New Skinny Bundles on the Horizon

television-sony-en-casa-de-mis-padresAll of a sudden I am seeing the term skinny bundle all over industry press. The term refers to web video programming offered by a company that is already somehow in the telecom business, with the inference that it’s probably only available to their own customers. The line between skinny bundles and OTT programming like Netflix is likely to get blurred over the next year as a few of the skinny bundle providers make their packages available to everybody.

It seems like all of the largest cable companies and telcos either have skinny bundles or are working on them. In a recent blog I talked about the Comcast skinny bundle they are calling Stream TV. It’s a lineup containing mostly major network channels plus HBO. It’s likely to be controversial because Comcast wants to exclude usage on the bundle from any data caps while counting data usage for watching Netflix and other OTT offerings.

As has been anticipated since they bought DirecTV, AT&T plans to launch their skinny bundle in January. The company hasn’t released the details yet but recently gave some hints about what might be in it. For one thing, through DirecTV the company has the ability to air current season shows, including the latest episodes. AT&T may be offering different options to wireless and wireline customers. CEO Randall Stephenson was quoted recently saying that the bundle will “turn some heads”, but I guess we’ll have to wait until January to see what that means.

Their chief rival Verizon Wireless launched Go90 earlier this year. The package is an interesting mix that Verizon says is aimed at Millennials. Verizon describes the package as halfway between YouTube and Netflix. It has a lot of unique content produced by YouTube stars but also carries some traditional programming content. The service is currently free to Verizon wireless subscribers but is expected to soon have a premium tier.

On the landline side, Verizon offers a package called Custom TV. That bundle is sold in combination with 25 Mbps Internet service for $65 a month, and includes a lineup of about 35 channels plus a few additional add-ons options available. The package has been so popular that Verizon reports that one third of their new customers in the second quarter of this year opted for the skinny bundle. While Verizon says that might hurt revenue targets, they affirmed what many have thought in that they expect sales of skinny bundles to increase the bottom line. It makes sense that the skinny bundles, while smaller, are more profitable than the giant bundles of hundreds of channels.

CenturyLink has also announced that they will launch a skinny bundle in early 2016. They say that their main motivation is to sign up new customers without the need for a truck roll, and so they might offer both a skinny bundle as well as the full TV line-up over the web. This will save them on settop boxes and other costs associated with being a full-service video provider.

There are other companies also considering skinny bundles. For instance, Frontier has reported that they are talking to programmers about skinny bundle options. There was an announcement in October that Tim Warner Cable was trialing a skinny bundle but I haven’t seen any press on that since then. CEO Rob Marcus has been quoted several times in the last six months saying that he doesn’t think his customers are looking for a cheaper alternative.

We’ll have to wait a while to see what kind of interest the public has in the skinny bundles. The companies like Verizon that have already launched skinny bundles are not reporting customers counts for the new products, making it hard for the rest of the industry to understand the customer demand.

The skinny bundles are clearly an attempt to try to keep cord cutters on the big company networks. But just about all of these big companies publicly say that cord cutting is not a concern for them. There has to be some concern that offering smaller bundles will invite customers to downsize, but if what Verizon admits is true, it might be that there is more profit in skinny bundles than in the giant cable packages – in which case you can expect to see more skinny bundle options.

T-Mobile and Comcast Challenge Net Neutrality

Network_neutrality_poster_symbolBoth Comcast and T-Mobile have developed video plans that seem to be a direct challenge to network neutrality. In both cases they are playing favorites with video services in an environment where both carriers have data caps. I find it interesting that they would challenge the FCC in this manner while net neutrality is still being decided by the courts. Even should the FCC look at these cases, any decisions they make could be later changed by the court ruling. Carriers in general hate uncertainty and usually shy away from tackling regulatory matters that are under court review.

Comcast has come out with a skinny bundled they are calling Stream TV. It is being tested now in a few markets. The new service includes CBS, NBC, ABC, FOX, the CW, Univision, Telemundo, and HBO. It does not include the more popular cable networks like ESPN or AMC. The monthly price is $15, which is interesting since HBO NOW is sold at that same price if you buy it from HBO. It’s available only to Comcast broadband customers – it’s starting now in Boston and Chicago but should be available in the whole Comcast footprint by early 2016.

The service can be watched on any device in a home connected to the XFINITY network, but does not come to the Comcast settop box. A customer could watch it on a smart TV or by using Roku, Apple TV or similar devices. Comcast says this is a product aimed at cord cutters and at young viewers who don’t want to sit in front of a television. Everybody has been expecting these kinds of offerings from the big cable companies as a way to keep cord cutters sending them a monthly check.

There are two regulatory issues with this new offering. The first is that it does not fit into the scheme of the prescribed kinds of lineups defined by various cable laws enacted by Congress. It comes closest to being a basic cable line-up since it includes the network channels, but it excludes things like PBS and local government access channels. I think Comcast is trying to get around this by having this not delivered to the settop box. It’s instead delivered on the IP path. But there still seems to be room for a challenge to the legality of the offering because the various federal rules on cable tiers are silent about technology differences and the same sorts of line-up requirements apply to somebody like a Verizon FiOS network.

The net neutrality problem comes because Comcast is not going to count the bandwidth from the Stream TV service against their newly established 300 gigabit per month data caps, which are being trialed in a few markets but are expected everywhere. That seems to be a direct slap in the face to the FCC since net neutrality rules prohibit favoring your own products over those of competitors. It’s really hard to see how this can be allowed to stand. Watch Comcast without a data cap or some other alternate provider like Hulu and it counts against the cap.

The T-Mobile product takes a totally different tactic. T-Mobile has rolled out their own skinny bundle called Binge On. The product includes a wide range of channels like ESPN, HBO, Netflix, Showtime, and Hulu with a total of 23 choices. Customers must buy each of these separately, and the beauty of that is that customers get to put together their own skinny bundles of just what they want to watch.

The net neutrality issue is that none of the video viewing will count against a T-Mobile customer’s data cap. On quick glance that doesn’t look to be discriminatory since there is a wide range of possible programming to buy. But the rub comes in that if a customer watches other video on their phone from a site that is not part of the package then it counts against their cap.

This means that T-Mobile is picking winners and losers for video streaming. They are allowing a small handful of programming to be unmetered but exclude the other thousand sources of video. This exact situation was discussed by the FCC when they first proposed the new net neutrality rules and their worry was that allowing carriers to pick winners and losers would result in stifling new innovation on the web. If all of the carriers mimicked T-Mobile then a new video offering would have a huge uphill battle and we would have an oligopoly of a handful of the largest video providers.

Interestingly, FCC Chairman Tom Wheeler said that he didn’t see any problem with what T-Mobile is doing and that it sounded “highly innovative and highly competitive.” I don’t think that the video providers not included on the T-Mobile list agree with that, nor should they. It’s not hard to picture every large ISP making similar deals with the current OTT providers like Netflix, Hulu, and a few others and effectively shutting out any future new video providers from the majority of customers in the US.