As predicted, Intel has sold off its OnCue video streaming platform to Verizon.
In the release announcing the sale, Verzion was a bit vague as to its plans for OnCue. "The transaction will accelerate the availability of next-generation video services, both integrated with Verizon FiOS fiber-optic networks and delivered "over the top" to any device," according to Verizon's release.
The company's CEO, Lowell McAdam, in a statement on the acquisition, indicated that OnCue "will help Verizon bring next-generation video services to audiences who increasingly expect to view content when, where and how they want it. Verizon already has extensive video content relationships, fixed and wireless delivery networks, and customer relationships in both the home and on mobile. This transaction provides us with the capabilities to build a powerful, capitally efficient engine for future growth and innovation. We will have the opportunity to enhance, expand, accelerate and integrate our delivery of video products and services to better serve audiences on a wide array of devices."
Intel's OnCue never saw the light of today, but from previous reporting about the service it was said to offer both live and on-demand programming over the Internet with a massive "cloud DVR" that stored the past three days worth of programming. Here's how Wired's Roberto Baldwin described it:
The UI of the new Intel media box is impressive. Gone are the station numbers and the schedule grid. They've been replaced by a flowing list of networks that can be customized. Stop on a network and you're presented not only with current and future programming, but also programs from as far back as three days ago that can be watched immediately. It's like a cloud-based DVR that has already recorded every show.
Intel was also said to have developed video compression technology that would make video delivery to mobile phones that much better.
Verizon, of course, has its own TV business. Through its FiOS network, the company runs a small IPTV business serving about 5 million subscribers. They also offer a Netflix-style streaming service in partnership with Redbox (of DVD kiosk fame). The question is, what does Verizon plan to do with OnCue?
GigaOm's Janko Roettgers, who has followed the OnCue story closely, offers a few thoughts:
An internet-delivered pay TV service would give the company a chance to finally break free from the chains of its FiOS footprint and market its TV service everywhere. And with Verizon Wireless now even more closely aligned with the rest of its business, it could easily bundle TV with mobile to create its own double- and triple-play offerings. It also could turn cable companies like Comcast into a dumb pipe and offer a competing TV service over their infrastructure.
I think there are two distinct plays here, one more plausible than the other. The first is a TV offering for mobile device users. The mobile world has been trying, unsuccessfully, to develop a live TV option for phones for years. But if Verizon can deliver live programming to mobile phones using the supposedly stellar compression developed by Intel, it could be a game changer, particularly because Verizon, thanks to the recent net neutrality ruling, can exempt whatever data it chooses from its bandwidth caps. You can easily see the pitch: sign up for a top-tier Verizon data plan and get live and on-demand streaming TV for an extra $5/month with that TV streaming exempted from your data consumption.
The second play, using Intel's OnCue technology to turn Verizon into a Netflix, is less certain. If Verizon starts to offer a competing TV service over other service provider's infrastructure, then what's to stop Comcast (and other cable/satellite providers) from responding in kind? It would merely be a matter of who had the most dollars to invest in content rights and technology -- a war that would quickly consolidate the number of players offering video services. How would this help consumers? If the streaming music model is anything to go by, content licensing would more or less harmonize, with no one service really differentiating itself on the number/quality of titles (wild cards would include sports and local programming). The price would harmonize as well. You'd basically have competition between the user experience -- which streams were most reliable and which user interface worked best.
But remember, with the recent net neutrality ruling, the cable companies are manifestly not "dumb pipes." If Comcast sees its subscribers dumping their TV plans (but keeping broadband) in favor of Verizon TV, they will respond by increasing the cost of their bandwidth or finding other ways to disadvantage Verizon streamers. Instead of paying $50 for broadband and $30 for a basic cable package, you could end up paying $70 for broadband and $10 for your streaming TV service. You'll be faced with bandwidth caps and tiered pricing similar to the pricing structure in the mobile world -- a move which, incidentally, could strangle the roll-out of 4K TV services, as those consume considerably more bandwidth than HD video. In short, the companies that own the pipes are well positioned to fend off challengers like Verizon who want to steal customers by going "over the top."
In the end, even if Verizon "breaks free" of the geographic boundaries of its FiOS TV service and starts competing with every cable provider in the country, there's no reason to think your wallet is going to emerge the winner.