand cable content to be streamed on many popular mobile devices such as the iPhone, the iPad and Android smartphones.

However, both of these offerings work only on Wi-Fi and do not provide 3G compatibility for now. And this brings us to the next big reason. Why would customers want to subscribe to a mobile video service and stream live TV on an expensive cellular data plan? Watching videos on the LTE-enabled iPad is already making some users worrisome as they are exhausting their $30 monthly plan in two hours of streaming. [2] Carriers, too, have urged subscribers to stream videos over Wi-Fi in order to avoid congestion on their data networks, and this seems to be quite a departure from that stance.

Low Demand for 3G/4G Only Mobile Video Services

We can gauge how small the demand for 3G/4G mobile video services is from the fact that Qualcomm had to shut down its Media FLO TV business a year ago and sell off its wireless spectrum to AT&T. The FLO TV network was designed to provide live TV services on Qualcomm’s own wireless spectrum and to reduce congestion on the carriers’ data networks, but the service never caught on.

In any case, even if there is some demand for 3G/4G offerings, Comcast is already working on providing that feature in its Xfinity app in the future. Also, Dish Network has its “TV Everywhere” offering that lets users download a remote access app on their smartphones or tablets and watch live TV as well as recorded content “on the go” using their data plans. [3]

With so many similar offerings in the market and little demand for cellular-only TV services, we don’t see why the FCC would consider Verizon’s proposal alone to be a value-add significant enough to approve the spectrum deals. We feel that in order to win approval, Verizon should look for ways to alleviate the anti-competitive concerns and make a compelling case vis a vis its spectrum crunch situation, rather than try to side-step these real problems with half-baked solutions that hardly have any tangible benefits for the customers.

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With the launch of Lumia and a strong line-up of LTE-capable smartphones soon after should ensure that the carrier can at least partially recover these costs through increased adoption of its LTE phones
Notes:
  1. Verizon Pitches Mobile Video, WSJ, March 30th, 2012 []
  2. LTE Option Poses Data Dilemma For iPad, Smartphone Users, News4Geeks.com []
  3. TV Everywhere site, Dish Networks []
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