Verizon Hub - Bad Timing Or Bad Strategy?

On February 1, Verizon Wireless (VZW) debuted its new Hub VoIP phone. I had the chance to meet with some of the guys at VZW who developed the Hub to see a demo and play with the device.

 



 

The product is a 7-inch touchscreen display and a single cordless handset that is designed to be the center of communications for the home. It goes for $200 after $50 rebate (with a two-year contract), and additional cordless handsets are available for $80 each. You can connect to the Internet using any cable or DSL broadband service via an Ethernet or wireless connection. While the Hub is carrier-agnostic for broadband, it is only currently being made available to VZW customers (although that may change in the future). 36198_verizon_hub_application_scr_5

Once connected, users can place and receive unlimited local and long distance phone calls to anywhere in the US, Canada and Puerto Rico using the “unmanaged” over-the-top VoIP service for a monthly fee of $34.99. That’s $10 per month more than leading over-the-top provider Vonage, but roughly on par with bundle-discounted “managed” VoIP service from most cable MSOs.

I could go on about the interesting features and functionality of the Hub device, such as visual voicemail, photo viewing, and directory services with mapping technology. I could describe in great detail the integration with Verizon Wireless services like VZ Navigator (sending turn-by-turn directions to your mobile phone from the Hub), VCast (watching video clips in the kitchen while making dinner), and Chaperone (to easily track the location of your kids’ cell phones). I could also note the drawbacks, such as the “walled garden” approach to content, the inability to access the Internet itself even in a limited manner, and the lack of a Chumby-like open platform for developers to build their own widgets. But at this point in time, I don’t think those things matter.

What does matter in today’s economy is cost. A majority of consumers claim their financial situation has gotten slightly or substantially worse over the past 12 months, and an even greater portion believe their financial situation will remain the same or become worse over the next 12 months. As I have discussed in a couple of recent reports, our data indicates that fixed voice service is particularly vulnerable to cost-cutting measures. (If anyone is aware of the impact of cord-cutting, it would be Verizon and Verizon Wireless.) To charge $200 dollars for the privilege of acquiring the device, and another $160 to $320 to obtain 2 to 4 more handsets to outfit the (targeted) busy family household is simply asking too much from today’s consumer. And adding $34.99 per month on top of that means chances are high that a customer switching from their fixed voice service to the Hub may result in very little or no actual savings in the monthly budget. Oh, and there is an early termination fee to boot.

Sure, there is added value with all the interesting things the Hub can do. And the Hub arguably improves the overall end-user experience of fixed voice by improving the convenience of managing communications in the home. But the adoption curve of the Hub will remain particularly shallow in the current economy until such time as the up-front cash outlay for the device and handsets is reduced. Dropping the monthly recurring fee to bring it in line with other over-the-top VoIP services and below the going rate for cable voice service wouldn’t hurt, either.

I agree that service providers need to look for ways to enhance the value of landline to stem the loss of subscribers (see this report published in the fall). But consumers are cutting the cord to save money and increase convenience. Service providers need to keep both of those criteria in mind when positioning any enhanced landline product in the market.

 

What do you think?  Will the Hub succeed or fail, and why?  Would you buy one?