Citing that the “current cable TV model is broken beyond repair,” Bixby, Oklahoma based BTC Broadband is trialing an OTT video product from Entone. Using Entone’s Fusion TV platform, BTC is offering an integrated DVR product with local over-the-air channels and OTT video services like VUDU. The offer does not include traditional linear channels.
OTT Business Model
“We currently have a IPTV product, but we find the margins are thin incrementally. Now the broadcast networks and the cable-only guys are working hard to raise their rates with everyone believing they have extremely high intrinsic value and are indispensable,” BTC Broadband CEO Robert Rozell explains in an email interview with me. Rozell thinks an OTT video offer may be the answer for a growing number of consumers who do not want to pay upwards of $100 per month for cable TV.
“The encouraging thing is that we see the beginnings of the next wave of consumers take more and more of their entertainment OTT. There are also a significant number of households that either can’t or don’t want to pay $100 for cable service all by itself,” says Rozell.
The OTT model is not without its challenges, especially considering how nascent the business model is. Rozell says their trial is revealing some interesting data points. Price points for equipment are a problem for example, with consumers not expressing great interest in paying for an OTT set-top-box. Early indications point to a potential cellular type model for BTC, where the cost of the box is subsidized for customers who agree to a term contract.
“If you buy this grade of Internet you can get this box for $50 or even free, allowing you to record off air programming and get a guide like cable and satellite customers get,” says Rozell.
BTC sees providing an OTT package as an incentive for customers to sign up for better broadband. “Since the whole reason we got into TV was to sell high-speed internet, we hope to find a product that will allow us to do that without having to pay the extortion to the programmers,” adds Rozell.
Local Channel Advantage
BTC has a great advantage in location. Rozell says some portions of his territory can get up to 42 local channels over-the-air. Others are seeing 24. That’s a decent number of local channels that can add tremendous value to an OTT offer that is paired with a DVR. Many smaller rural providers may not have that advantage, requiring them to capture and stream those local channel feeds and presumably, still have to pay retransmission fees.
The move by BTC is a development to watch. Many broadband carriers are trying to find a business model that allows them to leverage OTT content for their own gain. Some existing IPTV and cable providers are integrating OTT into their traditional pay-TV offer. Others are selling a Roku box as a value add to their broadband bundle. BTC and Entone are trying to figure out how broadband carriers can leverage a stand-alone OTT offer.
“I have held the belief long before the rest of the world that everything was going to be driven to OTT. It isn’t really technology or even so much cost that will drive it there, because the network costs have to be recovered no matter what everyone sells or new networks will not be constructed and old networks will not be maintained. It is the fact that consumers are becoming more and more individualized and less likely to just follow in mass what everyone does and all on the same schedule,” says Rozell.