Why Verizon Believes "Cord Cutting" is Real

Even though Verizon is a significant supplier of video entertainment subscription services, Verizon executives have in the past not been shy about video cord cutting being a "real," not just "potential" form of end user behavior. 

 In 2010, then Verizon CEO Ivan Seidenberg argued that young people in particular are "not going to pay for something they don’t need to.” You might argue that is an unusual thing for an executive with millions of video subscribers to say, especially since virtually all cable TV executives say video cord cutting is quite insignificant at the moment. 

“We take the over the top issue with video very seriously,” Seidenberg said. “I think cable has some life left in its model…but that it is going to get disintermediated over the next several years.” 

And Verizon's views apparently have not changed. That is one reason why Verizon has formed a joint venture with Redbox to create a streaming movie service able to be purchased by any U.S. household with broadband access. 

More recently,  Maitreyi Krishnaswamy, head of Verizon FioS TV, reiterated the belief that streaming behavior and receptivity to video cord cutting continues to grow. 

"No, that trend is not stopping. It's growing," Krishnaswamy said. "The question is, is it growing enough for us?" What Krishnaswamy means is that the absolute numbers of people willing to consider buying less-costly video tiers of service is the current issue, while fuller streaming behavior remains a bit off into the future. 

"Is the migration to a-la-carte enough that we can go that route?" she rhetorically asks. "It's not something we can do overnight, but definitely something we've been looking at."


Strategically, cable operators have much more to lose from cord cutting, as they have more share of the video subscription business. But cable operators already acknowledge that their future revenue prospects come in other areas, such as business services. 

And though Verizon's FiOS network is fast enough that less video revenue and more broadband revenue is a viable revenue opportunity, that might not be so true for other service providers with less-capacious networks, including satellite providers, telcos with digital subscriber line not reinforced with significant fiber trunking. 

Still, as a strategic matter, Verizon clearly believes streaming delivery is a real threat to the traditional subscription TV business.