The window of opportunity for digital media adapters appears to be closing. The category which has vexed the strong such as Apple and felled the weak such as Moviebeam and Akimbo may finally go mainstream - but it won’t be brought to you by any of the aforementioned companies.

Instead, it will be ushered in from the unlikeliest of sources - a company that wasn’t even in the video game just  a few years ago - Verizon. Today, Verizon is beta testing a new streaming service marrying its FiOS set-top box with content delivered directly from the internet. Initial content partners include: youtube, veoh, and blip.

The feature is another component of Verizon’s strategy to single-handedly slay the DMA category and prove my long standing theory that the DMA category would only be a blip on the radar until its functionality was subsumed by the pay TV STB, correct.

Already, Verizon’s Media Manager service allows subscribers to stream personal content such as photos and music (video is coming soon) from their PC to their TV - another function DMAs promised to fulfill.

The launch of internet video available via the set-top box, combined with the aforementioned features is an indication of what the future of pay TV will look like. The STB will not longer just be a vehicle in which users access content from one proprietary network. Instead it will serve as a multimedia gateway bringing together disparate sources of content into one endpoint - in an easy to use and searchable interface. This will pose a challenge to competitors who will be forced to improve their user interface, create new content relationships, and develop new hardware to serve these functions as Verizon is doing.

But that will not happen immediately. Yes, competitors will probably take note of this announcement but their focus on adding HD channels at the behest of other features, to compete better with satellite services remain the primary short term goal. In fact, this announcement is unlikely to result in otherwise uninterested subscribers opting for FiOS.

What it will do is serve two very important goals

1.         Improve Customer Retention. Without competing services from other SPs, FiOS subscribers that switch service will lose significant functionality and may lead them to stick with FiOS.

2.         De-commoditize the service. As others race to offer the cheapest bundle, Verizon’s ability to offer new services allow them to remain above the fray. They are not selling a commodity but an experience. And experiences can never be commoditized which will actually help Verizon grow ARPU as subscribers upgrade to more advanced tiers.

This test will hopefully be just the beginning for Verizon - as they continue to build out their partnerships but avoiding conflicts of interest will be an ever present challenge. Would a partnership with Netflix devalue its VOD service? If so, is it still worth incorporating? Verizon will have to make these decisions. It has tipped its hand as to its thinking already by offering customers Starz Play - a subscription online video service featuring content from Starz, Encore, and MoviePlex.

The pace at which Verizon is adding subscribers is making competitors take note. Perhaps they too will realize that they are not competing in a commoditized environment any longer and need to improve the experience to compete with Pay TV 2.0.