Verizon Communications Goes "Skinny" with Linear Video Bundle

Eventually, customers in competitive markets get what they want.

Though many would contest the characterization of the linear video business as “competitive,” it appears to be competitive enough to spur moves in the direction of giving people “what they want, when they want it.”

That is why over the top streaming services are proliferating. Another sign of the change is the move to create “skinny” bundles of linear channels that cost less, since consumers are signaling by their behavior that they consider the existing product too expensive, compared to the value they receive.

Verizon Communications, for example, has launched a new "Custom TV" bundle featuring high speed access and 36 basic (ad-supported) channels, with the option to buy genre-based channel packs, such as a sports bundle or kids channels.

Users can add extra packs for $10 each, or swap or unsubscribe any pack after 30 days. Verizon has seven channel packs in total.

Starting April 19, 2015, consumers will be able to sign up for a package of TV channels including broadcasters such as ABC and Fox, CNN, AMC, Food Network. They can then add on “channel packs” covering various genres such as sports, kids, pop culture and lifestyle.

FiOS’s cheapest plan will cost $55 a month and will include two channel packs. Each additional package, which can consist of about 10 to 17 channels, will cost $10 a month.

A package featuring the base package, two channel packs and 50 Mbps Internet access service costs $75 a month.

Though not a full move to a la carte pricing and buying of linear channels, the Verizon move is part of a trend that eventually will lead to new sets of choices that more closely resemble full choice, channel by channel or program by program.

WhatsApp Adding Video Communications, After Voice?

Facebook-owned WhatsApp, after having introduced voice communications, now seems set to add video communications.  That illustrates a pattern we now have become quite familiar with. A would-be disruptor enters a market, at the low end, and is dismissed as “a toy.”

The new app or service does not have anywhere near the features of the incumbent products, but the new product offers high enough value to solve a problem, generally at very low cost (free app, for example), or at least costs noticeably lower than the market level (cable TV voice, high speed access).

Over time, the new product adds more features. One day, the attacking product is feature by feature equivalent to the incumbent products. That pattern of disruptive innovation now clearly can be seen at WhatsApp, transitioning from an instant messaging product to a full communications platform.   

Space X "Falcon" Booster Almost Makes Landing

Once the technique is perfected, the cost of satellite launches will fall, since boosters can be reused. 

Star Wars Episode VII: Yay!

CenturyLink Adds Another Gigabit Community

It can be argued that if a firm is a provider of fixed telecom network services; does not own mobile assets; has a normal mix of consumer and business accounts and does not intend to sell its assets, exiting the business, then high speed access holds the key to survival, and any hope for prosperity.

CenturyLink might now be among the best example of that strategic imperative. CenturyLink has been aggressively launching symmetrical gigabit services across its service territory, most recently adding La Crosse, Wisc. to the list of communities able to buy the service.

Since 2013, when CenturyLink lit its first gigabit network in Omaha, CenturyLink in 2014 announced neighborhoods in 16 cities would get gigabit networks.

Residential customers can purchase 1 Gbps service for a monthly recurring charge of $79.95 with a 12-month term commitment and when bundled with additional, qualifying CenturyLink services. Stand-alone prices are likely to be in the $130 a month to $150 a month range.

What If No Business Case for Gigabit Metro Networks Exists?

One has to wonder why a concentrated 20-mile downtown fiber network apparently was not financially interesting to a single U.S. fiber specialist, Internet service provider or competitive local exchange carrier, causing San Leandro in 2011 to create and build its own fiber backbone serving the downtown area.

The likely answer is that commercial suppliers could not create a business case. And that might be the story for such networks: they might wind up being built because no single commercial service supplier actually can earn a financial return.

A federal grant of about $2 million, for example, was used to build 7.5 miles of the initial 18-mile core network, which was itself financed by OSIsoft CEO Patrick Kennedy, as the anchor tenant.

San Leandro Dark Fiber LLC, the firm created by Kennedy to build the network, invested $3 million to pull fiber strands through existing conduit.

San Leandro is sandwiched between Oakland on the north and Hayward to the south. The suburb of perhaps 85,000 people features any number of industrial (food processing) operations, several corporate anchor firms (JanSport, The North Face, Ghirardelli, OSIsoft, Otis Spunkmeyer), a Coca-Cola plant. Maxwell House coffee roasting plant and five shopping centers.

But the story here might just be that no commercial provider could create a viable business plan for the whole network. In San Leandro, an anchor tenant was motivated to create gigabit connectivity because such connectivity is essential for its own business.

Net Neutrality Founded on Bad Science

Analyst Martin Geddes has been arguing for “science-based” telecom policy. Unfortunately, he argues, U.S. network neutrality fails, in that regard.

Discussing the Federal Communications Commission’s new rules, Geddes spares no words. “Regrettably, they have proceeded to issue rules without having their science in order first,” Geddes says. “As a result they have set themselves up to fail. My fear is that other countries may attempt to copy their approach, at a high cost to the global public.”

Consider the apparently easy issue of “no blocking of lawful packets.” Most people agree lawful packets should not be blocked (some governments disagree). But is it “blocking” when a specific Internet service provider does not interconnect with some other Internet domain?

“How will the FCC differentiate between ‘blocking’ and ‘places our ISP service doesn't happen to route to’"?

Geddes says there are issues of business practice. “Why can't an ISP offer ‘100 percent guaranteed Netflix-free!’ service at a lower price to user who don't want to carry the cost of their neighbors' online video habit?”

“A basic freedom of (non-)association is being lost here,” Geddes notes. “To this foreigner, ‘no blocking’ is a competition issue for the FTC and antitrust law, not the FCC (and the FTC agrees, by the way).

Similar problems exist with "no throttling" policies.

“Broadband is a stochastic system whose properties are entirely emergent (and potentially non-deterministic under load),” Geddes says.

How will a regulator distinguish between "throttling" and mere "unfortunate statistical coincidences leading to bad performance"?

And fairness is an issue. “Why should someone who merely demands more resources be given them?” Geddes rhetorically asks. “Where's the fairness in that!”

What's the metric used to determine if "throttling" has taken place? User behavior matters.

Optimizing networks for "speed" performance produces better results for large file downloads, not interactive apps, for example.

What are the proposed metrics for performance and methods for measuring traffic management? What's the reference performance level for the service? Without these, "no throttling" is meaningless and unenforceable, Geddes notes.

The real issue is whether the service performance is good enough to deliver the quality of experience outcome(s) that the user seeks. And that’s a problem. By definition, “best effort” is just that: best effort.

The other problem is that such an approach necessarily prevents creation and use of classes of service that users benefit from, and might well desire to buy and use.

Traffic scheduling (packet “prioritization”) is a good thing, even if it violates the rules, in other words.

Net neutrality “undermines rational market pricing for quality.”

We already have "paid priority", he notes. “All CDNs offer de facto priority by placing content closer to the user, so it can out-compete the control loops of content further away. Paid peering is perfectly normal.

“If you tried to make spectrum policy rules that broke the laws of physics, you'd be ignored by informed people,” Geddes says. “Boadband is similarly constrained by ‘laws of mathematics.’ Why don't we try making rules that fit within those, for a change?”

“We need a new regulatory approach, grounded in the science of network performance, that directly constrains market power,” Geddes argues.