Late yesterday Verizon announced that Indianapolis will be the fourth city to get 5G residential service in the second half of 2018. The other 3 initial cities are Houston, Los Angeles and Sacramento. Potentially the biggest news from Verizon yesterday was that it would include both Apple TV and YouTube TV in the initial 5G offering for subscribers in all 4 cities.
It’s not clear from Verizon’s press release exactly what these offers will be or how the terms will work for subscribers. The cheapest Apple TV is currently $149 and YouTube TV runs $40 per month. If the promotion follows others we’ve seen from telcos, Verizon will likely require a minimum commitment to qualify for the Apple TV and will offer some type of monthly discount on YouTube TV. It’s also not clear what the monthly rate will be for 5G service itself.
What does seem clear however, is that Verizon is very much planning to position residential 5G service as video capable, and therefore as a potential replacement for landline broadband. This is of course a business which cable TV operators have long dominated and is crucial to their growth strategies.
In fact, just 2 weeks ago on Comcast’s earnings call, the company repeatedly referenced its “connectivity” business strategy that emphasizes broadband as the core to future offerings. Broadband subscriber additions hit a Q2 record this year of 260K. But in my post, I cautioned that the specter of 5G, which is telcos’ highest priority, is going to limit whatever growth there’s still to be had in broadband.
The Verizon news yesterday makes that warning a reality, and also a harbinger of what’s to come. Assuming 5G actually works as a replacement to landline broadband, then as telcos roll it out, consumers will have a bona fide alternative. Depending how Verizon (and soon AT&T) price/bundle 5G, it could be very compelling to drop landline broadband.
Also interesting here is Verizon’s decision to partner with YouTube TV, a clear signal that it has dropped its years-long foray into pay-TV. YouTube TV and other skinny bundles are natural partners for telcos’ 5G efforts with their OTT and mobile focus. Depending on how extensive Verizon’s YouTube TV promotions are, they could significantly accelerate the shift from multichannel services to skinny bundles.
With its own DirecTV Now skinny bundle, AT&T has even more incentive to aggressively bundle 5G and position it as a broadband replacement. All in all, assuming Verizon’s 5G actually supports video streaming well, it is an early indication of the further changes that will be coming to both broadband and pay-TV.