Rumors abound of the imminent death of Redbox Instant.

Comcast’s Streampix and Verizon’s Redbox Instant have not lived up to the expectations of their respective owners and the two Netflix-like services have quietly been partly decommissioned or have stopped accepting new customers altogether.

Loathe to admit the services are roadkill on the TV Everywhere highway, Comcast claims it is simply downsizing its Streampix service and Verizon issued a terse “no comment” to GigaOm’s Janko Roettgers in response to rumors Redbox Instant would begin shutting down for existing customers on Oct. 1.

But truth be told, neither service made a competitive dent in Netflix, either because they were poorly marketed or found no audience. Comcast denies it is even trying to compete against Netflix. But it did admit in a regulatory filing Streampix found very few takers at its $4.99/month asking price.

“Though Comcast sought to create excitement around Streampix by offering the online version through a unique online site and app, and offered Streampix to a small number of XFINITY broadband-only customers in one region, these attracted minimal interest,” Comcast wrote.

Streampix will be a shadow of its former self, continuing on mostly in name-only.

“Going forward, Streampix will simply be part of the XFINITY TV app and website like other video-on-demand offerings,” said Comcast in the filing. The Google Play and Apple App stores seem to confirm as much when customers looking for the Streampix app instead find: “Streampix has moved to XFINITY TV Go. Comcast customers with Streampix should download XFINITY TV Go to view Streampix content.”

Comcast launched Streampix in February 2012 as a streaming-only offering, but added download capability in late 2013.

When customers balked at paying Comcast another $5 a month for the streaming add-on, Comcast began giving it away to customers who subscribed to multiple premium channels or high value triple play packages as part of ongoing promotions.

Comcast’s XFINITY Streampix admittedly didn’t draw much interest from customers.

Critics of Comcast’s merger with Time Warner Cable suspect Comcast’s real intention was to launch the service to markets outside of its service area to compete for premium over-the-top video customers without cannibalizing its cable television revenue. With the merger under scrutiny at the state and federal levels, some suspect Streampix’s public demotion is a maneuver to protect the deal from a potential political liability over Comcast’s growing dominance in the cable and broadband business.

The troubles with Verizon’s Redbox Instant service go well beyond the realm of public policy debates. Since launching in mid-2013, the service has attracted only minor interest from the public. Critics contend a marketing deal with Redbox was wrong from the start. Redbox’s success comes from renting DVDs from kiosks, not competing with Netflix. Verizon hoped a promotional tie-in offering online viewers up to four free DVD rentals a month from Redbox kiosks would bring the two services closer together. Redbox Instant also rented current movie titles on a pay-per-view basis, and hoped it could convince kiosk users disappointed with out of stock DVDs or otherwise poor pickings to go online and stream a pay-per-view video instead.

But customers would have to be psychic looking for something to stream – Redbox does not publish online movie availability on its kiosk-service website. Unsurprisingly, kiosk users have stayed loyal to renting movies through the kiosk and online viewers usually won’t bother renting a DVD from a kiosk, even with a voucher.

Free trials of Redbox Instant service brought an underwhelming number of customers converting to paid subscriptions. That might be attributed to the heavy overlap of titles available from Redbox Instant and competitors Netflix and Amazon.com, making three services redundant for many. Although Redbox’s parent has invested $70 million in the service, it is dwarfed by the massive content acquisition budgets available to its larger competitors.

It would take a larger subscriber base to change that for the better, but Redbox Instant seems intent on sabotaging its success, still refusing to enroll new customers three months after a security breach. It seems Redbox Instant’s website was an excellent resource for credit card thieves to verify if stolen card numbers were still valid. Current customers are still able to use the service, but reportedly cannot update or change their credit card information, meaning they will lose service if their credit card expires or the credit card number changes.

A notice on Redbox Instant’s website prevents new users from enrolling.

Company executives have told investors they are not happy with Redbox Instant’s subscriber numbers. Not allowing new customers to sign up while gradually losing old ones because of an expired credit card could go a long way to explain this. Redbox’s parent company previously warned it has the right to pull out of the venture if the numbers don’t improve, and they won’t if the website remains locked down.

When Roettgers asked Redbox and Verizon to comment on a reddit rumor that the service was to close down on Oct. 1, the only reply was “no comment.” Roettgers believes that is telling, because no company would want such a false rumor to spread unchallenged. With Oct. 1 less than 24-hours away, we won’t have long to wait to see what happens next.

Roettgers would not be surprised to see Redbox Instant downsize itself with an end to its subscription video plan and move forward exclusively as a paid, video-on-demand service. It already powers Verizon’s On Demand video store. Having a traditional television partner like Verizon FiOS TV could help Redbox survive in an already crowded marketplace of online, on-demand video stores like iTunes, Google Play, Vudu, Amazon, and others.

In a larger context, the industry’s belief in “if we build it, they will come,” appears to be untrue, especially cable and telephone company efforts developing their TV Everywhere platforms. Content and viewing limitations that confine online viewing largely to the home, a barrage of online video advertising, subscription fees, and the lack of quality content have all hurt efforts to deliver a good user experience that can promote customer loyalty. Nothing now or on the horizon appears to be anything like a Netflix-killer app.

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Two years ago, Porter Bibb, managing partner at Mediatech Capital Partners, panned the then-new XFINITY Streampix service for streaming the same television shows and movies customers can already see on Netflix and other services. From Bloomberg Television’s “Bloomberg West,” originally aired Feb. 21, 2012. (4:30)

The same Audi ad shown 16 times during one Comcast TV Everywhere On-Demand show.

What would you think about the cable company that offered you on-demand viewing of your favorite shows interrupted repeatedly by the same commercial shown over and over? What would you think of the company whose product appeared 16 times in one hour, filibustering your viewing experience without any ability to fast forward.

Welcome to Comcast’s TV Everywhere, America’s most annoying on-demand video experience.

Rich Greenfield from BTIG Research, a Wall Street analyst firm, sat through a single Audi ad — during a pre-roll and then three times in a row during five commercial breaks, while watching FX’s Americans over Comcast’s TV Everywhere.

“You almost can’t make this up, it is such a horrible viewing experience,” Greenfield said. “I’m starting to hate Audi at this point.”

Other cable companies like Time Warner also show ads during on-demand programming, but most can be fast-forwarded and a typical ad break consists of just one or two short commercials.

With Comcast, “you get the exact same Audi ad all three times during this commercial break as well as every other commercial break during this programming and we tried multiple different episodes. […] The only ad that was running incessantly was this Audi commercial to the point where I’d like to never see this advertisement again.”

With a viewing experience like this, Greenfield speculates the result will be to increasingly drive viewers to Netflix and Amazon Prime for commercial-free viewing instead of suffering through more than eight minutes of Audi advertising.

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BTIG Research’s Rich Greenfield shows off the endemic problems of Comcast’s TV Everywhere on-demand viewing: Advertising torture hell for customers. (4:08)

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CNN explores who is responsible for Netflix’s streaming problems on Verizon FiOS and AT&T U-verse. While one industry analyst seems keen to blame Netflix, his other articles on the subject show an increasing bias towards big ISPs like Verizon and AT&T. (2:54)

Netflix’s May speed rankings confirm Verizon FiOS customers are likely to find a degraded video streaming experience while using the otherwise speedy fiber to the home service. Netflix performance on Verizon FiOS dropped considerably last month — so much so that Frontier and Windstream DSL customers now get better Netflix performance than any Verizon customer receives. AT&T U-verse customers fared even worse with streaming performance below that offered by Mediacom — America’s bottom-rated cable company and CenturyLink DSL. In fact AT&T U-verse customers receive only marginally better service than Hughes satellite and Clearwire wireless customers. Verizon’s DSL came in dead last.

Coincidentally, both Verizon and AT&T, following Comcast’s lead, have been in negotiations with Netflix to receive payment from the streaming video provider to better handle its traffic. Verizon CEO Lowell McAdam said he’s confident about getting payments from Netflix, and he turned out to be correct — Verizon and Netflix reached an agreement in late April that is still being implemented. AT&T also says it is negotiating with Netflix. Verizon’s streaming video partnership with Redbox has not been affected by the sudden deterioration in online video streaming on Verizon’s network.

The problems with Netflix on some ISP’s have gone all the way to the top.

“My wife and I like to lay in bed and watch Netflix,” Tom Wheeler, chairman of the US Federal Communications Commission, said in January. The two companies serving Wheeler’s neighborhood are Comcast and Verizon. When enough customers launch streams on Netflix, saturating the inbound connection to either ISP, the video stops. When it does, Wheeler’s wife joins the parade of irritated customers.

“You’re chairman of the FCC,” she says to him. “Why is this happening?”

Last week, Netflix decided to answer that question with a more informative error message appearing when available bandwidth is insufficient to support a high quality stream.

“The Verizon network is crowded right now,” the message says. Netflix then attempts to restore the stream by serving up a degraded, lower quality/bit rate version to the paying customer.

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Bloomberg interviews Todd O’Boyle from Common Cause. He places the blame for this debacle solely on the shoulders of Verizon and other ISPs. (5:39)

The inability to successfully maintain a stable stream of Netflix content that ranges from 256kbps to 5.8Mbps seems odd on ISPs that offer customers connections far faster than that. The average Netflix stream is 2Mbps, slow enough to be comfortably supported on even a 3Mbps DSL connection. Netflix’s problems with Comcast evaporated after agreeing to pay the cable company to maintain a better connection between its customers and Netflix’s content delivery network. The same cannot be said for perfomance on AT&T’s U-verse platform. Although Verizon signed an agreement with Netflix, it has clearly not been implemented as of yet.

“We started a small-scale test in early May that lets consumers know, while they’re watching Netflix, that their experience is degraded due to a lack of capacity into their broadband provider’s network,” said Netflix’s Joris Evers. “We are testing this across the U.S. wherever there is significant and persistent network congestion.”

The companies with the biggest drops in Netflix performance are the same ones strongly advocating special paid “fast lanes” on the Internet for preferred traffic to resolve exactly these kinds of performance problems.

“Some large US ISPs are erecting toll booths, providing sufficient capacity for services requested by their subscribers to flow through only when those services pay the toll,” said Evers. “In this way, ISPs are double-dipping by getting both their subscribers and Internet content providers to pay for access to each other. We believe these ISP tolls are wrong because they raise costs, stifle innovation and harm consumers. ISPs should provide sufficient capacity into their network to provide consumers the broadband experience for which they pay.”

The error message fingering Verizon as the culprit for a poorer Netflix experience brought an angry response from Verizon on its blog:

Reports from this morning have suggested that Netflix is engaging in a PR stunt in an attempt to shift blame to ISPs for the buffering that some of its customers may be experiencing. According to one journalist’s tweet from last night, Netflix is displaying a message on the screen for users who experience buffering which says: “The Verizon network is crowded right now.”

This claim is not only inaccurate, it is deliberately misleading.

The source of the problem is almost certainly NOT congestion in Verizon’s network. Instead, the problem is most likely congestion on the connection that Netflix has chosen to use to reach Verizon’s network. Of course, Netflix is solely responsible for choosing how their traffic is routed into any ISP’s network.

[…] It is sad that Netflix is willing to deliberately mislead its customers so they can be used as pawns in business negotiations and regulatory proceedings.

It would be more accurate for Netflix’s message screen to say: “The path that we have chosen to reach Verizon’s network is crowded right now.”

However, that would highlight their responsibility for the problem.

Milch

That was quickly followed by a cease and desist letter from Verizon demanding Netflix remove error messages that blame Verizon for the problem. It also demanded a list of Verizon customers that received the Netflix notification.

“Failure to provide this information may lead us to pursue legal remedies,” wrote Verizon general counsel Randal Milch in a letter to Netflix general counsel David Hyman.

“This is about consumers not getting what they paid for from their broadband provider,” Netflix spokesman Jonathan Friedland said. “We are trying to provide more transparency, just like we do with the ISP Speed Index, and Verizon is trying to shut down that discussion.”

“Verizon’s unwillingness to augment its access ports to major Internet backbone providers is squarely Verizon’s fault,” Netflix general counsel David Hyman wrote.

“Netflix does not purposely select congested routes,” added Evers. “We pay some of the world’s largest transit networks to deliver Netflix video right to the front door of an ISP. Where the problem occurs is at that door — the interconnection point — when the broadband provider hasn’t provided enough capacity to accommodate the traffic their customer requested.”

Despite all that, Netflix also admitted it plans to drop the error messages after the “small-scale test” ends on June 16.

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CNBC explains how Netflix content gets to end viewers over a complicated series of Internet connections between Netflix and your ISP. (1:31)

Cord-cutting is a real, measurable phenomena and is especially common among those under 30 who don’t care about traditional cable television service.

Those are the views of Verizon’s chief financial officer Fran Shammo, speaking this week at the Wells Fargo 2013 Tech, Media & Telecom Conference in New York.

Shammo told investors Verizon FiOS subscriber numbers showed the company has an excellent position in the broadband market because it is the only national provider other than Google offering fiber-to-the-home service.

Verizon TV customers are regularly encouraged to upgrade to 50Mbps Quantum service with a push of a button on their remote control.

“Broadband is absolutely key,” said Shammo. “Most of our customers are taking our 50Mbps [FiOS Quantum] or higher speed and part of that is because you need that speed inside the home [to support] your wireless devices that run off of Wi-Fi. If you’re running hot water with five people, you are eventually going to slow down the hot water and it is going to run cold. The same thing happens when you are running five wireless devices over your Wi-Fi network.”

Shammo said as more online video becomes available people will gradually shift more of their viewing time away from traditional television.

“We’re also seeing fewer people taking [our cable television] product,” said Shammo. “They really want the broadband speed and if you look at the demographics, those 30 and below don’t care if they have linear TV. They are looking at getting their content through other means.”

Shammo said he doesn’t necessarily have a problem with that because heavy online viewing will stimulate upgrades to faster Verizon FiOS Internet speeds.

“We invested in FiOS for broadband and for television and we think we have a superior product,” said Shammo. “But we’re smart enough to realize that the ecosystem will eventually change and people are bringing content in over-the-top. We want to make sure we have the fastest — the best broadband […] and we believe we have the best linear TV product but we know that over the top video is going to become more popular.”