Verizon weathered the second quarter cord cutting storm on the premise of strong performance in the wireless sector, while pointing to its 5G infrastructure as strong assets for OTT video bundling business cases – taking advantage of the dwindling pay TV subscriber bases seen at rival operators.
Spring 2020 will mark the first trickle of 5G-OTT video pairings, kicking off with HBO Max. Yet for all Verizon’s talk, the telco doesn’t appear to have any organic video strategy in place to match AT&T’s much-anticipated streaming launch, nor do executives appear to care, with Hans Vestberg noticeably ignoring questions on the matter during the earnings call. It does, of course, have a deal with Google to bundle a YouTube TV subscription into 5G wireless home and Fios internet, telephony and TV packages, but details are thin on the ground other than describing offering “unique, high-value promotions to customers across platforms.”
So, Verizon would rather bundle a third party OTT video service than give Fios a well-needed video refresh with a mobile flavor. Naturally, as a telco by trade, Verizon today is in a distinctly opposite position to the likes of AT&T, Comcast and Dish Network, which all continue to boast double-digit cable and satellite TV subscriber bases, albeit in freefall, as well as mobile subscriber footprints.
Verizon’s Fios video connections declined by 52,000 in Q2 to a shave under 4.3 million, making it 217,000 net losses for the year to date period, while the wireless segment recovered with 73,000 subscriber gains to total 93.9 million, after Q1’s stumble of 163,000 wireless losses.
However, the company noted in its earnings call that the partnership with YouTube TV will embrace both linear and the Fios optionality as well as the wireless customer base. YouTube TV therefore looks like being positioned at a discount to reduce Fios video churn while boosting ARPU. Here at Faultline Online Reporter, we have said before that Verizon would be wise to look to an established streaming platform to sustain value in its video business, which is on course to drop below 4 million subscribers before the close of 2020.
Verizon CFO Matt Ellis said, “The most important thing to customers and wireless is the quality of the network experience. And so, for the past couple of years now, we’re seeing competitors bundle video offerings in with wireless and we continue to lead the industry in phone gross adds and we continue to lead the industry in churn. So, I think that demonstrates the most important thing to customers is the quality of that connection, the reliability of that connection and that when you have the best network, you don’t need to bundle other things in there in the same way and we’ll continue to be focused on providing the best quality network out there.”
To bundle or not to bundle? Verizon is giving off contradictory messages, so probably doesn’t even know itself yet.
It comes just a few weeks after a forecast surfaced showing how live sports streaming will represent 53.2% of a $4.9 billion 5G telco-OTT bundling revenue opportunity by 2024, according to Ovum, rising from 20.5% in 2019. SVoD will be the second largest market for 5G telco-OTT by 2024 at 31.9%, an increase from 25% of the 2019 5G telco-OTT market which figures place at just $6 million today.
Of course, live sports content is a key asset for YouTube TV, although not cheap at $49.99 for matches and other content from leagues including NFL, NBA, MLB, NHL, EPL and more.
One caveat however is that the dedicated bandwidth and network slicing required by live sports streaming will not be “immediately on tap” amid 5G network rollouts – suggesting an initial slow burner.
Elsewhere in Verizon’s second quarter, the Fios internet segment saw gains of 28,000 subs to reach 5.84 million, driven by fiber demand, as Verizon is purported to have laid some 4,200 miles of fiber during the second quarter across 60 cities – an increase from the 3,000 miles of fiber achieved in Q1. This fiber network rollout forms the backbone of Verizon’s so-called Intelligent Edge Network, a project two years in the making designed to support its 5G small cells deployment and existing 4G LTE network.
Total operating revenues at Verizon were essentially flat year on year with a marginal 0.04% decline to a little under $22 billion, while operating income improved with a $276 million jump to $7.34 billion.