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Cable/Video

How Will Telcos Avoid Me-Too TV?

NEW YORK -- The Future of Broadband -- How can the telcos best position themselves to grab significant video market share from the cable companies? This was one of the big questions being pondered here at Light Reading's The Future of Broadband conference.

According to one panel discussion, the main issue at hand for telco TV is how the carriers will differentiate themselves in the market in order to give people a reason to subscribe to their new video services.

"The message we give to AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) is be different -- don't be 'me-too,' " said Bob Greene, executive vice president of Advanced Services at Starz Entertainment LLC . What concerns Greene is that without any clear differentiating features, the telcos will not be able to make any headway into a very saturated market. They cannot be a "me-too" provider that has no obvious benefits over cable.

But Verizon itself has gone on record in the past referring to itself as as just that -- a "me-too" provider. During a Verizon event in New York City a few weeks ago, Verizon's vice president of FiOS Television, Terry Denson, remarked that its FTTH service is "the Lance Armstrong of me-too services," meaning that they're doing what plenty of people out there already do, but they want to do it better than the rest. [Ed. note: And with one testicle?]

Some of the panelists agreed that this high quality-of-service approach could be a differentiator.

Timothy Hanlon, SVP of Ventures at Denuo Group, a strategic media and advertising consultancy, pointed out that cable companies currently rank towards the bottom of the pack in terms of customer satisfaction, meaning "improvement alone, could be a differentiator for the telcos."

But he also added that telcos can't be satisfied with just the "anything you can do I can do better" approach -- they'll have to differentiate the services as well as the quality.

Hanlon suggested that the telcos might want to figure out how to be more innovative in delivering targeted advertising, a long-promised mission of the cable industry that he sees as largely a failure:

"There is the promise to deliver more personalized services; and the capability to more precisely serve an ad message based on time, demographic, or psychographic would be an amazing leap forward. Everybody thought cable would do that. But until telcos get into more robust video footprints, it's going to be slow going."

What are some other things they can do? "They have mobile services to throw into the mix, whereas cable does not," said Greene. Indeed, the "quadruple play" is something cable cannot provide. We've already seen AT&T offer mobile services with its U-Verse service as part of a "three-screen" type of feature where you can view content anywhere whether it be on your TV, computer, or mobile phone. This bundling of services is a feature unique to telcos.

The panel agreed with this notion. "Being able to tie the wireless product to the video product is critical," said Karl Quist, founder and CEO of TotalVid.

Whereas the cable companies' bundling of services simply refers to everything appearing on one bill, the phone companies have an extraordinary opportunity to bundle their services in a unique way in which they truly operate together as one.

Without taking advantage of this opportunity to truly differentiate themselves from cable, the telcos could face quite the uphill battle. "I don't think they are going to displace Comcast Corp. (Nasdaq: CMCSA, CMCSK) or Time Warner Cable Inc. (NYSE: TWC)," said Greene. "There is 80 percent video provider penetration in the U.S. already, so they will have to expand the pie."

Clearly, Verizon and AT&T understand that they won't succeed just by gobbling up the remaining 20 percent of the population that still watches TV with rabbit ears. They have been running aggressive ad campaigns pointing out how they differentiate from cable in order to lure subscribers away from them.

How will they best pull this off? Don't be a "me too" provider is the message here at The Future of Broadband.

— Raymond McConville, Reporter, Light Reading

optodoofus 12/5/2012 | 3:08:25 PM
re: How Will Telcos Avoid Me-Too TV? "Clearly, Verizon and AT&T understand that they won't succeed just by gobbling up the remaining 20 percent of the population that still watches TV with rabbit ears. They have been running aggressive ad campaigns pointing out how they differentiate from cable in order to lure subscribers away from them."

Hey, I must have missed those adds. The only ads I see are ones in which Verizon talks about their low price FIOS bundles and then has actors complain about bad service from the cable company.

So far, the telcos are doing a very poor job of differentiation. If someone really wants to access their video programming on a cell phone, then the telcos may have some differentiation potential. If not (and I know I will never pay for video on my cell phone), then they will be competing on price and will never recoup their investment.

Telcos will probably pick up the disgruntled cable customer base out of the gate. But eventually, people will realize that the telcos are no different than the cable companies, and people will start to arbitrage between them for price. We saw how that worked out for the long distance companies back in the '90s. The next few years will be interesting.

optodoofus
techomojo 12/5/2012 | 3:08:23 PM
re: How Will Telcos Avoid Me-Too TV? Telco sucks when it come to offering multiple services. It was the MSO/VOIP ISP that made them react in the first place with a budnled solution. How can a bunch of old voice guys offer a competent service - by selling at the lowest price and trying to grab everyone.

Net is RBOCs are NOT innovative in anything the do they are a political utlility company.
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