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You have described what I can only assume is Apple's sales pitch to the carriers: Do you want to be stuck charging $50/month to "cable cutters" or do you want t

You have described what I can only assume is Apple's sales pitch to the carriers: Do you want to be stuck charging $50/month to "cable cutters" or do you want to sell a sexy "Apple TV" with an associated $100+/month "smart TV" plan?

AnthonyMouse 14y ago
Basically. Except that there is no need for a "smart TV" plan, just charge that much for the wire itself. Apple TV isn't going to do Verizon any good other than build a dependence on Apple like what the recording industry did with iTunes. If people want an Apple TV they can buy one from Apple and hook it up to the wire. Or they can get a gaming console instead, or roll their own Linux box, Verizon shouldn't have to care. They're in the wire business.
- twoodfin 14y ago
  But right now their "wire" costs $50 or so a month. Their users currently pay them $60 more for a standard lineup and $10 for HBO on top of that (rough numbers). What happens when those users can get all that content through the $50 connection and start cancelling their TV? A 100+% price hike would be a tough needle to thread.
  - AnthonyMouse 14y ago
    The answer is to change what they're selling. You can currently get whatever it is, say a 16Mbps connection, for $50/month. Stop selling that entirely. Discontinue it; put the existing triple play customers on the new triple play (which so happens to have the same price, just with more allocated to the connection itself), stop offering that tier to existing internet-only customers as soon as their contracts expire. Your new alternative is a) a very slow connection (not fast enough for Netflix/Hulu/whatever) for $29/month, b) a 100Mbps+ connection for $99/month, or c) a "triple play" 100Mbps+ connection + basic cable + phone for $110/month, and whatever premium channels you want on top of that for exactly what the channel itself charges for its content. Or you can get phone from Skype and TV from Hulu and Verizon couldn't care less, because they're not in the content business, they're in the wire business -- they should want you to stop subscribing to their over the top offerings and switch to third party services, because that's not where the money is. Compare the revenues or market cap of Skype or Hulu to that of Verizon FiOS, and then realize that both Skype and Hulu have more customers than FiOS, and ask yourself which business you'd rather be in. Infrastructure operators selling over the top services is just an invitation for them to interfere with competitors -- let the over the top market be competitive (and therefore have very small margins) and take the margins from the infrastructure where you can hold on to them. Look up "one monopoly rent" theory. If they're going to have a monopoly and collect monopoly rents, just let them do it in the monopoly market and not have to lose the benefits of competition in the over the top market merely in order to claim the same overall margins spread out over more products. It actually seems to be Pareto optimal -- who is going to lose out here? Maybe the cord cutters, but they're doing something which is unsustainable at scale unless what I'm proposing ends up happening. So where's the drawback?

AnthonyMouse 14y ago

Basically. Except that there is no need for a "smart TV" plan, just charge that much for the wire itself. Apple TV isn't going to do Verizon any good other than build a dependence on Apple like what the recording industry did with iTunes. If people want an Apple TV they can buy one from Apple and hook it up to the wire. Or they can get a gaming console instead, or roll their own Linux box, Verizon shouldn't have to care. They're in the wire business.

twoodfin 14y ago
But right now their "wire" costs $50 or so a month. Their users currently pay them $60 more for a standard lineup and $10 for HBO on top of that (rough numbers). What happens when those users can get all that content through the $50 connection and start cancelling their TV? A 100+% price hike would be a tough needle to thread.
- AnthonyMouse 14y ago
  The answer is to change what they're selling. You can currently get whatever it is, say a 16Mbps connection, for $50/month. Stop selling that entirely. Discontinue it; put the existing triple play customers on the new triple play (which so happens to have the same price, just with more allocated to the connection itself), stop offering that tier to existing internet-only customers as soon as their contracts expire. Your new alternative is a) a very slow connection (not fast enough for Netflix/Hulu/whatever) for $29/month, b) a 100Mbps+ connection for $99/month, or c) a "triple play" 100Mbps+ connection + basic cable + phone for $110/month, and whatever premium channels you want on top of that for exactly what the channel itself charges for its content. Or you can get phone from Skype and TV from Hulu and Verizon couldn't care less, because they're not in the content business, they're in the wire business -- they should want you to stop subscribing to their over the top offerings and switch to third party services, because that's not where the money is. Compare the revenues or market cap of Skype or Hulu to that of Verizon FiOS, and then realize that both Skype and Hulu have more customers than FiOS, and ask yourself which business you'd rather be in. Infrastructure operators selling over the top services is just an invitation for them to interfere with competitors -- let the over the top market be competitive (and therefore have very small margins) and take the margins from the infrastructure where you can hold on to them. Look up "one monopoly rent" theory. If they're going to have a monopoly and collect monopoly rents, just let them do it in the monopoly market and not have to lose the benefits of competition in the over the top market merely in order to claim the same overall margins spread out over more products. It actually seems to be Pareto optimal -- who is going to lose out here? Maybe the cord cutters, but they're doing something which is unsustainable at scale unless what I'm proposing ends up happening. So where's the drawback?