I've read just about every piece on the web today about Verizon's (NYSE:VZ) plans to acquire the OnCue assets from Intel, and the one question I haven't seen anyone answer is, what exactly is Verizon getting for their money? What are OnCue's "assets"? Intel (NASDAQ:INTC) has never been very open with regards to OnCue from a product or technology standpoint and as a result, no one other than Verizon really knows what they are acquiring. It's impossible to evaluate what this deal means for Verizon, outside of the cost savings benefit, as too many questions are still unanswered. We don't know how far along the OnCue technology is, how much additional development is needed or how quickly Verizon can deploy it at scale. Many assume it works perfectly right now, as is, but that's a big assumption. You also have to think about the integration time that it would take Verizon to deploy this inside their network, which won't happen overnight.
I've seen a few people write that Net Neutrality plays a role in this since Verizon is getting Intel's "over-the-top TV service", but that's not accurate as Intel doesn't have a service of any kind. Intel never brought any kind of service to the market, so Verizon isn't acquiring a "service", only technology assets and people. Others are talking about the impact this will have on Verizon being able to offer some kind of OTT content play, but Intel didn't have any content deals in place, so that's not why Verizon wants to acquire them. This deal isn't about content, or even OTT, as much as it is about infrastructure, costs savings and providing IP services at scale.
From the little I do know about Intel's OnCue technology, what Verizon is getting out of the deal, and what I would classify as the most valuable part, is the technology to be able to make their FiOS TV service 100% IP based. A lot of North American MSOs talk about going all IP, but none have yet to do it, at scale, and from what others have told me, that's what the OnCue technology gives Verizon. Verizon would have the only true 100% IPTV service in North America and the cost savings alone they would get from going all IP would by itself pay for the OnCue acquisition.
Anything Verizon gets from OnCue on top of that regarding the front-end consumer facing piece, like video playback interfaces, search and usability would all be an added benefit. Some have said that the user interface Verizon will get is "key to the deal", but Verizon's not paying hundreds of millions, if that sale price estimate is accurate, just to get a better interface. So initially this deal isn't about accelerating Verizon's content strategy or OTT play, at the core it's all about costs savings and infrastructure, at scale. Everything else they get on top of that is gravy.
Verizon had a total of 6.1M FiOS Internet and 5.3M FiOS Video connections at the end of 2013.