DirecTV, Verizon LTE-satellite link a bigger threat to cable than OTT

Jim Barthold

There is a fascination bordering on obsession about the new breed of over-the-top (OTT) content providers and how they'll give consumers huge gold-plated shears to slash the cable TV cord.

Ignoring, for a moment, the absurdity of believing that the content experience will be greatly or even mildly enriched without some kind of cord, there's even another reason to push the cord cutting argument into the corner: DirecTV (Nasdaq: DTV) and Verizon Wireless, working quietly in obscurity (and even its residents would probably say Erie, Pa. is an obscure location) are developing what could be the greatest threat to cable TV's current status.

The website Investors.com put together two neat little bits of information and came up with an earth-shattering conclusion. First there was the item months ago by Broadband Reports that Verizon (NYSE: VZ) and DirecTV were working on some kind of LTE-satellite link. Then there was the public comment last week by Verizon CEO Ivan Seidenberg that LTE could serve as a cable replacement.

Put the two together, Investors.com concluded that "By partnering its LTE with DirecTV, the nation's No. 1 satellite broadcaster, Verizon aims to create a powerful marketing bundle that would let it sell broadband services to homes outside its traditional landline and FiOS service area."

Take this the next logical step: Both services start with a rooftop connection--a DirecTV dish and an LTE antenna. Both migrate into the house with wiring, probably using existing cable-installed coaxial cable. Once inside the house, DirecTV delivers the television picture and LTE delivers the data, including the beloved over-the-top content over which everyone is drooling.

The subscriber gets TV from DirecTV and data from LTE--which, when this service is finally rolled out, should be a reliable broadband delivery system--and Web content from both in a blended TV experience. It's not cord cutting; it's not even cord shaving. It's cord redirection and, when it comes to threatening cable, it's diabolical.

DirecTV has made its living picking up those subscribers cable has discarded, either through sloppy mismanaged customer service or ever-spiraling prices. Verizon has a lion's share of pretty loyal wireless customers who will be even happier once the cell carrier starts working with iPhones. Verizon, the wireline service provider, has proved that it can deliver entertainment television via FiOS and confirmed what everyone said at the start of that experiment: It's expensive to run fiber to every home.

It's been rumored forever that Verizon would acquire DirecTV--it would certainly be cheaper than NBC Universal--and those rumors will no doubt pop up again. It's immaterial. The two service providers have effectively partnered in the past in ways that many other companies have not been able to partner with cable TV. A further partnership that effectively cuts the cable cord into the house but maintains the cable cord within the house to deliver wireless and satellite services is a formidable threat.

Sure, there are those who will say that LTE can't handle the load; that DirecTV is hamstrung because it doesn't have access to all the local cable content that, say, a Comcast has or that neither Verizon nor DirecTV understand interactivity and television the way cable does. And they may be right.

The potential, though, is that they're wrong--that coming at the competitive space from two different angles, DirecTV and Verizon will be able to rain on cable's interactive parade and bring true meaning to the terms cord cutting and over-the-top.

This is one of the five trends I'll be studying before the end of the year when I deliver the first FierceCable 5-and-5: five trends of 2010 that will continue in 2011. If you know about a trend that might fit, drop me a line. Nothing's final--kind of like the Comcast-NBCU deal--until all the tees are dotted and the eyes crossed.--Jim

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