Telcos Adopt OTT Video and TV Apps to Keep Pace in Video Market

Verizon and Redbox have begun beta testing their joint streaming and DVD rental service, with plans to start it commercially this year, said Robert Mudge, the telco’s vice president-consumer and mass business markets. “We will be in the market in the fourth quarter,” he said. “Quite frankly, this has been a heavy lift.” Known as Redbox by Verizon, the forthcoming service represents a “prudent step with over-the-top,” Mudge said. He said Verizon will offer it as a standalone subscription service to any U.S. consumer with any kind of broadband connection, making it a direct competitor to Netflix. “It’s a prudent step,” he said. “We're giving our customers what they're asking for at a price they want. They [Redbox] have 30 million customers and all those kiosks."

Mudge described the deal with Redbox as part of a broader strategy to respond to the rise of what Verizon calls the “borderless lifestyle.” The telco is aiming to enable dozens of video apps and services to all devices, no matter where they are, through a mix of wired and wireless networks. Mudge shared the results of new consumer research, called the FiOS Innovation Index, which found that 39 percent of U.S. adults already fall into this “borderless” demographic. He said these consumers are a highly sought-after group for advertisers, with 48 percent of them earning more than $75,000 a year and 51 percent possessing a college degree. The numbers came from a survey of nearly 2,300 adults conducted last month.

Windstream has made initial progress with Roku on the streaming video front. Windstream CEO Jeff Gardner said the telco’s new OTT video service with Roku, known as Merge, is proceeding so well that his company is now thinking about developing a new device for it. “The adoption rate has been very good,” Gardner said, without disclosing any subscriber figures for the service. “We have plans to build on this platform.”

Under the Merge program, Windstream, which operates in every U.S. state except Alaska and Hawaii, installs a Roku streaming video box in its DSL subscribers’ homes. Customers can then subscribe to customized Web streaming video packages, including such premium services as Netflix and Hulu Plus, on top of their basic broadband service. Gardner said the service is designed to capture “young techies” not attracted to Windstream’s more traditional pay-TV product with Dish Network. “We wanted to carve out own path here,” he said. “We didn’t want to do a me-too approach.”

Merge steers viewers to Internet-based content by posing sets of questions, making the service personalized. Gardner said future versions of the service could build on that idea. “They're being flooded with 500 channels and they want à la carte offerings, so we're developing more along those lines,” he said. The telco is considering developing a more Windstream-specific box in conjunction with Roku, Gardner said. “We are absolutely looking at partnering with companies on products like that that will bring in some additional content to augment that over-the-top experience, but not in a me-too way, not in a traditional cable-offering way."

AT&T is seeing similar multi-screen video viewing habits develop among its U-verse TV subscribers, Dillard said. She cited new consumer research indicating that 65 percent to 70 percent of U-verse customers with secondary video devices use those devices several times a week while watching TV in their homes. “We do see OTT content coming in and customers engaging outside the TV,” she said. Dillard said AT&T is focusing on creating more than 30 TV apps for U-verse that use or sync up with tablets, smartphones and other companion devices. Some sample U-verse apps include a Facebook integration and personalized “Multiview” mosaics that show the feeds of several live TV shows at once. AT&T has developed a version of Multiview for Chicago Cubs baseball games that lets viewers watch from multiple camera angles.

AT&T is encouraging third-party development of TV apps through an application programming interface program. Among the newer U-verse-enabled apps to emerge from that effort is TwonkyBeam, which lets users grab Web video from a tablet or smartphone and “beam” it wirelessly to the TV. “Driving the customer engagement is what this is all about,” Dillard said. She noted that service providers must keep these applications simple and easy to use to spur customer adoption.

Dillard said AT&T’s deployment of wireless TV receivers in U-verse homes is growing rapidly. The receivers, based on 802.11n technology, enable customers to tap into the U-verse platform even in rooms without a traditional TV outlet. AT&T, which introduced the receivers about a year ago, recently began cranking up its sales efforts by offering free wireless receivers to customers who sign up for certain U-verse product bundles. The company has now placed more than 1 million wireless receivers in customer homes and cut down on installation costs, Dillard said. AT&T ended Q3 with more than 4.3 million U-verse TV subscribers, adding nearly 200,000 customers over the summer months.