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Verizon to Champion Differentiated Pay-TV

A recent Forbes column asks the question, would you rather search cooking shows by recipe than by host? How about tracking your fantasy football team's score while the game is in the background? Or watching a movie in bed that you digitally recorded in your living room? Here, in a lab about ten miles outside Boston, Verizon Communications is trying to get there -- before its competitors do.

Inside a few large buildings surrounded by woods, some 100 engineers and researchers are trying to add data-driven and interactive elements to television content that would make today's digital cable look like TV with rabbit ears. While wild turkeys have taken a liking to the grassy courtyard between buildings, inside it's business: buzzing meeting rooms and long hallways of offices. Inside one room, a worker has notes about one of Fermat's mathematical theorems scrawled on a whiteboard.

"Everybody's looking for the next revenue model," says Shawn Strickland, vice president of TV product management. "If somebody finds something that resonates with consumers, we have to be able to build something really quickly."

The number of rivals is growing fast. Cable companies like Comcast and Time Warner have swooped in to steal a chunk of Verizon's phone customers with cheap telephone service packages, and upstarts like Vonage are also targeting its core business. Local power utilities may soon start selling broadband Internet access over their lines, and wireless technologies from metro Wi-Fi and WiMAX to high-speed cellular networks may even challenge the need for wires into the home.

Forbes concludes; phone companies that were sitting pretty just a few years ago with digital subscriber line and voice services, must innovate or face 'irrelevancy.'

Which raises an interesting question, where is the best place to discover truly new innovations -- in a telco research lab that's full of bright engineers and scientists, or actually at the logical source of all potentially useful and relevant insights, within a consumer's home? The answer is, of course, you have to fully utilize both resources.

"Verizon needs to move quickly away from a 'me-too' offering to one that leverages the unique characteristics of IP, delivering a service that cable operators cannot provide," says a recent report from Pyramid Research. As it stands, the company's TV offering looks and costs about the same as digital cable, with a vast majority of standard-definition channels, the same set-top box and the same confusing remote control.

Apparently, Verizon is vividly aware of the potential to get caught in this 'commodity pay-TV' trap, and has already made appropriate investments. They have a team focused on building the TV experience, including customizing on-screen menus, designing a better remote control and testing potential features, ranging from on-screen annotations about the movie you're watching to a Web portal that lets you program your digital recorder from anywhere. One section of the lab is a mock house, complete with red exterior siding, wallpaper, appliances and furniture, from home office to living room and even a kid's videogaming palace.

Perhaps this is the smartest investment that Verizon has made to date, as they continue their business model transformation at the crossroads of the communications and entertainment sectors. Given my own perspective regarding where there's likely fertile ground for service offering innovation, I'd stay closely focused on that consumer experience in the digital home, and beyond.

Personally, I wouldn't worry about landing a triple-play windfall, I'd worry more about falling victim to a singular price war. That's the real issue at hand, until someone uniquely re-imagines the legacy television experience that is clearly overdue for a meaningful remake.

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