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No IPTV for FiOS?

I'm not surprised that, as reported recently, Verizon Communications Inc. (NYSE: VZ) doesn't see any compelling case at the moment to deliver IPTV with its FiOS network. The way I see it, Verizon has made an aggressive investment in fiber but is providing a traditional broadcast TV service. AT&T Inc. (NYSE: T), on the other hand – while saving money by opting for copper-based VDSL2 access – is probably spending a bunch on all the pieces (e.g., middleware, VOD server, encoders, STBs) necessary for IPTV delivery. So this, in a nutshell, is the big picture: AT&T is getting the experience in IPTV but eventually will have to invest in fiber bandwidth; while Verizon has started cautiously with FiOS and says it has no plans for IPTV, yet.

But there are many good arguments for Verizon to consider a transition to IPTV, and here are a few powerful ones:
  • It would allow Verizon to offer subscribers much more broadcast and VOD fare than if it stayed with its RF overlay approach.
  • IPTV makes more sense if you're thinking of offering more and more high-definition channels. (And who isn't going to prefer high-definition to standard-definition video?)
  • The logic of having a converged network that delivers two services (data and voice) gets even stronger when offering three services.


I can, however, understand Verizon playing coy when it comes to IPTV. Telcos delivering IPTV services today are merely at the cusp of beginning a mass-market rollout. As they ramp up, there will be lessons learned regarding not only IPTV as a technology, but also what applications to provide to make IPTV not just a me-too offering but a superior user experience.

For Verizon, sticking to its more conservative approach buys it time to understand what, if any, will be the relationship between IPTV and Internet video. Despite its fast-growing popularity, in terms of picture quality net video is going to keep looking like, ahem, net video as long as telcos control the last-mile bandwidth and it is delivered via a best-effort IP service. In fact, surveys indicate that the telcos themselves have not figured out whether net video complements or competes with IPTV. If I had to guess, I'd say that there will be some kind of accommodation between telco TV and net video.

Frankly, I think that Verizon's FiOS is a smart play because it has put its money into something fundamental – fiber bandwidth. Despite other telcos going the IPTV route, Verizon doesn't have to be at the leading edge. FiOS TV gives Verizon time to kick the tires of IPTV and, as it says, make the transition to IPTV "when and if" there's a business case for it. "When" Verizon might move to IPTV is anybody's guess; it's the "if" part that I don't buy. I'm betting that Verizon will make the move to IPTV sooner rather than later.

— Sam Masud, Senior Analyst, Heavy Reading

lawton 12/5/2012 | 3:40:28 PM
re: No IPTV for FiOS? Thanks for the great analysis! I believe this is the same question confronting any telecom service provider looking to offer video service over their network. In some cases it is an easy decision, for example, if they already own a CATV network, but if you are starting from scratch this is the $10,000,000 question.
paolo.franzoi 12/5/2012 | 3:40:28 PM
re: No IPTV for FiOS?
Verizon already runs its VoD service over the main data channels of the PON - not over the RF overlay.

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