"Coverage" Limits Telco TV Gains

Coverage is a major factor enhancing or limiting video service provider market share. 

In fact, coverage limitations are the biggest barrier to telcos taking more market share from cable operators.

Cable TV companies operate in virtually every city and town in the United States. 

Satellite providers likewise cover nearly 100 percent of the surface area of the entire country.

Telco TV providers do not yet have ubiquitous coverage, though where they do operate, providers such Verizon have gotten about 35 percent market share, where the cable provider might get 39 percent or 40 percent share, with satellite providers getting the balance of accounts of homes that do buy video entertainment.

To be sure, AT&T and Verizon are now the fifth and sixth biggest subscription video entertainment providers in the United States, trailing Comcast, Time Warner Cable, DirecTV and Dish Network.

Still, because telco TV is not ubiquitously offered, U.S. phone companies have about 10 percent  market share, where cable TV companies have about 55 percent share, and satellite firms have close to 30 percent share.

You might think the telcos have issues with content, marketing or retail packaging. That isn’t the case. The issue is coverage. By 2015, AT&T, for example, will be able to market to only about 33 million locations.

Verizon’s FiOS covers about 17.8 million homes, so the two telcos will pass about 51 million U.S. homes, by 2015, out of perhaps 145 million U.S. homes by 2015. That implies coverage of about 35 percent of U.S. homes. Other telcos will sell telco TV as well, but collectively could only theoretically reach about 14.5 million homes, or so, by 2015, best case.

Even under the best of circumstances, it is unlikely U.S. telcos will be able to pass even 45 percent of U.S. homes by 2015.

That is one reason why some observers believe either AT&T or Verizon might eventually buy either DirecTV or Dish Network, or a combined entity, should the two satellite firms wind up merging with each other.

That is the only way, aside from launching robust streaming video services offering virtually all the standard channels sold as part of a standard cable TV, satellite TV or telco TV offering, that a telco could achieve full national coverage.

But changing customer habits and eventual content owner preferences are a wild card. Some might argue that today’s subscription video business is past its prime, and that streaming delivery is the future.

If so, a distributor could achieve national distribution by using an over the top approach. And that might ultimately be viewed by a few telcos as the best way to proceed.

Doing so would mean national coverage without the need to build access facilities, for example.