Telcos must be in video business, argues Telco TV speaker

Telcos with broadband networks are in the video business, whether they know it or, more importantly, whether they want to be or not, Bernie Arnason, managing partner of Pivot Media, a marketing intelligence and consulting firm, said during an Alcatel-Lucent-sponsored workshop at TelcoTV 2012 on Wednesday.

"All paths lead to video" and IPTV is "absolutely fundamental to the [services] bundle" that telcos deliver, Arnason said. That bundle's main purpose is "not giving consumers the opportunity to leave, but giving them an opportunity to stay," he continued.

While encouraging telcos to make IPTV a cog of the triple play bundle, Arnason offered an honest assessment: Video, he said, is a tough business. "If video had to prove as a standalone business model, it would be very difficult for telcos to do it," he explained, adding that, "at best, it's a loss leader."

Nevertheless, he emphasized, "if you have a broadband pipe into the home, I would contend you are a video provider."

Telco service providers, as a group, are in a better position to attract new video subscribers than incumbent cable operators who are losing customers and satellite providers whose figures are relatively flat, he said.

"You guys have the momentum," he said, adding, "it's good to be with the industry that has the momentum" in attracting new subscribers.

Telcos today face two primary forms of video: traditional TV and over-the-top (OTT) unmanaged video running on the broadband network. The traditional pay TV model, Arnason maintained, will not be sustainable because at some point soon, consumers will balk at paying more for TV. OTT, on the other hand, will grow over the coming years, and service providers should be able to benefit from it.

Telcos also must work to avoid becoming just broadband pipes--no easy trick when it comes to developing and providing differentiated content, Arnason said, because "a small independent telco just doesn't have big enough scale to build a [content] business so there has to be some aggregation." The small independent telco, though, has a local advantage over its competition with "independent niche content that's available today."

Service providers, Arnason said, must be cognizant of OTT because it will run on their networks and their broadband customers will expect quality delivery--even if it's running on the unmanaged portion of the network.

"From a customer's perspective, this is not a best-effort service," he said. When push comes to shove, the customer demands a good experience when viewing OTT and expects the service provider to make it happen.

"Who is going to provide the best experience, you or your competitors, when it comes to this online challenge?" Arnason asked, pointing out that online video will "probably soon be the number one use of time for broadband."

IPTV, Arnason said, gives service providers the opportunity to play in both ends of video delivery and, for now, telcos have the best opportunity to be the video provider of choice. He added that broadband satellite is improving but has "issues," and 4G is coming on strong, but it's wireless, and wireless has its own challenges.

"Make sure your customers know you're in the video business," he exhorted. "Broadband carriers are already in the video business."

Broadband carriers are in the home as well, so it is essential to have a "very robust in-home networking" offer to make certain that consumers can get video on multiple devices within the home environment, he emphasized.

"We can't ignore the reality and the impact of video," Arnason concluded.

Related articles:
ABI Research: Online video seen as multi-billion dollar threat to pay TV revenues
Survey suggests MVPDs were right: Consumers are ready to pay to play

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