Verizon Eyes Launch of Internet TV Service with 20-30 Channels This Year

CEO Lowell McAdam also denies report that Verizon is exploring AOL acquisition but says there's potential to partner

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Verizon Communications expects to roll out a “mobile-first” Internet pay-TV service in the second half of 2015, likely with between 20 and 30 channels, aimed at younger consumers who aren’t interested in full-blown cable, CEO Lowell McAdam said.

“Millennials are not signing up for 300 channels that they have to sit in front of the TV at 8 o’clock to see a certain show,” said McAdam, speaking at the Citi 2015 Global Internet, Media & Telecommunications Conference in Las Vegas. The new over-the-top service would be a nationwide service, separate from Verizon’s current FiOS TV.

Verizon will be one of several companies launching alternatives to traditional cable and satellite TV service. At CES on Monday, Dish Network unveiled its plans for the U.S.’ first Internet-delivered pay-TV service, dubbed Sling TV, which includes ESPN and 11 other channels for $20 per month. Sony also plans to bow an OTT pay-television service in early 2015, but with a lineup comparable to existing subscription TV packages.

In the fourth quarter of 2014, Verizon secured several content deals that gives the telco the ability to offer TV network programming over the Internet, according to McAdam. The telco announced a pact with Viacom last fall that includes OTT rights.

Not every TV network will be available on over-the-top services, McAdam said, “but I would tell you it is not going to be a 300-channel offering anyway. It is probably going to be a 20- or 30-channel offering, and the content that we see will be very compelling.” The CEO had previously set a mid-2015 target for Verizon’s OTT launch, and said it would include broadcast networks from ABC, CBS, Fox and NBC.

Separately, Verizon and Outerwall last fall shut down the Redbox Instant by Verizon subscription VOD service, after it was unable to gain traction.

Last January, Verizon paid about $200 million to acquire Intel’s OnCue OTT division. Intel had been developing technology and a service offering to compete with pay-TV providers, but decided to exit the business over cost concerns. In addition, in the last year Verizon has acquired content-delivery network provider EdgeCast Networks and upLynk, which sells managed streaming-video services.

Also at the Citi conference, McAdam dismissed a Bloomberg report that Verizon is exploring an acquisition of AOL but said there’s possibly an opportunity to partner with the Internet media company.

“I think AOL — along with lots of other media companies — are potential for us to do partnering with on a commercial basis or whatever,” he said. “But to say that we are having significant acquisition discussions is really not accurate.”

McAdam added, “I don’t see us as a content company. I don’t see us as a big software development company. I see us as the platform company that makes all of those things work and a few applications that will really drive some interest and some loyalty in our overall product set.”

Asked about the prospect that the FCC may adopt rules that regulate broadband as a Title II telecommunications service, McAdam said such a move would be “just silliness,” and he warned that it would have unintended consequences. The commission is expected to vote on a net neutrality plan in February.

“Taking something originally applied to the railroads and then maybe to fix the monopoly wireline and applying it to a dynamic environment like mobile today is just silliness,” he said. “Other than a political move, it doesn’t make any sense.”

McAdam added that he is hopeful that Congress will introduce net neutrality legislation that will find a middle ground, with a law that prohibits Internet service providers from blocking or degrading access to content services but doesn’t impose economic regulations. “Frankly, the lack of certainty around this will impact capital deployment in the future and I don’t think that the economy can stand that,” he said.