Cable Scouting Report: TelcoTV '08
Oh, you knew all of that? Sorry.
Well, even if this week's TelcoTV didn't reveal any startling new strategies, it showed that the telecom industry is making headway into the video space and is still gunning for some of cable's market share.
No telco or telco supplier had a silver bullet on display, but all the expected pieces were there: more advanced IPTV set-tops, video distribution platforms, conditional access and encryption systems to protect it all -- and even some new players that are evidently willing to tie it all together with a big yellow bow. (See EchoStar Pitches Telco TV Package.)
So, what kind of telco offensive should cable be bracing for?
Race to convergence It's abundantly clear that the telcos -- particularly AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) -- are going to hang their competitive video hats on aggressive convergence strategies that will enable them to pipe video, not just to (yawn) TV sets, but also to the PC, mobile phones, and just about any type of screen consumers can connect to the network.
In his keynote, AT&T executive vice president Dan York noted the future is about more than bundling services together. Based on a platform that ties IP-based services with mobility, "It's about providing integrated services that go beyond what our competitors offer," he said.
Verizon SVP of marketing and digital media John Harrobin agreed, noting that telcos can pitch integrated services as a revitalization tool for the TV industry. "It's our contention that TV is far from dead," he said in his keynote. (See AT&T & Verizon: We're Video Playas and Telcos Declare TV Love.)
Why is this becoming central to both carriers' video strategies? Because they have massive wireless businesses that give them a clear line of attack on their cable foes, and one that should give them a distinct advantage until MSOs can catch up.
In other words, they're doing this because they can, much the way DirecTV Group Inc. (NYSE: DTV) plays up its superior HDTV channel tonnage, touting a service category that cable won't be able to match for a while.
Of course, cable's not exactly being caught flat-footed on mobility and service convergence. PacketCable 2.0 is deeply rooted in IP Multimedia Subsystem (IMS), and several major MSOs are developing mobile plans based on 3G and 4G technologies like WiMax and long-term evolution (LTE). (See Cable Plays Clearwire Card, Cox Preps Cellular Network, Eyes LTE, and Cox Wireless: Soup to Nuts .)
Although the telcos are leading video subscriber growth, cable is more than making up for that by snapping up high-speed Internet subscribers and siphoning away phone customers. Cable used the bundle to win the first heat of this race. The next leg will center on convergence.
And when it comes to IMS, many believe the telcos are already well ahead of the curve. "That will come as a shocker to cable," says Venkat Krishnan, senior director of worldwide IPTV and strategic market solutions at SeaChange International Inc. (Nasdaq: SEAC).
Advancing with ads
Telcos are also playing up the potential for interactive and addressable advertising, elements that can bring TV into the more targeted and measurable world of Internet advertising.
Here, they think the unicast nature of IPTV could be an advantage over cable's zoned and multicast approaches.
The telcos can also thank cable for working out the kinks for them. After all, the telcos will be basing their digital ad insertion and more advanced ad application deployments on gear that adheres to standards developed under the auspices of the Society of Cable Telecommunications Engineers (SCTE) . SCTE-35 and SCTE-30 cover cue tones and digital ad splicing, while the more recently developed SCTE-130 standard defines addressability and targeting and serves as the blueprint for advanced advertising.
Telco TV specialist Alcatel-Lucent (NYSE: ALU) has developed an ad-splicing blade that snaps into its 7750 SR-7 service router and uses the SCTE standards. The module, which was being demoed here running on the Microsoft Corp. (Nasdaq: MSFT) Mediaroom platform, is slated to debut in the first half of 2009, according to Ilan Kepten, senior director of business strategy for AlcaLu's IP division.
"It's a new feature that we are proposing to our customers," he said. "Our first market [for the advertising module] is certainly IPTV."
RGB Networks Inc. , a digital video specialist that cut its teeth on cable during its formative years, also sees some significant potential from the telco TV world, and particularly in the area of advanced advertising. Here at the show, it was shining the light on its Modular Video Processor (MVP), a chassis-based platform geared for IPTV deployments.
Today, about 90 percent of RGB's business comes from the cable industry, but the vendor envisions half its business eventually coming from telcos, according to Ramin Farassat, RGB's vice president of product marketing.
— Jeff Baumgartner, Site Editor, Cable Digital News