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Cable Technology Feature Article

May 22, 2014

Layer3 TV: A Stealthy Cable Innovator to Watch

By Bob Wallace, Founder, Fast Forward Thinking LLC

While the mega-mergers of Comcast-Time Warner Cable and AT&T DirecTV (News - Alert) slog slowly toward possible approval, upstarts such as Layer3 TV plan to quickly drive innovation and new service offerings to draw attention – and business - from the eye-rolling, video-hungry consumer masses.

On its Spartan website, Layer3 TV describes itself as “a next generation cable provider spearheading a new era of home media, combining the best of television, social, and digital life,” but doesn’t provide detail. Layer3 TV is likely building an IP-based video package that could also include programming.

The upstart has a depth and breadth of experience with brainpower provided by CEO Jeff Binder (formerly of Broadbus), former Comcast (News - Alert) CTO David Fellows, and execs from TWC and the former Broadband One. A Layer 3 TV exec says it will sell direct to consumers – much like Aereo and OTTers Netflix, Hulu (News - Alert), Amazon Prime and more.

IP: The Cableco Enabler

Layer3 TV’s focus on IP is emblematic of an intensifying shift to more flexible and available video services. Even the largest pay-TV provider, Comcast, has embraced the approach with its Xfinity X1 operating system and expanding infrastructure. But, tapping the web for distribution is easier than building your own IP network.

“You need look no further than what Comcast is doing with X1 to see how important IP video and multiscreen is for every cable operator,” explained Jeff Heynen, Principal Analyst, Broadband Access and Pay TV for market analysis firm Infonetics Research (News - Alert). “Of course, Comcast, Cablevision, and other tier 1s have the finances to do a wide scale rollout of IP video and the resulting CDN build outs required to support the new content ingest systems.”

Key Caveat

While it increasingly appears that Layer3 TV will sell directly to consumers, a mid-March report by Fierce Cable claimed the upstart would sell turnkey IP packages to tier 2 and 3 cable providers. That would enable smaller operators without the deep pockets of a Comcast – and lacking the time to build and IP infrastructure - to get in the IP game faster and be more competitive in their offerings.

Layer3 TV did not provide a response to a request for clarification of this key business model point.

Smaller is Better

Layer3 TV hasn’t disclosed its product or business strategy but is likely to deploy widely, preferably nationally, as Aereo has struggled against opponents to do. Look for the firm to rollout a robust package over IP in a manner that its cableco execs find more flexible and attractive than offerings from their prior employers. The emphasis is faster.

A quick scan of Layer3 TV’s ever-expanding Careers page http://layer3tv.com/careers/jobs.html  seems to indicate that the company is focusing on a feature-rich, turkey virtual cable package that includes voice-activated directions, video-on-demand as well as search and recommendations features over a flexible, end-to-end content delivery infrastructure.

The company’s mention of “home media” and “digital life” could be the phrases that reveal interesting add-ons that can help differentiate Layer3 TV’s offering from numerous other IP video to the end device services. These phrases can be interpreted to mean home networking, any-room DVR, residence monitoring and automation and video access via multiple devices (wired and wireless).

The possibilities are seemingly endless and we won’t get a clear idea of Layer3 TV’s product, strategy and value until the upstart exits stealth mode.

Where’s the Programming?

A Layer3 TV exec was recently quoted as saying that the upstart will work within the current cable ecosystem for programming rather than take the Aereo approach, which is being debated by the Supreme Court for legality in a landmark case brought by broadcasters. Aereo take over-the-air programming and streams it to consumers for $8 a month without compensating broadcasters.

Layer3 TV could look to current over-the-top (OTT) video services such as Netflix as a compensated programming partner, for example, with no shortage of content owners looking to expand their viewership using new and innovative approaches and distribution.

Since the upstart plans a VoD element to its offering, building a relevant content library will require much help from content partners who have TV shows and movies and/or those companies that specialize in near- turnkey VoD systems.

And if Layer3 TV instead sells directly to tier 2 and 3 cable operators, those providers could likely harness the programming they already offer as part of their TV service for use in a new, IP offering.

Looking Ahead

Perhaps nobody knows more about what a “next-generation cable service” needs innovation and packaging/pricing-wise than first-generation cableco senior executives. Layer3TV has plenty of them, and they’ve seen what needs to be different (and priced more attractively) than even current cable TV services for their offering to succeed with consumers.

The most exciting and possibly impactful aspect of a next generation cable service is determining whether it has the ability to disrupt today’s cable TV status quo as Aereo did with the over-the-air broadcast TV industry.  That represents change that’s believed in and has been widely embraced by consumers.

It’s unlikely for the above mentioned reasons that Layer3 TV will reinvent the current cable TV service and almost a lock that the promising upstart will take the Monty Python approach and deliver “something completely different.”

Edited by Maurice Nagle

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