Verizon is quietly getting ready to launch its next-generation TV service in at least one of its Fios markets later this year, Variety has learned from multiple sources with knowledge of the company’s plans. The service will be based on a new set-top box that incorporates some of the technology Verizon acquired from Intel a little over two years ago, and represents a bigger shift towards IP-based technology and a world where traditional pay TV isn’t the only game in town anymore.
A Verizon spokesperson declined to comment.
Earlier this week, Verizon filed documents with the Federal Communications Commission (FCC) to get approval for a new “video set-top box.” Those documents included a mention of OnCue, the internet TV service that Intel developed years ago, only to sell it to Verizon before it ever launched. Variety has since learned that this new box, code-named “Mallard,” is the centerpiece of the company’s new TV service. The FCC documents were first reported by Light Reading.
The new device will offer pay-TV services with a new interface that won’t look at all like Verizon’s existing Fios TV service. Moreover, it will also offer access to online video services, according to multiple sources. There’s no word yet on which services will be added, but Netflix would be a plausible candidate, as would a tight integration of online video programming developed at Verizon subsidiary AOL.
Work on this next-generation service began at Verizon even before the company acquired Intel’s media unit. Parts of the former OnCue team have since been assigned to work on the project, while others have been developing Verizon’s mobile Go90 video service. Both projects have been completely separate. However, recently, Verizon has tapped into the Go90 team to bolster its TV efforts, moving former Technicolor CMO and CTO Chris Carey from the mobile service to the pay TV project, according to a source.
Part of Carey’s mandate is to get the new service ready to ship before the end of the year. The company plans to start testing it with some subscribers as early as this summer, and bring it to one market by Q3 or Q4. However, multiple sources cautioned that the timeline could still shift. Verizon was originally looking to launch the service earlier, but had already been forced to delay it, leading to this new timeline.
Part of the reason for the delayed roll-out is are technical complexities that go far beyond simply giving consumers a new set-top box. Verizon is looking to finally replace its existing QAM-based TV delivery with a complete IP-based solution. In layman’s terms, this means that the company is getting ready to ditch the way TV signals have been delivered over existing cable networks and replace it with the same technology that gets Netflix, and any other internet service, into your home.
The old-school QAM approach pushes all content, all the time, to consumers, whereas IP-based technology only delivers the channel a consumer is watching. The result will be massive cost savings for the company, and will free up a lot more bandwidth to give consumers faster internet access. It also makes it possible to use cheaper set-top-box technology, and possibly even forego the set-top altogether to deliver the same programming to third-party streaming devices or mobile screens.
Verizon had long planned to eventually switch from QAM to IP, and in fact boosted this as one of the reasons it acquired OnCue in 2014. However, it’s also a massive undertaking that will likely see the company switch over large numbers of customers in a short period of time, market-by-market.
That’s where another interesting tidbit about the company’s FCC filing this week comes into play: Labels for the box, and accompanying remote control, featured Verizon’s logo, as well as a “designed in California” tagline in a nod to the Silicon Valley-based former OnCue team, but not a single mention of Fios. Granted, the filings are heavily redacted and, for example, don’t feature any photos. However, it’s conceivable that Verizon would ditch the “Fios TV” branding entirely, and replace it with a new name for its forthcoming service.
Fios has long been a mixed bag for Verizon. The company initially built out a fiber-optic wireline network to compete with the TV and internet access business of cable providers like Cablevision, but struggled to significantly expand its customer base. As a result, investment in Fios slowed, and Verizon actually agreed to sell its wireline infrastructure in California, Florida and Texas to Frontier Communications, ridding itself of a total of 2.2 million Fios and DSL subscribers. But just this week, Verizon announced that it was going to build out new Fios infrastructure in Boston.
Wireline still is a massive business for Verizon, generating revenue $37.7 billion in 2015. The company had seven million Fios internet and 5.8 million video subscribers. That’s not nearly as much as competitors like Comcast, which ended the year with 22.3 million video and 23.3 million internet subscribers. But Verizon also knows that the industry is shifting, with viewers embracing options outside of the traditional cable bundle, and an increasing number of smaller bundles competing with each other.
A new TV service can not only help Verizon to stay competitive in this world, but also lay the technical foundation for the next thing, which could be anything from a service that streams over third-party broadband networks to a mobile-powered in-home streaming service. Verizon’s continued investments in content and advertising clearly show that the company wants to keep playing competing in this world, and the company’s new TV service for existing Fios subscribers could be an important first step.