Verizon's Upcoming Internet TV Service Isn't Aimed at Cord-Cutters

By Markets Fool.com

Cord-cutters, or those who've chosen to ditch cable, have an increasingly large array of Internet-based video content to choose from. There's the usual suspects -- Netflix, Hulu, Amazon Prime -- but also a number of new entrants, including Sling TV, PlayStation Vue, and HBO Now.

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For some time, Verizon has been working on its own Internet-based service, but it may disappoint those who were hoping for another alternative to the traditional cable bundle. In its most recent earnings call, Verizon's management shed some light on the upcoming service, suggesting that it may not be the cable TV killer some had hoped for.

Two different markets
In early 2014, Verizon acquired Intel Media from the eponymous chip giant. Intel Media had been working on an over-the-top video service called OnCue. Although it was never formally announced, various reports indicated that it was designed to disrupt the cable complex. Shortly after the acquisition, the former head of Intel Media, Erik Huggers, told The Next Web that the idea for OnCue was to offer an innovative, Internet-based alternative to the local cable company.

Verizon has announced that it will launch some sort of over-the-top video service this summer. What this service will entail, exactly, remains a mystery, but it may prove to be quite different from the service Intel had originally envisioned.

During its first-quarter earnings call last month, Verizon CFO Fran Shammo discussed its video plans at length. The wireless provider is still on track to launch its over-the-top service in the next few months, but cord-cutters are not the intended audience.

... on over-the-top video ... you see us announcing some of the content deals that are in this. But it goes back to what I said before. This is all around having the consumer consume more content on their wireless handset through the Verizon Wireless network. And that we know the consumers want content. We know what the viewership is. And this is appealing to mobile content, and let's not confuse that with linear TV content. So I would not read into the Custom TV package as a precursor to the over-the-top video. It's not. These are 2 very distinct ecosystems. [Emphasis mine.]

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Rather than serve as an alternative to cable, Verizon's service appears to be aimed at offering additional value to its existing wireless plans. Some of the major paid-TV providers, like Comcast and DirecTV, offer mobile apps that allow their subscribers to watch live shows on their mobile devices, but not everyone has such a provider, and even when an app is offered, not every channel is available.

Even if it doesn't excite cord-cutters, it may still be an intriguing product. Verizon has faced increasing competition in the wireless space, as T-Mobile and Sprint have shaken up the industry with aggressively priced services. In an attempt to increase the value of its offerings, Verizon could pitch its video product as additional value its competitors can't match. It has long used NFL Mobile -- its video service that streams live NFL games to subscribers' devices -- in a similar capacity.

But Verizon isn't a fan of the big bundle
That said, it's clear that Verizon isn't a fan of the traditional cable complex. Late last month, ESPN sued Verizon over its decision to offer its FiOS TV subscribers a more customized package of channels. If Verizon is ultimately successful, that could do more for consumers, shifting paid-TV business to one more "a la carte" in nature.

It will be interesting to watch Verizon unveil its new video service this summer, but cord-cutters shouldn't get their hopes up.

The article Verizon's Upcoming Internet TV Service Isn't Aimed at Cord-Cutters originally appeared on Fool.com.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Intel, Netflix, and Verizon Communications. The Motley Fool owns shares of Amazon.com, Apple, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.