Fiber TV First, but Google's Eyeing OTT
Google Fiber may be offering TV service over its own gigabit broadband network today, but the company would rather be in the over-the-top TV business.
Speaking at the 2016 Incompas Show, Google Fiber Head of Network Deployment and Operations Chris Levendos declared that the current content model in the US is "broken" and suggested that OTT TV could and should be used to "blow up" the existing system.
"The current model's just too restrictive economically to encourage scale and investment to be able to then compete in the marketplace for the services," said Levendos. "So there's more flexibility needed."
Asked later for further clarification, Levendos confirmed that Google Fiber Inc. would prefer an OTT model to its current TV strategy. Today, Google Fiber builds out access network infrastructure in select cities, negotiates for the necessary TV franchise agreements, and then offers TV service within its network footprint. But in addition to the geographic limitations, Google Fiber is facing the same challenge that every other cable and telco TV company is up against: rising programming costs. It's a problem that's even more intractable for new market entrants and small operators than it is for large incumbents with widespread audience reach and the leverage to negotiate more favorable content licensing terms. (See Rumored Apple TV Service Hits Another Snag and Rep. Rips Retrans 'Racket' .)
Levendos even hinted that investing in access network deployments is a worthwhile and retrievable cost, but that creating any new, large-scale, competitive TV service is economically unfeasible. In other words, even building out fiber to the home, which is a capital-intensive process, is a better financial bet than getting into the TV business.
Referring to fellow Incompas speaker Colin Spence, SVP at BT Group plc (NYSE: BT; London: BTA), Levendos said, "Colin talked about the economic challenges of building the access networks and they're there, but it should not have us just retrench and suggest that we're not going to do it because the demands to support additional access, more access is there and necessary, and only growing. So I think one important aspect to focus on is the over-the-top model and the technologies there to blow up the content model that exists."
Of course, Google already has a thriving OTT video business with YouTube Inc. but it's a different viewing experience from traditional TV, which is focused far more heavily on premium, scripted shows. There are others like Sling TV , Home Box Office Inc. (HBO) and Netflix Inc. (Nasdaq: NFLX) that are gradually pushing more high-quality television content onto Internet-based platforms. Google Fiber may be looking toward those examples as it evaluates its future TV strategy, but so far the company hasn't made any public declarations. The closest it's come to revealing any new video plans is acknowledging this week that OTT is the best TV model out there, and that Internet TV has the power to shake up the existing content ecosystem.
As for the TV service it sells today, Google Fiber has done little to showcase the offering, or the company's ability to innovate on television more broadly. However, Levendos suggested to Light Reading that changes are coming. And he's not the first at Google Fiber to do so. (See Alphabet Is Serious About Google Fiber.)
— Mari Silbey, Senior Editor, Cable/Video, Light Reading