t-mobile unlimited data planVerizon is taking somewhat of a bold step with their FiOS TV channel-line up, FiOS Custom TV. They are giving customers more choice in selecting programming, by offering a “skinny” bundle and add-on programming packages. It looks somewhat similar to the approach being taken by Sling TV with their new streaming OTT service. But ESPN is not happy about it.

New FiOS TV Programming
The new programming packages begin with a base package of about 35 channels including local broadcast channels and familiar cable channels like CNN and AMC. Customers can then select seven different programming packs for an additional $10 per month each, based on interests. Sports packs include ESPN and Fox Sports; Kids pack includes Disney and Cartoon Network; a Pop Culture pack includes MTV and Comedy Central; a News Pack includes Fox News and MSNBC; etc.

https://youtu.be/d7zSSMbgNug

Verizon will offer a double play pack of symmetrical 25 Mbps FiOS Internet and the base channel line-up and two additional packs for about $65 per month ($75/month for triple play). Customers can then add packs and/or increase their Internet speed as they wish.

While not true a la carte programming, this is the closest step towards it from a traditional pay-TV provider. No doubt the shifting video landscape of growing OTT and SVOD offers has pushed Verizon to take this step, and some of their programming partners don’t like it.

ESPN Not Happy
ESPN has offered the most vocal opposition to this move, publicly saying that Verizon does not have the right to offer ESPN in this fashion. Traditional programming rights contracts, especially those from ESPN, dictate channel placement in the broadest available tiers, meaning pay-TV providers like Verizon can’t push ESPN into a paid sports tier like they apparently are doing. Verizon disagrees.

Verizon Takes a Liberal View of Programming Contract Language?
It appears that Verizon has taken the DISH Sling TV deal framework and applied it to their traditional pay-TV package. That deal framework allowed DISH (and presumably others who get similar terms) to move ESPN networks into a different tier, a streaming one in this case. Verizon may have been offered the same terms for their well-documented upcoming streaming OTT service. Perhaps Verizon took a liberal view of that contract language and applied it to their traditional pay-TV service?

“And we believe that we are allowed to offer these packages under our existing contracts,” said Verizon CFO Frank Shammo on today’s Verizon 1Q 2015 earnings conference call. “So we’ll leave it at that.” Ouch.

Verizon also may be leveraging their mobile dominance. Perhaps the message to ESPN and others is – you want to use our vast 4G LTE network to get your content to our 100+ million customers? Time to play ball with these programming rules then.

Verizon very well may be pushing an issue here that could end up in court, and perhaps impact the unwieldy programming rights’ contracts that video service providers despise. Those agreements force carriage of channels on programming line-ups and greatly influence rising cable TV bills. Verizon is one of a few companies who can take on Disney/ESPN and the old school programming apparatus. Their army of lawyers and retained law firms can go head-to-head with the best of the pay-TV establishment. Not to mention the mobile card they hold.

This will be an interesting debate to watch unfold.