Windstream Communications Inc. (Nasdaq: WIN)'s plan for a new over-the-top (OTT) video service using Roku Inc. technology is just the first step in what the company says will be an aggressive plan to bulk up the value of its broadband service by adding unique video content and capabilities. (See Windstream Uses Roku to Launch Streaming Service.)

Windstream plans to launch its own OTT video delivery device, currently under development with an unnamed vendor, later this year. It will use it to stream unique content, on-demand movies and other video, as well as access to off-air digital broadcast channels. Windstream's intent is to control its broadband future and make sure the cord consumers cut belongs to the cable company.

"Consumers are clamoring for alternatives," says David Redmond, VP of consumer marketing for Windstream. Unhappy with pay-TV options when the Internet offers so much for free, some are are cobbling together their own alternatives.

For about $2 extra per month, Windstream will deliver its new Merge service on a Roku device over its 3Mbit/s, 6Mbit/s and 12Mbit/s high-speed Internet tiers, and let consumers view Internet-delivered video from services such as Hulu LLC and Netflix Inc. (Nasdaq: NFLX) on TV screens, tablets or mobile phones, and PCs.

That translates to $52.99 for the 3-meg service and $54.99 for 6-meg, with Merge. Redmond estimates about 70 percent of Windstream's current customers can get the 6Mbit/s service, and says the company continues network upgrades to drive that penetration higher.

Merge uses adaptive bit-rate (ABR) technology to enable video to be delivered over speeds as low as 1.5Mbit/s, but Windstream is advising consumers that they'll want at least a 3Mbit/s to stream video at a quality they'll be happy with.

Redmond admits that with this first Merge offer, Windstream is catching up to some of its cable competitors, but thinks the company's next step will put the independent telco ahead of the pack.

"One of the reasons we are developing our own box is that we want to further monetize our [broadband] pipe, and claw away that revenue from cable," Redmond says. "This puts us in a position, with the rising costs of capex, to continue to build out our backhaul network and to better monetize that pipe and continue to pay back" on that investment.

The lack of pay-back was what led Windstream to forgo developing its own IPTV offering, but it does continue to resell Dish Network LLC (Nasdaq: DISH)'s satellite TV service, which Redmond views as complementary to Merge for consumers who want a broader array of broadcast video options, as well as on-demand service.

— Carol Wilson, Chief Editor, Events, Light Reading