Telco TV: What's Good for the Goose is Good for the Gander

Carl Weinschenk

The cable guys should be worried. As nice a job as they are doing in telephone services and broadband, video is still their main source of revenue and the service that defines them. Just as they took a ton of voice business from the telcos' signature service, the phone companies -- unencumbered by legacy infrastructure -- are moving effectively onto cable's video turf.

Everyone knows that the world of video is changing radically. It's evolving ever-more quickly into an IP-based service that can be
delivered in the same way as any other Web service or packaged, for a fee, with a sometimes worthwhile bells and whistles.


The speed at which the times are changing is illustrated by a chart at Silicon Valley Insider. It says that AT&T's U-verse and Verizon's FiOs outpaced Comcast, Time Warner Cable, Charter and Cablevision in new digital TV subscribers from later 2008 through the end of the first quarter of this year. While impressive, the chart is not proof-positive of a permanent change because it doesn't include satellite providers or other cable or telephone operators. But, from any sensible cable operator's point of view, it should be seen as a pretty disconcerting piece of anecdotal evidence.


The cable operators, of course, benefit from IP-delivered video to the extent that they are broadband providers. But it just isn't as good as the old days, when they owned the field (the delivery network), controlled the ball (the programming) and largely monopolized the fans (subscribers). To beat a theme to death, today it's a whole new ball game.

That the telcos are in good position is becoming the accepted wisdom. FierceIPTV's Dan O'Shea points out that second-quarter results illustrate the effectiveness with which Verizon and AT&T are bringing the battle to the cable MSOs. He says the results indicate strongly that the telcos' jump into video was a good move. The real story is that they have achieved great results simply from offering the same fare as cable. The future will bring more creative and differentiated products -- and perhaps even greater success.


That's a long way of saying that cable companies better get with the program. It is important to remember that some smaller telcos are working the IPTV route as well. For instance, SureWest-a telco that serves Kansas City, Mo., and Sacramento, Calif. areas-said this week that it is switching to Motorola's Mediaroom IPTV platform.

Parks Associates also believes that telco video is in the ascendancy. The firm's new report, IPTV and the Digital Home, says that there will be almost 40 million telco/IPTV homes by the end of this year. The company says that represents a growth rate of 50 percent this year. In 2008, the growth rate was almost 80 percent. The firm says that the most success will be found when pure IPTV is mixed with home networking, communications and other value-added services.

There is a sense of symmetry to the telephone industry's success in video. The move can be seen as payback for the cable operators' similarly successful assault on their the telco's core voice business, which began about a decade ago. These two mutual forays -- telcos into video and MSOs into voice -- have created a brave new world of generalist providers capable of doing a good job of delivering three or four communications platforms.

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Jul 30, 2009 5:10 AM Bill Sheppard Bill Sheppard  says:

Sorry, this data isn't as alarming as a first glance might suggest. By-and-large the telcos are signing up new IPTV customers as they build into new areas which they didn't previously serve, hence they are offering a new service and some percentage of customers are opting to try something new (i.e. dump cable) or take advantage of a new service.  Other than in new construction, the cable operators have generally offered service to most of the population for years, so most who want cable already have it, and you're not likely to see rapid uptake.  Given that most cable operators have stable or growing overall video subscriber bases, I don't see any obvious red flag.

Jul 30, 2009 5:15 AM Carl Weinschenk Carl Weinschenk  says: in response to Bill Sheppard

Thanks for the thoughtful comment, Bill. I sort of agree with you. There may not be a red flag, but there clearly is a yellow one. That is that the telcos and the over-the-top players are battling the cable guys very effectively. It's almost a carbon copy of the MSOs foray into VoIP. The bottom line is the cable guys who don't adjust to a world in which they aren't awarded the video market based solely on the fact that they are the video guys of a bygone era are in trouble. The folks who adjust will do fine.

Jul 30, 2009 11:26 AM Ron Webb Ron Webb  says: in response to Bill Sheppard

This article references the company SureWest... which I happen to be a customer. I switched to SureWest from Comcast because SureWest provided a whole lot more bandwidth than Comcast could provide and the quality of the HDTV programming from SureWest is vastly superior. With SureWest's active optical network, each subscriber has a dedicated 100 Mbps synchronous connection with the head-end. Out of that 100 Mbps, 15-50 Mbps of synchronous bandwidth is available for Internet, with the remaining 50-85 Mbps for all the TV channels. Unlike traditional cable, IPTV only sends the channels being requested at the moment. Until recently, we had MPEG2 signals, but they recently changed to MPEG4... I have yet to notice a deterioration in HDTV quality... it is still far superior in quality to ANYTHING from Comcast.

The issue is newer technology is superior to traditional technology, but those who have invested heavily in traditional quality feel the pain of others adopting the newer technology to begin with. Traditional phone technology has been around for several decades with improvements along the way. With these improvements, attempts to maintain backwards compatibility has existed. Along came VoIP and telephone companies started to feel the pain; not only from VoIP, but also cellular telephone. Some telephone companies, such as SureWest, has recognized the trends and invested into expanding their IP network. They still offer copper telephone service, but expanding more with fiber and using VoIP. At the same time, they are taking on cable companies by providing a superior QUALITY service. SureWest does not have the marketing power as Comcast, so they don't offer the same programming, but they are improving.

Jul 31, 2009 9:45 AM Carl Weinschenk Carl Weinschenk  says: in response to Ron Webb

Thanks, Ron. You hit the nail on the head. The point always is that the incumbent has great advantages in first-to-market and a high profile and marketing muscle, etc. when the technology changes are simply a slightly different shade of gray. But when better technology emerges that is truly different (TDM to VoIP and traditional broadcast to IPTV are two examples) the advantage goes to the newcomer because they aren't weighed down by the old technology. Telcos, for instance, lost a bundle trying to squeeze every last buck out of their T1s and their TDM infrastructures in the face of new technology. It makes sense, you can't just say, "Hey, here's new and better technology--let's chuck what we've been doing for the past XX years."


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