Telco TV: No guarantees

Do you ever have that feeling where you and everyone around you are very excited about something, but you still have this encroaching sense of doom in the back of your mind? You're trying to ignore it, but it nudges you every now and then, just to let you know it's still there. Perhaps that's how you felt when the economy was strong and the real estate market booming. Maybe that's how you feel about Barack Obama's coming presidency. In any case, that's how I am starting to feel about IPTV and other dedicated telco TV architectures.

These new telco efforts certainly seem to be paying off, with AT&T, Verizon Communications and other collecting a surprisingly large number of new TV subscribers every quarter. And even beyond this initial customer fascination, the telcos really seem to be getting it-understanding that the TV services business is a new market with new requirements and new opportunities. It's galvanizing to hear telco executives talk-as they did at TelcoTV 2008 last week--about the goals for their TV services, and where they are set to take them through further innovation.

One of the observations to be gleaned from TelcoTV 2008 is that IPTV and telco TV players are still extremely interested in integrating over-the-top Internet video with other linear TV and video on demand offerings. However, the industry may be no closer to settling on common methods or devices for supporting that integration. Meanwhile, Vudu and similar companies that leverage a broadband connection to their own set-top boxes are gradually establishing an identity and adding to their content libraries and capabilities. Then, there's the rise of Internet-enabled TVs-the new must-have for all those people who were the first on their block to out-fit home theaters a few years ago. At the same time, TV networks and content companies continue to move more programming online, and online viewership of that TV content continues to grow. And, what about the X-Box 360 and PlayStation devices, which already have market footprint among the young and Internet-savvy, and whose broader connection capabilities are only beginning to be exploited by companies like GridNetworks?

Telcos have seen their new TV infrastructures as a potential customer loyalty mechanism, but despite growing telco TV adoption, customers are still moving their voice dollars to wireless, or worse (much worse) to cable TV companies. Whether or not they can keep customers loyal to their new TV services remains to be seen. TV also is a new revenue generator, of course, and to a large degree, the future success of telco TV efforts may be judged on their ability to turn a thus-far extremely controversial capability-targeted advertising-into gold.

Not all telcos are pursuing their own, dedicated TV infrastructures. Dale Merten, chief operations officer at The Toledo Telephone Co., of Toledo, Wash., made that clear during a TelcoTV 2008 panel last week (and also earlier, when he and I ran happened to cross paths at lunch). He talked about how his company has teamed up with Vudu to offer a video service that leverages Toledo's increasing broadband capabilities, without requiring the telco to build new infrastructure, acquire programming and over-spend on advertising and marketing.

If that kind of strategy can work for one telco, and cut a lot of the expense that would otherwise be required to support entry into the TV market, then it might work for many others, too. It makes one wonder whether some telco TV efforts might turn out to be wasted efforts. I hope not, but I just can't seem to shake that feeling.

-Dan

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