Intel has been pitching media companies its "virtual cable operator" plans, sources "familiar with the effort" told The Wall Street Journal's Sam Schechner and Don Clark, but from what we know of the plan there is a lot that could go wrong. From what it sounds like, the company wants to replicate cable's structure on the Internet, providing channel packages via a box, kind of like Roku. In theory that sounds ideal: We love Internet TV! But, this plan has all sorts of holes.
Intel isn't special. The race to perfect Internet TV is crowded. Intel's got competition from all over the place. On the Internet side, there is the streaming establishment: Netflix, Hulu, Amazon and the like. And then there are the cable companies and their giant wallets. And then there are the box makers, such as Apple, Google, Roku and Microsoft. Intel doesn't have any particular advantage over any of these companies. Unlike the cable providers, it doesn't have established relationships with networks. It doesn't have an established entertainment brand like Netflix. And, it doesn't have the same gadget clout as Apple.
The chip maker will run into the same issues as everyone else. Even these more logical groups haven't figured the Internet TV thing out. Networks at the point, fear losing their value. And getting their content on the Internet leads to very expensive difficult to negotiate deals with networks. (Think: the Netflix-Starz deal.) Cable companies already pay somewhere around $38 billion per year in licensing fees, note Schechner and Clark, for example. Even if Intel has a model that works for these groups, it'll most definitely be very pricey. Probably too pricey.
Intel has failed in this realm before. Intel backed Google TV. Google TV failed for all the reasons streaming TV has yet to take off. (Mostly because networks got scared of the Internet.) Before that, it debuted its own hardware Viiv in 2006, which also failed. It also has had its own failed talks with Hollywood content partners in the past, note Schechner and Clark. Not exactly the best record, here.
Intel does not have the bandwidth. "Some tech companies have retreated from plans to become virtual cable operators in part because of an inability to guarantee enough bandwidth for high-quality video at all times of day," write Schechner and Clark. Unlike cable companies, which control Internet access as well, Intel doesn't have that power. Intel isn't "deterred" by this prospect, but it should be. We're not about to pay for shoddy Internet TV.