Verizon has agreed to purchase Intel Media, a division of U.S. chipmaker Intel that develops online-TV products and services. Verizon says it will use Intel Media’s technology to develop next-generation video services that will be delivered over its FiOS fiber-optic network, as well as “over the top” to any connected device.

Verizon will purchase the intellectual property rights to Intel’s OnCue Cloud TV platform and other assets pertaining to it. The operator will also make job offers to the approximately 350 people who work at Intel Media, the activities of which will continue to be based in Santa Clara, CA and to be led by the current management team. Pending regulatory approval, the deal is expected to close within the next several weeks. Financial details have not been disclosed, but it has been reported that Verizon paid around $200 million for Intel Media, which had been looking for $500 million.

Once the transaction closes, Verizon plans to integrate IP-based TV services with its FiOS-based video service in order to further differentiate FiOS from traditional cable TV and reduce costs of deployment. FiOS customers are also expected to benefit from what the company calls “elegant search and discovery, interactivity and cross-screen ease of use” integrated with the Verizon LTE network.

Tarifica’s Take

Intel Media’s internet TV service, which had been in beta testing, was set to launch at the end of 2013, but Intel, with a new CEO, decided to refocus on its chip business and sell the media division. The OnCue system is described as affording users the ability to access and browse through bundles of TV channels through a seamless interface with high definition video and audio, which certainly sounds appealing. Where it had troubles, though, apparently, was in finding content. Cable companies including Time Warner reportedly pressured channel owners whose programs they distribute not to license them to Intel. Verizon, with its pre-existing status as a TV distributor through its FiOS network, would appear to be in a far stronger position for acquiring content. A more flexible, user-friendly way to handle content could help Verizon grow as a video content provider; currently, it has only around 5 million subscribers, compared to Comcast’s 20 million and Time Warner’s 11 million.

However, FiOS’s footprint is inherently limited by physical factors; it is mainly available in major urban areas, and there are many places in the U.S. where it cannot be installed. So what is most interesting to us about the Intel Media acquisition is the opportunity for Verizon to extend its TV presence via OTT and cellular service. OTT delivery would bring Verizon TV, via internet-connected TV sets, to homes that do not have FiOS, as well as to any Wi-Fi connected mobile device (controlled via an app). And even more promising is the integration of the Intel system with Verizon’s LTE network. Verizon is the biggest MNO in the U.S., with over 100 million subscribers, so having its video content available over cellular to mobile devices anywhere and anytime is a potentially huge new source of revenue. If the company can obtain enough high-quality content, this deal should be a winner.