The announcement that Verizon would buy Intel’s Media unit was a surprise to no one. The telecom giant had been rumored to be interested in the acquisition for some time after Intel started quietly looking for a new home for the 2-year-old unit that it built, but never used.
The sale gets one more distraction out of Intel’s way, allowing the chip giant to focus on hardware, while also giving Verizon the means to distribute the vast quantities of content that it has available for its FiOS network.
FiOS is Verizon’s bundle of Internet access, television and telephone services that is analogous to AT&T’s U-verse package. The deal means that Verizon gets the intellectual property and technology for Intel’s OnCue service, as well as the 350 employees now working for Intel.
The OnCue system enables “Over the Top” program distribution, which allows customers to see the content anywhere, not just in Verizon’s service area, according to a statement by Intel CEO Brian Krzanich that the company released with the announcement.
When it gets access to the technology, Verizon will have the network capacity and content access it needs to rapidly scale up OnCue. This as well as other recent Verizon acquisitions will allow Verizon to jump into television content delivery quickly—far more quickly than Intel could have accomplished on its own.
Perhaps equally important, the OnCue acquisition gives Verizon a way to work its way out of the pricing wars instigated by T-Mobile over the past few weeks. The other two major carriers are struggling to keep up with the fourth largest carrier in the United States as T-Mobile delivers on its “uncarrier” promise by lowering rates and increasing service flexibility. Both AT&T and Sprint have begun offering plans that compete directly with T-Mobile, but it’s the latter that’s growing the fastest.
Verizon has clearly decided not to fight that battle in the wireless wars. While Verizon does offer some low-cost and prepaid plans, the company has not gone after T-Mobile. But by sticking with its existing plans, Verizon has increased the monthly revenue per customer. Continuing to improve the revenue picture requires that Verizon provide extra value, and the OnCue television service is just the sort of value that fits into Verizon’s plans.
Verizon appears to be making an end run around the T-Mobile-inspired race to the bottom of the pricing structure. While the scrappy No. 4 is getting all of the attention, Verizon is quietly moving to play its own game.
Intel Media Deal Helps Verizon Scale Up FiOS Mobile Content Services
Instead of simply being a cheap provider of phone calls and data plans, it’s doing what the other three companies cannot. It will use its relationships with content providers to deliver vast quantities of content that the other companies simply can’t get.
In the process, Verizon has effectively linked its highly regarded FiOS television distribution system with its wireless service. While both Sprint and AT&T have content delivery services of one sort or another, Verizon seems to have been the company that has found a way to make it scale. Once the deal with Intel closes, Verizon will be able to deliver all of the content it has for the FiOS network to its wireless devices as well.
Of course, Verizon isn’t planning to simply make OnCue into a wireless delivery pathway for FiOS. The company is also planning to implement IP video services that will serve to expand the reach of FiOS. Effectively the deal will allow Verizon to deliver content over the Internet to its FiOS customers, which could reduce costs and increase flexibility.
Previously, Verizon had announced two other acquisitions, EdgeCast for content delivery and UpLynk, which facilitates the uploading of video. The three acquisitions will likely put Verizon into the catbird seat as the source for content delivery and distribution over all media. Mobile phones will be only a part of what Verizon becomes. An important part, perhaps, but only a part of a broad entertainment and information delivery system that reaches from handsets to the living room.
Intel, meanwhile, announced seemingly with great glee, that it was out of the Internet TV business. The company had started up OnCue as a way to spread out its fortunes as the core processor business got soft.
The company hired Erik Huggers from the BBC’s digital services to run the unit and help Intel find a way forward. Now, Huggers will join Verizon to run the OnCue business. Ironically, by focusing on the mobile hardware part of its business, Intel will enable more users to access the content network the company once owned.
“This sale also enables Intel to further align our focus and resources around advancing our broad computing product portfolio in segments ranging from the Internet-of-Things to data centers,” Krzanich said in a prepared statement.
The deal gives two big companies the parts of a puzzle they both need. Intel needs to get back to making smart devices, and Verizon needs to find a way to fight a pricing game with value. As a result, both companies are growing stronger by gaining needed capabilities, while also giving each the means to focus on their core strengths.