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.