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Summary:

Watching the big U.S. telcos, you’d think the only way to get into the telco video game is to invest obscene amounts of money on network build-outs. Verizon has dropped billions on its fiber-to-the-home network for FiOS, and AT&T, while being slightly more conservative with its […]

Watching the big U.S. telcos, you’d think the only way to get into the telco video game is to invest obscene amounts of money on network build-outs. Verizon has dropped billions on its fiber-to-the-home network for FiOS, and AT&T, while being slightly more conservative with its fiber-to-the-node U-verse network, has also invested significant capital to enable video service delivery.

This approach differs drastically from IPTV leaders in Europe, where Free, Neuf Cegetel (a subsidiary of SFR) and BT Vision have taken more cost-effective ways to offer video services using existing infrastructure and innovative customer devices such as the Freebox. These players, particularly the French IPTV providers, have been able to garner significant market share using lower-cost video delivery solutions.

And now the winds of change may be blowing in the U.S. With the abundance of new technologies to enable low-cost online video, even Baby Bells such as Qwest may be reevaluating their options. In July, Qwest Chairman and CEO Ed Mueller said “We believe there is an over-the-top video strategy” for the company. In the same article, a company spokesperson said the telco had trialed OTT video services using a Roku set-top box.

Will other telcos follow Qwest’s lead?  Companies such Roku, ZillionTV and NeuLion certainly hope so, while long-time IPTV solution provider Entone is betting on it by hooking up with OTT VOD provider Vudu.

According to GigaOM Pro analyst Steve Hawley, telco video services in the U.S. are going to be delivered through a variety of methods in coming years. In his just completed research note,  “Telco Strategies for Over-the-Top Video,” Hawley examines the range of options telcos will employ to offer video services, ranging from the full build out (a la FiOS) to partnering with OTT hardware providers such as Roku, to use of technologies such as placeshifting.

No doubt, with the emergence of TV Everywhere from cable MSOs and their push into authenticated online video for PC playback, over-the-top will certainly be a part of every large carrier’s strategy in years to come. And, given the growth in over-the-top video delivery combined with moves by players like Qwest, there’s a chance more carrier video services destined for the big screen in the living room will ride over-the-top as well.

  1. These are not apples-to-apples comparisons. In the U.S., TelcoTV services are growing quickly, but their overall market penetration will continue to be small — as in it’ll be a decade or more before we see parity between TelcoTV, DBS, and Cable.

    Outside of the U.S., it depends on the country. But Western European consumers have a much larger choice of free to air channels — hence the low penetration of PayTV services. Just look into the finances of cable operators in Europe, and you’ll see a wholly different picture than what we see in the U.S.

    Simply mentioning a couple of European operators doesn’t resolve the underlying question of whether OTT services will get consumers to pay..or why telecoms operators will sell the bundle.

    Judging from the results for Telecom Italia and BT, PayTV bundles (regardless of how they’re delivered) have been a difficult sale in markets where people aren’t used to paying for television. And in markets where there are accustomed to PayTV services, it will take many years of double-digit growth (again, regardless of how the service is delivered), for telcos to reach well into the single digit percentages of households.

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  2. @Daniel – I think in markets where you see big TelcoTV (i.e. FiOS), you’re seeing market share in the teens to twenty percentage range. I can tell you from talking to people in the cable industry, they’re definitely worried about TelcoTV.

    Regarding alternative technologies for the U.S. like terrestrial video, there are certainly better options in Europe, but I think that is changing. From the newly available digital spectrum for ATSC based digital video delivery, to innovative terrestrial video efforts from the likes of Sezmi, terrestrial is changing here as well.

    This doesn’t even consider the fact you can do a well-done over-the-top video service today (anyone who uses Netflix Watch Instantly or who has connected Hulu to their TV can attest to that).

    It is interesting that Qwest is considering an OTT option. If you look at Qwest’s history, back when they were US West, they rolled out one of the nation’s first video over DSL offerings in the Phoenix market. Then they got acquired by Qwest, fired the CEO evangelizing these forward leaning efforts in Sol Trujillo, and sold off all their valuable assets (like their wireless unit). Now look where they are….

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  3. [...] Pro analyst Steve Hawley. In his “Telco Strategies for Over-the-Top Video,” Hawley examines the variety of options telcos will employ to offer video services, ranging from full build-outs (like Verizon’s [...]

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  4. [...] Pro analyst Steve Hawley. In his “Telco Strategies for Over-the-Top Video,” Hawley examines the variety of options telcos will employ to offer video services, ranging from full build-outs (like Verizon’s [...]

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