Light Reading
MSOs attacking other MSOs with subscription video services? Crazier things have happened

Verismo Gives Cable an OTT Weapon of Its Own

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
10/26/2010
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Netflix Inc. (Nasdaq: NFLX) is generally considered one of cable's chief "over-the-top" video threats, but what if those threats were extended to include other cable MSOs? According to Verismo Networks Inc. it's not just a likely scenario, but one that's already starting to happen.

The Mountain View, Calif.-based company launched its latest, greatest "VuNow" Internet TV platform today, and one of its more interesting, potential applications is one Light Reading Cable's been tracking for a while -- the idea of an MSO going "over the top" to deliver on-demand and subscription linear programming outside its traditional service areas. (See Verismo Debuts TV Platform.)

Having an MSO attack another in its own backyard is intriguing on several levels. It would certainly put a severe strain on the traditionally chummy and collegial cable industry while giving the operator that's doing it a new revenue stream to pursue. This could be crucial at a time in which cable's losing video subs by the tens of thousands to the telcos and satellite-TV operators, while also being pressed by Netflix and other OTT competition.

Verismo EVP Dhaval Ajmera outlined such a usage case for his company's new platform, claiming it could let MSOs expand services, including linear TV networks (if the operator happened to have such rights) outside their regular geographic areas by riding atop the access networks of others.

The idea sounds a bit nutty, because cable's historically been this big, happy family that would rather stick its head in a vat of boiling oil before inflicting damage on one of its own. But it's also an idea that's been percolating for more than a year. Of relatively recent note, there's that persistent rumor that none other than Comcast Corp. (Nasdaq: CMCSA, CMCSK) is working on such a strategy that would involve the use a small, broadband-connected box to deliver video over the top in non-franchised markets. (See Rumor: Comcast Plots OTT Stealth Attack and Comcast Forges 'Excalibur' for IPTV.)

Interestingly enough, Verismo makes boxes and software (which also can be ported to cable boxes) that at least sound like a reasonable fit. And it wasn't all that long ago when cable engineers were singing Verismo's praises at a CableLabs conference. (See Verismo Gets Cable's Vote .)



And let's not forget that Comcast just took its Web-fed Xfinity TV service out of beta, though it's only for the MSO's current crop of video subs (for now). Oh, and it's working on a national, video-optimized content delivery network (CDN) that could fit nicely with an OTT video strategy. (See Comcast's TV Everywhere Play Breaks Out of Beta and Comcast's 'Project Infinity' Takes Flight .)

So it would appear that most of the ingredients to this recipe are there, or will be soon, for Comcast or Charter Communications Inc. to offer OTT subscription video services in, say, a Cox Communications Inc. or Time Warner Cable Inc. (NYSE: TWC) market. Comcast would not exactly have to move mountains at this point to add in DRM and adaptive streaming to help make it go.

That strategy would end up treating other MSOs as "dumb pipes," but some smaller cable operators aren't exactly all that scared and bothered about the concept -- why not let the heft and sway of a Comcast deal with those tricky programming carriage and retransmission deals? (See Indie MSOs Plug ‘Dumb Pipe’ Video Model.)

Ajmera won't name names, of course, but says Verismo is already working with "seven or eight" cable operators.

Verismo is also targeting its product at regular ISPs that want to add video to their quiver and become "virtual MSOs" by feeding services over broadband, with Net2Vu, a Caribbean-based company, already on board. He claims that Verismo, which mostly uses H.264 encoding, needs about 1 Mbit/s to deliver video in decent quality, and perhaps 1.5 Mbit/s to 2 Mbit/s to deliver something in the neighborhood of HD.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 4:20:20 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


Six years ago? Yep, you were ahead of this one. But it's interesting to see these stars begin to align.  Comcast is using this new Xfinity brand to the hilt, obviously an attempt to disassociate the MSO from the traditional cable service, since many people outside of Comcast's cable markets might not know who Comcast is. Some will, but they are definitely going with a brand that attempts to transcend olde style cable. 


 But I get your well stated point… faster access speeds enable MSOs to attack other MSOs (and telcos, too) in non-franchised areas, just as those same speeds have enabled Netflix, Apple, ivi etc. to move with OTT services of their own. But how soon do you think this will start to happen (msos going all OTT on each other)?


 It will change the way the entire industry has done business and turn old friends into new enemies. JB

JGHilde
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JGHilde,
User Rank: Light Beer
12/5/2012 | 4:20:20 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


I can't predict when it will happen ... only that it's a logical progression of the current competitive environment for video eyeballs, wall street pressure to GROW revenues (even when you lose subs), and technology curves for the future.


One dirty little secret of the cable industry is that while they all work together like chums at the corporate level, they compete like crazy in the field for new build areas.  Just watch what happens when new homes are built in an area that borders two MSOs.

JGHilde
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JGHilde,
User Rank: Light Beer
12/5/2012 | 4:20:20 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


I started predicting this about 6 years ago.


As MSOs raise DOCSIS bandwidths to better compete with other high-speed data networks to the home (wireless, copper, fiber, whatever), they essentially ENABLE over-the-top competition for video eyeballs.  There are already huge numbers of video content providers happily riding the "dumb pipe" high speed data networks of MSOs.


Sooner or later, a cable operator is going to wake up and say, "forget the nice guy stuff - I have to find new sources of revenue to replace what I used to get from video subscribers".


MSOs already have content relationships, limited content rights, huge peer-to-peer networks, name brand recognition, etc.


It's coming ... and the MSOs will HAVE to compete - they can't afford to let every other OTT video provider take the business.


Soon after ... we're heading for "dollars per bit" pricing.  The cable networks will go the way of electricity, water, natural gas, etc.  They will become a dumb pipe with a mildly competitive video product offering.


 


just my 2c worth!                         ... and i've been wrong before.

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 4:20:19 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


The growth aspect is a good one to mention. Cable's been losing video share for a while, but more than balancing that out with VoIP and HSD growth, but even those two new service areas are starting to show signs of flattening, so where are the new growth engines?  Biz services is a huge one they're all going after, but backfilling video subscriptions using OTT is pretty intriguing, too, on many levels.


Maybe we're on the cusp of a new era that will remind many cable vets of the old franchise wars, when just about anything went, and sometimes did!


JB


 

seffros
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seffros,
User Rank: Light Bulb
12/5/2012 | 4:20:16 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


Ummm, Jeff, you may be right that Verismo is one of the technical ways one cable operator could offer "service" in another's franchise area, but what "service"? Cable operators don't have the rights to deliver programming outside their own franchise area, or now to their own subscribers. Why would a programmer grant such a right, create a price war, possibly encourage a few very big OTT "winners" and then be in a worse postition to negotiate for programming fees? As I said, OTT is full of technical possibilities, but where's the business plan that would make sense for all the players? Consumers would lose, too, in the end, just as all the studies have suggested with a la carte. The end result: higher prices for fewer programs, controlled by a small group of very large companies and less diversity. Until there is some business plan that can be shown to avoid all these pitfalls I suspect we will have plenty of technical possibilities, but that's what they will remain.

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 4:20:15 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


The OTT service (of the subscription variety) is what's to be defined still, which makes me tend to believe that they might be able to try to replicate the Netflix model and go with an OTT streaming VoD service for the subset of content they have rights for.  There's already a bunch of ad-supported content on Comcast's Fancast service that can be viewed by anyone with a broadband connection, regardless of whether they get any services from  Comcast or even live in a Comcast market, so that's one step taken already.


What I found interesting about what Verismo was proposing was the idea of piping some linear content, but, as you point out, the idea goes nowhere without the rights, or if they only have rights for some channels and can deliver a less than complete package.


But at that point, you're right, it's more of a business question. The tech components seem to be pretty much there. Sorta reminds me of when TWC got its original TV on demand effort about a decade ago. It was the obtaining of rights, not the technolgy, that was the big inhibitor. JB


 

paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 4:20:14 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


 


Jeff,


 


There are some suppliers (small and generally very focussed) that provide what look like Linear providers via OTT video.  This does not have to have anything to do with cable companies.  Anybody that can get access to content can do it.


seven


 

seffros
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seffros,
User Rank: Light Bulb
12/5/2012 | 4:20:14 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


I agree with you, Jeff.  And while we're at it, let's ask the million, no, maybe multi-billion dollar question; what if OTT actually took off?  What if OTT started to become a dominant way to watch linear programming? How long would the infrastructure survive before a major crash?  Netflix, alone, is consuming over 20% of bandwidth in prime time now. What happens when everyone, in this supposed world of OTT viewing, wants to watch the Giants / Dallas game (although I don't know why they would....) at the same time?  The Internet is simply not designed for that type of loading. Then what?

Stevery
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Stevery,
User Rank: Light Beer
12/5/2012 | 4:20:13 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


On the cable side, I think the future biz model is clear:


1.  Cable rates will become negligible


2.  Internet rates will rise to make up the lost revenue


3.  Cable guys will eventually throttle OTT sources until payment is forthcoming.


Why is it more complicated than this?

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 4:20:13 PM
re: Verismo Gives Cable an OTT Weapon of Its Own


I dunno... maybe it would look something like this. 


 

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