According to an article in the Wall Street Journal, Intel is looking to develop at web-based video service to compete with cable and satellite. Intel's plan is to create a virtual MSO, a business idea that many have been kicking around in one form or another.
"Worst Company in America" 2012 bracket features eight providers of multichannel television (Comcast, DirecTV, Dish, Time Warner Cable, Charter, Verizon, AT&T and CenturyLink), among its 32 "contestants".
However, facts are stubborn things (hat tip, John Adams). Multichannel penetration is very high ~90% -- there are relatively few households who do not see it as a worthwhile purchase, despite the fact that subscription prices increase every year. That suggests that the customer satisfaction issue is likely less the service itself (not that it doesn't have its frustrations - long times on hold, among them), than frustration with the price and general lack of choice. (If it didn't, Charter wouldn't be doing things like this.)
If Intel were to offer a me-too service (i.e., a comparable package of services) at a lower price, it would likely attract some customers. However, multichannel providers are already cutting prices in a de facto way, as they offer sweetheart deals for new customers, particularly in areas of high competition. It isn't easy to compete on the low end with customers churning through the introductory offers in search of the best deal.
The me-too offering would have a competitive advantage if its operating cost of delivering the service were lower than the incumbents. It won't be because of lower programming costs. A new entrant into the market, like Intel, can expect to pay 20% or more greater programming costs than the incumbents. Intel wouldn't have to build the expensive distribution system (laying cable, launching satellites) that the incumbents did, but would be on the hook for the variable cost of delivering bits to its customers. The jury is still out on how much less expensive that would be. However, that does make Intel, like Netflix, highly dependent on the ISPs (who are the cable and telephone companies) to continue to provide unlimited service to their customers.
There are alternatives to a me-too service, of course. A la carte offerings of channels is a popular request, but one that it is hard to imagine the programming community embracing. (LA Times: Don't hold your breath for a la carte cable -- is that clear enough?) Given the high penetration of multichannel television, there isn't much reason for the programmers to look at a different, potentially less lucrative business model, unless they have to do so (as the music industry had to, after rampant piracy ended their chokehold on packaging and pricing). However, the multichannel subscription television market probably has less piracy today than it did in the past, due to the changeover from less-secure analog systems to more-secure digital ones). So, it won't be driven by piracy, at least not today's piracy, but maybe tomorrow's.
This is not the first Intel over-the-top story. GigaOm reported earlier this year that Intel was "in talks to buy Roku". BTW, Roku is now looking to raise some $50 million to expand...hmmm.
It is always interesting to see new entrants to an industry as that's often the origin of the new ideas that shake things up (Walt Disney's theme parks, Apple's iPod, iPhone and iPad). If Intel has that sort of idea, there will be a place in the market for them. There is certainly room for innovation in the distribution of television.