Light Reading

Why Did Verizon Buy OnCue?

Mari Silbey
1/22/2014
50%
50%

There's one thing that's puzzled me ever since rumors of a Verizon deal to purchase Intel Media's OnCue assets first surfaced. And now that the deal is done, I'm no less mystified by it. (See Verizon Snatches Intel Media Assets.)

Many have reasoned that Intel Corp. (Nasdaq: INTC)'s OnCue could give Verizon Communications Inc. (NYSE: VZ) the boost it needs to make the transition to a full IPTV service. That would help the company battle against Comcast Corp. (Nasdaq: CMCSA, CMCSK) and its growing cloud-based Xfinity platform, and it would extend Verizon's footprint across the country in preparation for the day when service providers are expected to compete nationally.

There's just one problem with the logic. Verizon doesn't need Intel to make any of its IPTV dreams come true.

Three years ago at CES, Verizon executive Joe Ambeault told me that the company had already worked to overhaul its infrastructure so it could deliver everything over IP. Ambeault painted the picture of FiOS TV as an app, and he suggested that while many business challenges remained, the technical hurdles to making that idea a reality were already more or less solved.

Fast forward to today and I have confirmation from an expert source in the trenches. Technically speaking, Verizon has the equipment and the ability to deliver television over IP already, even without the OnCue assets.

All of which leads me back to one question: Why did Verizon bother to buy Intel's dying TV service?

My only conclusion at this point is that there's a sexy combination of software and hardware in the OnCue assets that Verizon thinks will give it a more compelling offering for consumers. Despite being a software leader five or so years ago, Verizon hasn't invested much in its TV interface in ages. It could partner to bring its guide up to speed quickly, but I can see why bringing a finished product and more expertise in house would be appealing.

On the hardware front, Verizon's got plenty of set-top options at its disposal. But maybe Intel has invented something new; something innovative like Fanhattan LLC 's tiny little box that connects to a motion-controlled remote.

On the other hand, maybe Verizon just couldn't put its own pieces together for the IPTV transition. Maybe so many of the components are locked up in different corporate silos that it's been impossible for the company to make the logistics work. Maybe that's why the big bosses decided to bring OnCue into the fold instead.

I don't know the reason why Verizon pulled the trigger on the Intel deal. However, at the rumored discount price of $200 million, maybe it also doesn't matter too much. In the end, it's only what Verizon does with the investment that anyone will really care about.

— Mari Silbey, special to Light Reading

(6)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
albreznick
50%
50%
albreznick,
User Rank: Blogger
1/26/2014 | 1:55:48 PM
Re: One man's trash is another man's treasure
I agre, Mari. It's like Europe in the summer of 1914 waiting for WW I to break out. The big question is: Which company will be the Serbian nationalist to assassinate the Austrian archduke? 
gconnery
50%
50%
gconnery,
User Rank: Light Sabre
1/23/2014 | 4:06:49 PM
Re: One man's trash is another man's treasure
One thought... don't forget how much equipment VZ purchases from other people to deliver their content.  They have STBs from Cisco and Motorola that they pay probably limited amounts of money for.  And VOD streamers from Cisco.  And QAMs from Harmonic for their live channels.  And encoders for those channels from Cisco and perhaps others.  Maybe they have in mind replacing some of that stuff with in house equipment developed by some team they'll put together between in-house and On Cue talent? 

 
msilbey
50%
50%
msilbey,
User Rank: Blogger
1/23/2014 | 1:53:16 PM
Re: One man's trash is another man's treasure
Connery- I'm betting on "d". But right now we're in a nuclear arms race with a policy of mutual assured destruction. Nobody's quite ready to go outside their footprint yet, because they know that when they do, all of the other dominos will fall. Eventually (who knows when) it will be all-out war. 
gconnery
100%
0%
gconnery,
User Rank: Light Sabre
1/22/2014 | 6:37:48 PM
Re: One man's trash is another man's treasure
Yeah its not obvious. 


They can talk about offering OTT nationwide all they want--actually doing it is something else again.  I assume their own content partners would NOT be in favor of such a move, and might even have contractual language preventing it.  Plus what would happen if they were to offer a competitive TV package into a Comcast territory...?  Would Comcast:


a) outright block the service now that Net Neutrality is dead? 

b) rate limit the service so it didn't work very well

c) interfere with the service like they did with torrents before so it didn't work very well

d) do something trickier like raise their peering rates with VZ to accomplish the same

e) simply lower the caps until most people who wanted the service priced themselves out of the equation or found they couldn't stream shows much of the month

 

I'm not sure, but I am sure Comcast would respond.  And if you think content companies have been difficult about allowing streaming outside the home, and getting such rights has been difficult... wait for this!  Some partners might outright pull their content from VZ at the thought of price competition in TV causing price cuts and thus pressure on their potential earnings.
gwatkins8888
50%
50%
gwatkins8888,
User Rank: Light Beer
1/22/2014 | 4:00:32 PM
Re: One man's trash is another man's treasure
Perhaps it was done to take them off the market thereby, preventing some other company from buying them, adding to the competition. In other words, a defensive play. 
craigleddy
100%
0%
craigleddy,
User Rank: Blogger
1/22/2014 | 1:12:59 PM
One man's trash is another man's treasure
I had the same reaction when I heard the news: Verizon, you're buying OnCue because...why? Because Redbox is doing so well?? (Chortle, choke, cough)

As was speculated in yesterday's LR boards, perhaps VZ thinks the purchase would help an IPTV plan or eventual LTE video play. But it doesn't get over the fact that trying to replicate a full slate of live TV channels through an OTT play is a dead-end strategy. The content rights simply are too damn expensive.

 

And yet, beyond the on-demand realm of Netflix, Hulu and YouTube, it seems there should be room for some type of OTT play with live TV that would appeal to consumers and meet the selfish needs of programmers and service providers. Now if I could just figure out what that is... 

    

 
More Blogs from Column
There is an impressive array of technology that is planned for the transition to 5G that will enable many new possible services.
5G could shape up to be a stunningly expensive fiasco.
The Swedish vendor has undergone a significant transformation during the past few years, adjusting to the demands of next-generation communications companies.
Wi-Fi Alliance members have created Wi-Fi Aware technology to bring local experiences to life -- without requiring access to the Internet or GPS.
Bamboozled by the flood of abbreviations and acronyms that SDN and NFV have inspired? Here's a guide to some of the key standards bodies whose initials you will need to know.
Flash Poll
From The Founder
Ericsson's Hyperscale Datacenter System (HDS) 8000, featuring Intel's Rack Scale Architecture, caused a stir when it was announced at MWC 2015. For more on this revolutionary product, join me on Thursday, April 30 at 12:00 p.m. EST for a Super Webinar event, A New Hardware Paradigm for the Telco Data Center.
LRTV Documentaries
CableLabs' Clarke Updates Cable Virtualization

4|23|15   |   05:41   |   (1) comment


Former BT exec now leading CableLabs' NFV and SDN efforts explains key role of open source and updates efforts to virtualize the home network.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. II

4|23|15   |   08:19   |   (1) comment


In the second installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about cultural change, network slicing and technology advances.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. I

4|23|15   |   09:27   |   (3) comments


In the first installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about the incredible transformation underway in the communications networking industry.
LRTV Documentaries
LTE Paves the Way for the 5G Revolution

4|20|15   |   4:20   |   (0) comments


Håkan Andersson, head of 5G product strategy of the Radio Business Unit at Ericsson, discusses the role of LTE, the US and other industry verticals in building a true 5G ecosystem.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
LRTV Documentaries
AlcaLu + Nokia: The New Uber-Vendor

4|15|15   |   2:42   |   (4) comments


Heavy Reading Senior Analyst Gabriel Brown discusses the technological and competitive opportunities and challenges if a merger between Alcatel-Lucent and Nokia comes to pass.
LRTV Huawei Video Resource Center
Huawei's Data Center Power Play

4|15|15   |   6:22   |   (0) comments


Huawei has developed industry-leading energy efficiency capabilities for its indoor and outdoor data center solutions, explains Dr. Fang Liangzhou, vice president of Huawei's Network Energy product Line.
LRTV Huawei Video Resource Center
Huawei’s Routers, Switches Get the Green Mark

4|15|15   |   2:02   |   (0) comments


TUV Rheinland's Frank Dudley explains how Huawei's routers and switches have been successfully tested by energy efficiency experts and have gained Green Mark Certification.
LRTV Documentaries
A Finn, a Frenchman & a Guy From New Jersey Walk Into a Merger...

4|15|15   |   3:17   |   (0) comments


Stop us if you've heard this one before... Light Reading CEO Founder & CEO Steve Saunders weighs in on the technical and cultural implications of a Nokia and Alcatel-Lucent merger.
LRTV Huawei Video Resource Center
Accounting for Better Solutions

4|10|15   |   02:31   |   (1) comment


Murad Yousuf, CTO at Saudi Arabia's Ministry of Finance (Dept. of Zakat & Income Tax), talks about the benefits of deploying router technology from Huawei.
LRTV Huawei Video Resource Center
What's in Store for Huawei & DataCore?

4|10|15   |   05:44   |   (0) comments


At the CeBIT trade show in Hannover, Germany, George Teixeira, CEO of software-defined storage (SDS) specialist DataCore Software, explains why he has just signed a partnership agreement with Huawei Technologies.
Upcoming Live Events
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
In its latest survey covering network operators' plans and strategies for ICT transformation, Heavy Reading asked telecom operators worldwide to identify the most important goals and objectives for their ICT transformation initiatives. Heavy Reading also asked operators about the importance of a "digital first" strategy, which enables customers to complete an interaction across different digital channels, such as web and mobile self-service and social media.
Hot Topics
Comcast Formally Ends Its Bid for TWC
Mari Silbey, Independent Technology Editor, 4/24/2015
What if the Comcast Merger Fails?
Mari Silbey, Independent Technology Editor, 4/20/2015
Google's WiFi-First Mobile Service 'Fi' Is Here
Dan Jones, Mobile Editor, 4/22/2015
Adtran Is Developing White Box GPON Tech
Ray Le Maistre, Editor-in-chief, 4/24/2015
Comcast Merger May Hinge on Hulu
Mari Silbey, Independent Technology Editor, 4/22/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Many leading communications companies can claim to have undergone significant periods of reinvention during their histories, but none have been through more major ...
Data Center Interconnect, or DCI, is one of the hottest sectors in telecom currently. Since coming back to Light Reading last year, prodigal-son style, I've ...
Cats with Phones
Learning Curve Click Here
Pierre could never remember how to use Excel.
Latest Comment