May 31, 2012

Flies With Honey: How Network Operators Plan To Keep Their Audience

Verizon FIOS announced plans today to upgrade the speeds they offer residential customers (although keeping with tradition, the feature greeted registered users as a splash page which, when clicked on, lead to a dead page. Note to FIOS: you put up the splash page last, after you’ve got the other pages working. Sort of like a door.)

Websites missteps aside, what’s really significant about that announcement is that it’s just another step in the network operators plan to stop users from cutting cords.

Because Verizon’s pricing makes it more expensive to get high-speed Internet service as a stand-alone product versus as part of a bundle that includes TV and phone service. (FierceCable has the price of a 50/20 service only as $140/month. I pay less than that for 50/20 internet plus the comes-with-HBO-and-Showtime TV package and phone service. I remember when I was signing up that it wound up being cheaper to get a landline phone thrown in.) 

That’s how they lure you in.

You want all that bandwidth to watch movies and play games and download videos and everything else you do to be able to cut the cord. And they will give it to you. But only if you keep the cord. The network operators aren’t dumb. They know that by controlling the pipes (as previously noted, something like 94% of FIOS subscribers have both TV and internet with the service.) And part of controlling the pipes means controlling the pricing and manipulating it in a way that makes cord-cutting the more expensive option.

That’s why we’re not likely to see any sort of internet-only MSO coming from anyone other than an existing provider. The rumor mill on that is just plain baffling: say Facebook did want to launch their own socially enabled, internet based MSO. And they will only charge me $25/month for it. Great. Only where am I getting the internet connection from?

Oh right, FIOS. And they’re going to charge me big bucks if I drop my TV service to go with Facebook. So what am I going to do?

Well, if I’m really into the Facebook service, I’ll get it as an add-on, same as Netflix or HuluPlus. There may be some overlap between my services, but I may decide that it’s worth it just to get the cool extra features Facebook is offering on their TV service.

Which is exactly how I expect the eventual roll-out of these web-only networks to go: early adopters will get them as an addition to their current service and focus on what’s cool and different, not what’s identical. You know how people will tell you “I don’t really watch TV anymore, I only watch Netflix.”

Bazinga!


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