1:30 PM -- Evidence continues to mount that Charlie Ergen and Dish Network LLC (Nasdaq: DISH) are hard at work developing a virtual MSO that would provide some pay-TV channels via broadband for a variety of connected devices like tablets, phones and TVs.

Many of the technical pieces appear to be coming together over at EchoStar Corp. LLC (Nasdaq: SATS), the technology spinoff chaired by Ergen. EchoStar has already been talking about using adaptive bit rate (ABR) technology (coming way of its acquisition of Move Networks Inc.) to deliver live TV video streams to all sorts of devices, and teaming it with a networked DVR. EchoStar has also discussed how this could be applied to anyone with "the content and a pipe," suggesting that it'll be up to the partner to get the programming rights. (See EchoStar Sets Sights on a Network DVR and EchoStar Readies Over-the-Top Video Play.)

Dish is talking to Viacom Inc. (NYSE: VIA) and other major programmers about getting such rights, according to Bloomberg.

Meanwhile, Roku Inc. CEO Anthony Wood said at a recent industry event in New York that he sees a virtual MSO emerging in the next 12 months, with expectations that it'll be a traditional pay-TV provider with content deals in tow that will step up first. Roku sees its own devices supporting such a service, and happens to be a Dish partner.

Boxee CEO Avner Ronen said as much in January, predicting that an incumbent pay-TV player will be first to offer an OTT subscription TV package. (See A Virtual MSO Shall Rise, Boxee CEO Says.)

The idea of a cable operator like Comcast offering a potentially disruptive subscription video package in another MSO's territory would cause some significant upheaval in the cable club. Charlie Ergen apparently would have no such reservations, even if there's a chance an OTT TV video offer would compete with his satellite TV product. (See Signs of the Video Armageddon and Comcast Won't Go Over the Top.)

But getting the rights to enough content to make a small yet attractive OTT service is no slam dunk, either. As Joe Flint points out in The Los Angeles Times, Dish's recent legal spats with programmers, including broadcasters that own cable channels, may make it tough to get those deals signed. (See Signs of the Video Armageddon , Dish, Broadcasters Go to War Over Ad-Zapper and Dish Sticks It to the Broadcasters .)

Plus, the notion of getting programmers to unbundle their channels and alter the way they do business is more akin to "wishful thinking," he adds. So, it seems likely that the business issues, not the technology, could trip this up.

And is there much of a market for a reduced-rate TV package? Time Warner Cable Inc. (NYSE: TWC)'s ESPN-free TV Essentials package might serve as a nice save tactic, but it's not the kind of TV package that's going to get customers in droves. (See No-Frills Cable TV .)

But it's the sort of thing that could be attractive to telcos that have choked on high carriage fees and soured on the low-margin business of running a managed IPTV service, and are seeking a way out. They could instead combine their higher-margin broadband service with a small OTT package, and then leave it up to customers to obtain broadcast TV channels over the air.

That's the kind of model that is sure to be a hot topic of debate and discussion next month in Las Vegas at TelcoTV.

— Jeff Baumgartner, Site Editor, Light Reading Cable