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Commentary: Verizon's DVR offers a new view of TV

New multiroom service issues a challenge to cable companies and means consumers can expect more from providers of TV, broadband.

Commentary: Verizon's DVR offers a new view of TV
By Forrester Research
Special to CNET News.com
August 15, 2006, 10:00AM PDT

Josh Bernoff

Verizon Communications has announced that its Fios TV subscribers can get a "Home Media DVR" that delivers multiroom digital video recording, as well as connections to photos and music on home PCs.

For the first time, this means that Verizon can compete with cable on features, not just on price. Cable operators will now kick-start their own integrated offerings; PC and TV content will smash together; and consumers will expect more from the operators that provide their TV and broadband.

Verizon will be upgrading its DVR service in the seven states where it currently offers Fios TV. For $19.95 a month--$7 more than the regular service--consumers can upgrade to a Home Media DVR service that offers viewing of programs on multiple TV sets. With client software running on consumers' broadband-connected PCs, the television set can also show consumers' photos and play their music files.

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Verizon can deploy this feature quickly: New customers can get it when the company hooks up their set-top box and broadband connection, while the limited rolls of existing TV customers just need a software update from the central office to their PC and set-top box. Home Media DVR shifts the playing field because:

• Verizon leads the way in providing a device to connect to home media. The Home Media DVR comes on the heels of a similar announcement from Time Warner Cable. While Motorola and Moxi from Digeo provide DVRs that connect to home media, other major operators have yet to deploy these features. A TiVo box connected to broadband can also show photos and music, but users have to set it up themselves. Assuming that Verizon can avoid technical glitches, its solution will encourage others to jump on the home media DVR bandwagon.

• Verizon is also the first operator to make "bundle" mean more than "discount." Until this announcement, the company's TV customers bought mostly to save money, as there was no significant differentiation in TV services. But multiroom DVR with home media connections is a unique offering that actually takes advantage of the fact that a single home is subscribing to several services. Even bundle-happy operators like Cox Communications and Cablevision Systems won't be able to match it quickly, since they typically roll out new features after months of lab work and trials in test markets.

A new world of converged media
Cable, content and consumer electronics companies will have to adjust to the new playing field that Verizon is creating.

• Cable will eventually match Verizon. Comcast could stand to lose a few price-conscious, low-end customers to Verizon--and could lower its prices in a pinch to match. But the customers for this Home Media DVR will be high-end technology optimists, and these are exactly the customers most likely to buy high-ticket items like video-on-demand movies and fast broadband tiers. Comcast will speed up its embrace of Motorola's "Follow Me TV" and other whole-home initiatives to win these customers back. Operators like Cox will similarly add integrated features to their bundles to reduce churn in their services.

• Broadband video will flow to the TV. Future versions of the Home Media DVR will likely connect to the Internet and bring videos from AtomFilms, Google Video or similar sites to TV sets. Once it incorporates parental controls, YouTube won't be too far behind. Television networks will find themselves competing directly with a long tail of niche video, right on the TV set. Look for them to counter with their own online offerings of extras and outtakes.

• Electronics companies will lose whole-home momentum. A host of devices like TiVo, Xbox 360, Playstation 3, Intel Viiv-compatible electronics, and connected DVD players from Cisco Systems and Kiss are touting their ability to bring home network connections to the TV. But Verizon's offering uses the set-top box that consumers need anyway for their TV service. Consumer electronics companies will need to differentiate based on incredible interfaces and online services, or these snazzy features will get sucked into the set-top box, just as DVR was.

© 2006, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.