Telepocalypse

Verizon's glasshouse

Check out Verizon's pricing for FTTH:

Why the big kick up in price from 15 to 30Mbps? Because an HDTV channel is about 20Mbps! They want you to have to go through their video system rather than stream stuff of your friend's TiVo. They know they've lost all voice revenue when they give you fibre, and the trivial bandwidth of audio offers no easy means of clawing it back via connectivity charges. But HDTV is the big mama of bit shuffling. At least until we all have food DNA analysers in our fridges and send a few million genome scans a day to the labs to check for contaminants.

It's all about extracting the value of the communication from the user's pocket. TV is both high bandwidth and high user value. That makes service and connectivity charges substitutable. At least for as long as TV is the highest-bandwidth service people want.

If you wanted to undermine Verizon's pricing, get people hooked onto PC remote backup services. A 200Gb drive backed up every night takes 15 hours over a 30Mbps connection according to my no doubt faulty maths. Then people will suddently want 100Mbps+ connections and that value is driven by the pricing of PC backups (much less than a premium TV package, I'm sure), the $200/month is unsustainable, and TV comes as a cheap trickle on your superfat pipe.

Incidentally, has anyone questioned the logic of the inevitible "triple play" (voice, video, Internet) that underpins their business case? How many people with FTTH will stick with expensive Verizon voice service? (Yeah, they can throw it in for free with bundled mobile service, but then again so can anyone else with VoIP.) If their Internet pipe isn't overcontended, then download or streaming TV is perfectly feasible. You simply aren't tied to them for any services at all.

In the long term the triple play is a mirage -- the only bit that counts is an Internet connection. As soon as lots of people have fiber the competing video servers spring up everywhere to bypass the telco's servers. No wonder Akamai are doing well. They're selling the digital wheelbarrows to the telecom gold diggers.