AT&T and Verizon Are Making Very Different Bets on What 5G Will Mean for Consumers and Content

Next generation of wireless tech promises to make carriers more competitive with traditional TV providers

Telecom giants AT&T and Verizon are battling for supremacy.
Illustration: Matthew Billington

Later this month, AT&T will cloister 300 media, advertising and entertainment executives in a Santa Barbara, Calif., resort for three days. The telecom’s leaders will present some industry research it conducted, unveil a new brand name for its advertising and analytics business, and network over cocktails.

The exclusive gathering is essentially a peace summit. Fresh off the close of deals to absorb AppNexus and Time Warner, AT&T has big plans for the ad industry. It wants to automate the buying and selling of television advertising. It wants to re-calibrate which commercials are seen by which viewers. And it wants to eventually merge sales of premium video with those of digital display and native in the same big marketplace.

All of these ambitions are in service of AT&T’s transformation into what it calls a “modern media company”—a stack of content, data, ad tech and distribution tuned to maximize their tandem value. Experts say this model could provide a promising path forward for an industry stuck in the shadow of Google and Facebook.

But in order to match that scale, AT&T needs the cooperation of some of its competitors—which, as it happens, now include most of the media and advertising industry.

“We want to be able to support this entire ecosystem,” says Kirk McDonald, AT&T’s CMO of advertising. “A duopoly has formed in digital where two companies that didn’t spend their time bickering with the rest of the ecosystem are emerging in [a leadership] position. TV and premium video feels to us to be a place to do this right, and we don’t intend to make those mistakes.”

Until recently, chief rival Verizon seemed to have similar dreams. The carrier giant had pumped a reported $1.2 billion into Hollywood to build out Go90, a mobile streaming service meant to rival Netflix and Amazon. It had just consolidated its purchases of AOL and Yahoo into a single entity with a formidable ad-tech stack.

But Go90 effectively flamed out in less than a year, and rumors are starting to swirl that Oath is underperforming expectations. With a new technical-minded CEO at the helm (the company’s former chief technology officer, Hans Vestberg), Verizon wants nothing to do with owning more content shops. It now plans to remain in a position where it can partner with as many different content providers as possible, and sees managing another big media company as a potential albatross in that pursuit. It still adamantly stands by Oath, but the division’s content production is focused on just four core verticals: sports, finance, entertainment and news.

“Choice is the most important thing. We will focus on specific content that we believe is where the content industry is going—not where it has been—and we are going to be leveraging Oath to develop that content,” says Verizon’s chief strategy officer, Rima Qureshi. “We’re not going to tie consumers to particular content that they may not want or a bundle they’re not necessarily interested in.”

Both companies’ maneuvering is happening on the precipice of what could be a monumental shift for the wireless industry. The fifth generation of cell service promises to exponentially boost network speeds, making viable a whole range of connected technologies from mixed-reality streaming and instant movie downloads to self-driving car coordination and remote healthcare.

Fixed 5G is expected to eventually be fast enough for consumers to trade terrestrial broadband for home wireless plans, making carriers more competitive with traditional TV providers. That could ultimately lead to a grand convergence in the long term—lines will blur between wireless and cable companies, streaming and traditional video and other media tied to a particular distribution scheme, according to Doug Brake, a telecom analyst at the think tank ITIF.

“To some extent, their business models are converging, but they’re also taking different paths,” Brake says. “Everyone is moving to a point where the pipes are increasingly commoditized, and it’s about building value on top of that large, robust broadband pipe.”

The nation’s two biggest wireless carriers are taking increasingly different bets on what sorts of business propositions will make sense in this future state—AT&T thinks it will pay to own content and the means to monetize it, while Verizon sees value in selling quality network access to a range of partners across existing markets and any that might arise around 5G. In doing so, they’re reorganizing the media and advertising industries that sit atop their infrastructure.

“This is setting the blueprint for what I think the future of the modern media company may look like,” says Evan Hanlon, president of GroupM’s [m]Platform unit. “This, to me, is very much the first inning of a very long game.”

Targeting TV

David Verklin spent much of his 2008 talking about dog food. Then the CEO of a venture called Canoe, he was trying to explain the relatively untested idea of addressable, or targeted, TV ads to industry execs. His favorite oft-repeated example: the technology would show dog food commercials only to dog owners, denture ads only to the toothless.

Canoe was a consortium organized by six major cable companies to build a national system for targeted interactive TV ads through set-top boxes. That dream didn’t last long. The competing interests involved and the difficulty aligning agendas sunk the effort by 2012, and Canoe pivoted to a focus on video on demand. Addressable TV ads still haven’t seen widespread adoption.

“These are companies that are kind of frenemies,” Verklin, now a senior adviser at Boston Consulting Group, says. “Some days they’re allied, other days they compete. So it’s hard to get their interests in alignment.”

AT&T is staking its media strategy on succeeding where Canoe failed. Addressable television is central to the telecom’s pitch that its vast trove of data and ad-tech assets can add significant value to ads and thus, the content on which they appear. But AT&T’s cable channels are still distributed by various cable providers, where the company can’t control targeting. AT&T will most likely need to forge deals or some sort of joint venture with these other distributors.

“The ability to scale addressable TV inventory really is going to be dependent on us continuing to find ways to bring a stronger and scaled data set to the market and also working with—and not working against—other [multichannel video programming distributors (MVPDs)] to make sure we can actually aggregate this large-scale inventory pool for marketers to buy into,” McDonald says.

It’s not just the distribution side where AT&T needs to make friends. The carrier also wants to use AppNexus to build a universal media-buying platform for the whole television industry, uprooting a long-entrenched system of phone call and handshake deals. It could do so through private licensing deals with TV companies, but McDonald says AT&T is “philosophically opposed” to the idea of a closed platform; it aims to create a “community garden” instead of a walled one.

AT&T will need to convince rival TV companies that the telecom will treat their inventory fairly in an open exchange in which it will also presumably participate with its own cable networks, says one media buying exec who declined to be named because of client conflicts. That trust could take time to build, but it’s not without some precedent. The exec compares the situation to Google’s relationship to publishers through its DoubleClick platform.

This story first appeared in the September 3, 2018, issue of Adweek magazine. Click here to subscribe.

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