Verizon May Ignite Pay-TV Competition With Service to Compete With Netflix


The service from New York-based Verizon could be a milestone because it would mark the first time a cable or other pay-TV provider moved to sell its content outside its regional footprint, said Tony Wible, a Janney analyst. The move may prompt cable operators, such as Comcast Corp. (CMCSA) or Time Warner Cable Inc. (TWC), to take similar steps, he said.

“We see this as a catalyst” for other companies, Wible said in a research note yesterday.

Verizon is set to offer an online video service using Internet Protocol technology that will compete with Netflix Inc. (NFLX) and cable-television companies, Wible wrote. Verizon had 3.98 million customers for its FiOS TV service as of September.

Verizon hasn’t announced the online video service and Deidre Hart, a spokeswoman for the company, declined to comment. Reuters reported that Verizon would offer a service to compete with Netflix yesterday, citing people briefed on the plan.

“We’ll continue to look at different alternatives, but I think there will be a place for over-the-top” video, Verizon Chief Executive Officer Lowell McAdam said today at a UBS AG conference in New York. The company may combine streaming video with other forms of distribution, with the model “yet to be determined,” he said.

First Movers’ Advantage

Verizon fell 0.3 percent to $38.19 at 9:35 a.m. New York time and had gained 7.1 percent this year before today. Netflix rose 0.2 percent to $68.28 and had dropped 61 percent this year.

A move by Verizon into video may prompt cable and telephone companies to charge broadband customers based on the amount of data they use, what’s known in the industry as usage-based billing, Wible said. That would allow pay-TV providers to build up new revenue streams even if they lose customers for their television services, he said. It may hurt Netflix since its service would effectively become more expensive, he said.

Pay-TV providers that move quickly into each other’s territories could benefit, Wible said.

“The first movers may have an edge in the market,” he said.



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