Is Verizon using Redbox Instant and Ellipsis to build a virtual pay TV platform?

Steve Donohue, FierceCable

As a Verizon (NYSE: VZ) quadruple-play customer, I've gotten used to seeing promotions for the new Redbox Instant streaming video service when I pay my bill online. And while Verizon has also plugged Redbox Instant on its FiOS TV start page, it took the pitch to a new level Thursday morning, when it ran what could be compared to an online home page takeover ad. Before I could watch NBC's "Today" show, Verizon ran a static ad on my TV screen for Redbox Instant, offering one month of free service.

The fact that Verizon is marketing the $8 monthly Redbox Instant to FiOS TV customers isn't significant, even though it's pitching an online movie service that competes with FiOS paid video-on-demand content. But when you consider other moves from Verizon's wireline and wireless divisions, including its acquisition of cloud TV technology vendor upLynk, patent applications and the introduction of the $250 Ellipsis tablet--which comes pre-loaded with Redbox Instant--it seems Verizon appears to have bigger plans in the works involving virtual cable or over-the-top video.

We might hear more about Verizon's online video plans on Nov. 19, when it plans to hold a press event at the Mall of America in Minnesota. Verizon hasn't said what it will announce, other than noting in invitations that the event will focus on the "reinvention of the wireless customer experience" and that "things are about to get interesting." My colleague Phil Goldstein, editor of sister publication FierceWireless, will be attending the event and providing coverage.

redbox instant, ellipsis, verizon

Verizon plugged Redbox Instant through FiOS TV set-tops. 

It's a decent bet the event will involve Ellipsis, which is one of the most affordable tablets. When I heard about the Verizon event, I thought of some of the trademark applications Verizon filed last month. One of  the applications, filed on Oct. 15, included a design for the interior of a retail store. The image Verizon included in the filing doesn't reveal much. But it also wrote this description: "The mark consists of three-dimensional trade dress depicting the interior of a retail store featuring a central monolith structure with a digital display screen and a shelf for product. The sides of the monolith structure are lined in red LED lights. The ceiling is cut out in an oval shape above monolith. That oval is simulated on the floor by different color flooring. In front of the monolith are three display tables."

Verizon has also filed trademark applications in recent weeks for wireless devices and accessories called Skimboard, Swiveo, Roctane, Rink, Slixer, Drumpad, Jade, Tabra, Uki and Sailboard, and it has reserved the right to use the brands Halfpipe and Bright Stripe for the name of an online retail store.

Big deal. So maybe Verizon has a new retail strategy and a new line of wireless devices. But what if Verizon plans to use its wireless network and devices to launch a virtual pay TV service in which it would offer access to linear broadcast and cable networks, along with video-on-demand content sold under the Redbox Instant or FiOS brands?

Verizon engineers are developing technology that could allow it to deliver broadcast programming to wireless devices. On Thursday, the U.S. Patent & Trademark Office published a patent application from Verizon titled "Flexible Provisioning of Wireless Resources Based On Morphology to Support Broadcasting/Multicasting."

The patent details an approach for efficiently distributing wireless data, including streaming video and broadcast content. "Content provider may include free television broadcast providers, (e.g. local broadcast providers, such as NBC, CBS, ABC and/or Fox), for-pay television broadcast providers, (e.g., TNT, ESPN, HBO, Cinemax, CNN, etc.), and/or Internet-based content providers (e.g. YouTube, Vimeo, Netflix, Hulu, Veoh, etc.) that stream content from Web sites and/or permit content to be downloaded," Verizon wrote in the patent application.

I'm not suggesting Verizon will announce the launch of an over-the-top or virtual pay TV service next week at the Mall of America. But it appears to be moving in that direction, and technology such as LTE Broadcast, 5G and video compression could help it get there. Verizon spokeswoman Robin Nicol said the company doesn't yet plan to share more details about what it will announce next week, but she said Verizon plans to provide a live webcast from the Mall of America.

There have been several reports in recent weeks that Intel (Nasdaq: INTC) may sell the OnCue virtual cable platform it has been developing to Verizon, or that it could partner with the telco. Even if Verizon did team up with Intel or buy its virtual cable platform, it would still need to strike deals with programmers to distribute content to wireless customers. And if it does launch a virtual product, Verizon would face competition from other pay TV distributors that want to do the same thing, including Comcast (Nasdaq: CMCSA), Dish Network (Nasdaq: DISH) and Cox Communications.

"We've talked to virtually every programmer about OTT," Dish CEO Charlie Ergen said on his Q3 earnings call earlier this week. "I would say it's going to happen at some point in time. But I don't know if that's a one-month schedule or a 10-year schedule."

It's been a big year for multiplatform video, and 2014 could be even bigger, with the rollout of Comcast's X1 platform and its talks with other pay TV distributors about offering Xfinity to their subscribers. We could also see Netflix (Nasdaq: NFLX) team up with Cablevision (NYSE: CVC), Cox and other providers in its Open Connect content delivery network to market Netflix to pay TV customers, and there have been reports this week that Hulu is talking to cable operators about bundling Hulu with their subscriptions.

These are still very early days for the development of virtual cable platforms. Programmers like Walt Disney Co. (NYSE: DIS), which launched TV Everywhere content on Roku this week, may not license linear networks to an Internet-based provider until pay TV subscriptions and viewing erode to the point where they believe they could grow revenue from deals with virtual operators. --Steve