Telcos Still Face Challenges Delivering TV Services

Technology is not a major obstacle blocking U.S phone companies from delivering video services in competition with cable or satellite TV providers, but the telcos still face a number of challenges ranging from cultivating effective marketing techniques to securing content, executives said Wednesday at the TelcoTV Conference and Expo in Orlando.

Phone companies are not known for being savvy marketers, yet they must persuade customers of cable and satellite TV services to ditch their current video provider, says Geoff Burke, video solutions marketing director for Calix, delivery solutions provider.

Says Phil Thompson, executive vice president of product management with mPhase, a maker of integrated DSL set-top boxes and video softswitch middleware: “Telcos becoming an entertainment provider is a cultural change.”

However, the concept of linking telecom providers to television is beginning to take root in the United States. There are more than 100 incumbent phone companies providing video services to approximately 250,000 subscribers in 200 communities, according to Burke. That is hardly a number to cripple the customer base of leading U.S. cable companies like Comcast Corp., but they might have cause for alarm. U.S. phone companies delivering video services are capturing about one-third of the market at the expense of cable and TV satellite providers, Burke says.

Still, phone companies are not netting a profit delivering video services, says Stephen Gleave, vice president of marketing for net.com, a maker of networking equipment for service providers, enterprises and government. “Nobody’s got it quite figured out,” Gleave adds.

The video market is a brand-new business for phone companies. And securing content such as movie rights from the likes of Hollywood is expensive. Plus, phone networks were not designed to support movies and other programming.

But executives point out the technology has matured. Net.com and other vendors have been refining systems to improve the reliability of entertainment services over the phone networks.

On Wednesday, for example, net.com announced the new version of its video platform featuring IP multicast functionality and other features. Meantime, phone companies like North Central Telephone Cooperative are proving the cable operators are not indomitable. Within five months of introducing video service, the cooperative captured 25 percent market share, says Jeremy Graves, marketing manager with the NCTC.

The real kicker: the co-op acquired its rival, a local cable company. Graves attributes the co-op’s success in part to outreach campaigns designed to play up its standing as a local company. For example, NCTC held community focus groups soliciting feedback on what services customers wanted, invited the public to submit photographs of their pets to become the video mascot and even hosted a tailgate party, Graves said.

Karthik Ranjan, vice president of sales for set-top box maker Amino Communications, says the phone companies will begin reaping financial perks through premium services, including personal video recorders and interactive gaming, as well as other sources of revenue such as advertising geared for a customer based on viewing habits. “That is the future, targeted advertising,” he says.

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