[opendtv] Re: A ‘Dumb Pipe’ No More: What Verizon Wants from AOL
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Sun, 24 May 2015 09:55:21 -0400
On May 23, 2015, at 4:12 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:
Of course, but starting with the telephone networks, more than a century ago,
some of these networks have been scrupulously neutral, by law, while others
have been walled up, like traditional cable nets. The Internet, from the
outset, has followed the neutral philosophy. And the MVPD or cellco nets,
which now carry that Broadband Internet access to subscribers, are faced with
this new culture of neutrality.
Verizon has been more than a telco for more than a decade. They reach about 1/3
of US homes with their FIOS MVPD service and have more than 5 million
subscribers. The walls between the telcos and cable co panties have been
crumbling over that time as the cable companies got into the VoIP business and
started deploying massive WiFi networks that will compete with the wireless LTE
networks.
This tidbit from January is quite interesting:
http://www.multichannel.com/blog/bauminator/will-verizon-unleash-virtual-mso/373113
Will Verizon Unleash A Virtual MSO?
While Verizon Communications’ near-term plans for its proposed acquisition of
Intel Media’s assets is to enhance and upgrade its FiOS Video platform for
the IP-based multiscreen world and put it on more technologically even
footing with Comcast’s cloud-fed X1 platform, at least one industry watcher
believes the telco has much more in mind – fulfilling the original vision for
Intel Media’s “OnCue” service by developing and launching a virtual
multichannel video programming distributor (MVPD) that can be sold and
marketed out-of-footprint.
“We presume the main reason Verizon would be interested in acquiring Intel
Media would be to prepare Verizon for a nationwide launch of a virtual MVPD,
specifically targeted at regions outside of its FIOS footprint (FIOS
currently has a bit over 5 million subscribers),” BTIG analyst Richard
Greenfield wrote in a blog post (registration required) last November, when
rumors about a sale of Intel Media’s began to circulate. “To launch a virtual
MVPD utilizing Intel Media’s technology, Verizon would need to negotiate
expansions of its current programming deals for FIOS to incorporate
non-facilities-based offerings.”
Bert continues:
Ironically, AOL was an early ISP, but a non-neutral one. Seems almost an
oxymoron nowadays. Instead Verizon, coming from the neutral telco background,
became a neutral broadband provider quite "naturally," but now they want to
play in the content-walls game too. I don't think it's anything more
complicated than this. AOL has that walled-in content model all worked out.
AOL largely got put of the content business. The article I posted said as much
- their ad insertion technology is what Verizon is after.
I think AOL had two things working against it, in its early incarnation: (1)
it depended on slow dialup telco lines, which became undesirable when
broadband access started to become available (mentioned by your Fortune
article), but also (2) it tried to wall in its service, when the world was
just waking up to what this Internet model was supposed to be all about.
The huge valuation for AOL, when they merged with Time Warner was based on the
belief that they could control both the pipe, and the content. Meanwhile, many
industry pundits thought that the Time Warner Full Service Network was going to
be the next big thing, not the World Wide Web. The merger gave AOL access to
the broadband pipes being developed by Time Warner and their video content; and
TW got the "you've got mail" leader in Internet Access.
Who knew that the web would blow both concepts apart?
The archives of this list are filled with discussions of the merits ad pitfalls
and the ugly truth that the companies killed each other.
For some reason, cellos thought, and to an extent STILL think, that they
don't need to be strictly neutral. That's why, in the US at least, your
smartphone will behave differently on different cellco nets, even if it's the
same brand. I think this FCC is less likely to accept non-neutral behavior,
from cellco nets, than the previous FCC. Non-neutral cellco behavior probably
had its roots, in the US only, from the Michael Powell FCC's decision to let
the cellcos compete in coming up with the 2G air interface. And now we may
have gone full circle, where maybe 4G and 5G will be more inified.
The early wireless industry was anything but neutral, as Bert points out. The
telcos partnered up with different groups that held IP and wanted to win in the
marketplace. This was not much different than the global battle between ATSC
and DVB - it was all driven by Intellectual Property rights and the royalty
streams they could support.
The battle shifted from the RF arena to the data processing arena when the
phones became highly capable mobile computing platforms. We are still seeing
the remnants of the IP wars stirred up by the Smart Phone with the endless
lawsuits and appeals among the companies that brought these devices to market.
At least the shift from building RF walls to App ecosystems forced the telcos
to move to a common RF infrastructure built around LTE and WiFi.
I can see why Verizon might want to play the OTT game, buying up AOL, but
perhaps the better question is why doesn't AOL just strike out on its own,
just like another Netflix?
Read the article again Bert. The value of AOL is not in content. It is in the
monetization of content, which has always been, and will always be the basis
for building walls. The only way we can ever get to a truly OPEN world of
content is via micro payments - the ability to access any content - rather than
subscribing to bundles that offer a few high value exclusives to lure you into
the gardens.
Regards
Craig
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