Will Big Telcos Ever Go Over-the-Top?

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.

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