There were two main streams running through TelcoTV last week in New Orleans: The importance of multiscreen offerings to providers hoping to maximize their video efforts and the importance--and threat--of over-the-top content.
Both provided interesting color to what was a pretty black and white conversation about IPTV subscriber growth.
But the bottom line? IPTV numbers are growing in the United States, although Mother Nature and labor unrest took them down a peg for telcos in the third quarter.
For its part, Verizon (NYSE: VZ) saw 131,000 net adds to its FiOS TV service. The company said it has hurt by storms that brought flooding to much of the Eastern Seaboard. Its growth also was stunted by a strike that saw it accumulate a backlog of some 100,000 FiOS installations. The added subs, nonetheless, put Verizon over 4 million FiOS TV customers, keeping it in the No. 1 spot among telcos in the U.S. That backlog also spelled big gains for the fourth quarter, during which the company forecasts it'll see at least 200,000 net adds.
AT&T (NYSE: T), meanwhile, added 176,000 subscribers to its U-verse TV service, bringing it to 3.6 million total subscribers.
AT&T, too, said storms cut into its gains significantly.
"We were disappointed by the numbers," AT&T's Jeff Weber, VP of video services, told me. "But not really surprised. The weather took a toll. Our technicians, instead of going out to do new installs, instead had to go out and fix problems that the storms had caused. We expect solid growth to continue."
Weber was on hand to deliver a keynote and to talk about AT&T's newest product rollout, its collaboration with Cisco to deliver IPTV throughout a home wirelessly. Using a pair of components from Cisco's (Nasdaq: CSCO) Videoscape initiative, a wireless access point and two receivers, the telco can drop ship the parts to subscribers for self-installation, reducing truck rolls and, Weber said, pushing U-verse penetration in areas where the service has already been rolled out.
"It's something that differentiates us from our competition," he said. "And that differentiation is going to allow us to attract new subscribers and to keep existing ones."
"Differentiation" was thrown around a lot during TelcoTV. It was used to describe the interactive products telcos were offering, to help set services apart from cable competitors and to explain why IPTV had the potential to be a dominating technology.
But Mariam Rondeli, an analyst at SNL Kagan, said that the difference between cable and IPTV services is eroding. And that the real reason, in SNL Kagan's mind, for the increase in IPTV subs at a time when cable subscription numbers are declining, is more simple.
It's about the network, more specifically the expansion of telco IPTV offerings.
"We fully expect IPTV numbers to continue to grow as they continue to take share from cable companies," Rondeli told me. "We think it's still the network expansion."
It's natural, she said, that a new play like IPTV would be able to attract, potentially, a substantial number of subscribers.
"Verizon, for example, keeps seeing its penetration slowing in areas it's been in for some time," she said. "It's just slowing down. We think that companies like Verizon and others with fiber to the home can, eventually, have a market share of something like 30 percent in four or five year, with cable at 50 percent and DBS at 20 percent."
Is there a service differentiation that's helping to drive IPTV numbers?
"They're not major enough that customers would change over one or the other," Rondeli said. "We believe that decision is still made on price."
There is, however, still a "cool" factor associated with FiOS TV and AT&T U-verse, the ability to do picture-in-picture and to use some of the other products cable still hasn't rolled out.
"FiOS, for example, initially built out in more prosperous areas; it's attractive to a different slice of consumers," she said. "That somewhat selective buildout has allowed it to prosper."
Rondeli said she expects the fourth quarter to show more string growth in IPTV.
"We expect it to be business as usual," she said.
That "business as usual" may apply to bigger operators who can push the kinds of numbers required to make IPTV a profitable segment. For smaller operators, that point hasn't yet been reached, as content costs and the expenses of deployment remain stumbling blocks.
Still, the value of IPTV for operators may be less in the form of income from that segment alone and more in the potential for all of the value added components users having that connection in a home can afford.
Things like home security, over-the-top delivery, technology and networking support and storage in the cloud options all have the potential to be extremely lucrative to operators.
"Video," as one panelist said, "is just one way to keep your foot in the door."
Drop me a note, and let me know how your operation is making video pay for itself. Despite those prohibitive costs.--Jim