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Verizon Schemes Stream Dreams

Verizon Communications next year may launch
an Internet-streaming service with a bundle of TV shows and
movies — a la Netflix — outside its FiOS TV footprint.

The telco has been looking at developing
some kind of over-the-top offering,
Verizon president and CEO Lowell
McAdam said at the UBS Media & Entertainment
conference last week in
New York. “I think the jury is out, but
I do think there is a place for over-the-top
here, and it will be part of our strategy,”
he said.

Verizon considered acquiring Hulu,
the Internet-TV venture owned by
NBCUniversal, News Corp. and The
Walt Disney Co., when it was on the
market earlier this year, McAdam said:
“We kind of looked at that and we will
continue to look at different alternatives
… I think there will be a place for overthe-
top, but I also think there is a place
for [traditional pay TV] — all the sports,
the late-breaking things.”

With broadband speeds accelerating,
the stage is set for a major player to launch a “virtual MSO” service
that will challenge incumbent pay TV providers, according
to BTIG Research analyst Rich Greenfield.


Verizon, “given their small video footprint with a national
wireless footprint … could have interest in [becoming] a virtual
MSO,” Greenfield wrote in a blog post. “Even if it cannibalized
their FiOS business, the net benefit to Verizon overall
would appear to far outweigh the risks to their existing facilities-
based video business.”

As of September, Verizon had 3.98 million FiOS TV

McAdam, speaking at the UBS conference, said over-the-top video won’t destroy the pay television business. “I
do think that the traditional FiOS [TV] broadcast will continue
for a long time. But I think over-the-top can be complementary,”
he said. “It’s one of those things that I want
to be positioned to transition and take advantage of it, but
I don’t think it’s one or the other.”

For the past two years, Verizon has been in discussions
with programmers about an out-of-market streaming video
service, Reuters reported last week, citing unnamed sources.
The subscription service would be limited in scope, focusing
on packages of movies similar to the Starz Play and
Epix services or children’s programming from partners
such as Disney or Viacom, according to the news service.

Verizon is planning to team up with Coinstar’s Redbox,
which operates a nationwide network of vending machines
that rent DVDs for $1.20 per day, to develop a Netflix challenger
slated to debut in May 2012, TechCrunch reported last week.

The service — dubbed “Project Zoetrope”
— will provide TV shows and
movies available on multiple devices,
with subscription plans that provide
credits for watching a certain number
of titles per month, according to

Verizon executives have discussed
delivering out-of-market video services
in the past.

In May, Verizon senior programming
executive Tricia Lynch said at
the Multichannel News/Broadcasting
& Cable
On Demand Summit 3.0 that
the company was planning to offer its
Flex View video-on-demand service
for watching movies and TV shows on
TVs, smartphones, tablets and computers
to non-FiOS customers.

The service is “available right now
to FiOS customers, but will soon be
available to non-FiOS customers,” Lynch said. To date Verizon
hasn’t offered Flex View services to consumers who aren’t
FiOS subscribers.


Meanwhile, Verizon Wireless — in which Verizon Communications
holds a 55% stake and U.K. cellphone provider Vodafone
holds 45% — has entered into an arrangement with
Comcast, Time Warner Cable and Bright House Networks to
resell the MSOs’ wireline voice, video and data products. As
part of that deal, the cable operators agreed to sell a nationwide
block of Advanced Wireless Services spectrum to the carrier
(see Mobile Mashup).

McAdam claimed the MSO tie-up would not hurt FiOS.
“The theory is … that all boats will rise, so FiOS will not be
disadvantaged in any way,” he said. “If I put my Verizon hat on,
we think that the FiOS platform is the strongest platform, and
each partner can take the core [Verizon Wireless] product and
do some innovation on top of that if they choose to.”