Recent days have seen a flurry of new launches for video services by both AT&T and Verizon. Markets like Jacksonville, Florida, South Bend, Indiana, and Hampton, Virginia are all now able to receive video from the local phone company in addition to cable and DBS options. And it’s not just the large players either. Smaller telcos across the U.S. continue to launch IPTV services. Avail Media, an aggregator of content and IPTV solutions for smaller telcos, announced 20 new affiliates this week. The competitive posturing continues as well, with all kinds of promotions being offered to entice people to switch services. I live in the D.C. area and noticed a commercial from Comcast the other day promoting free DVR for a year – a direct response to Verizon FiOS’ ongoing free multi-room DVR promotion. The ongoing battle lines seem to be intensifying. Should be fun to watch.

Avail Media announced the launch of several new affiliates for its VOD service. The new affiliates include Clarksville Utilities, NuVision, FTC Diversified Services, LigTel, Guam Telecom Authority, Kentucky Telephone, and Lafayette Utilities System. "With Avail On Demand, we are now able to provide our subscribers with a wide variety of content from both major motion picture studios and independents," said Dent Adams, COO, FTC Diversified Services in a Avail Media press release.

A recent survey sponsored by the Alliance for Community Media and the National Association of Telecommunications Officers and Advisors indicates that despite growing competition for incumbent cable operators, retail cable rates are actually rising. Sixty-six percent of the survey respondents said basic cable rates have increased in their communities, even after the arrival of competition. The survey focuses on the trend of statewide cable franchising bills, which the survey sponsors oppose, citing the loss of control by local communities for franchising issues. Only 1% of the respondents indicate lower cable rates as a result of new competition, which is coming mainly from telcoTV operators like AT&T, Verizon, and hundreds of independent telcos. Multichannel News offers more details on the survey results.

Having a market research arm at Telecompetitor’s parent, Pivot Media, I’m certainly not one to bash survey results. But I would argue that this issue needs more time before firm conclusions can be drawn. Competition between cable and telco simply hasn’t been present long enough in a sufficient number of markets to conclude that retail rates have not been impacted. I would also argue that while retail rates may not have dropped, their rate of ascent surely has been slowed by the arrival of competition. Additionally, perhaps a more accurate measure of competitive impact may lie with digital cable rates, since telcoTV offers are more closely aligned with digital tiers.

AT&T announced the launch of its integrated U-verse bundle, which includes AT&T U-verse TV, AT&T U-verse High Speed Internet and AT&T U-verse Voice in Tulsa, OK. The service will also be available in Jenks and Owasso, OK. AT&T will make U-verse services available to more homes throughout the area on an ongoing basis.

Chase Carey, CEO of DirecTV, says that they've felt the competitive impact (certainly not as much as DISH Networks) from telcos and their video offerings. But he's not too worried, because those gains, by his estimation, are unsustainable. Carey asserts that the discounts and promotions offered by telcos to grab video market share can't be continued, and that consumers are getting savvier about triple play bundles and the promotional pricing tied to them. There's certainly some truth to that, but its funny hearing it from a DBS industry that historically had very high (maybe the highest) subscriber acquisition costs when they were in the thick of taking market share from the cable industry. Maybe it's too early to tell, but it appears that strategy worked for them, since they now collectively have roughly one third of the video subscription market. Why then, can't telcoTV players follow suit? Carey offered his comments at a Lehman Brothers Wireless and Wireline Conference in New York City on Thursday. Carey said he's quite comfortable with DirecTV's position relative to its competitors. He says DirecTV is faring quite well and their successful HD market lead is paying dividends.

AT&T is making another assault on the “me too” scenario faced by telcoTV providers in the U.S. TelcoTV providers are constantly trying to create some differentiation between their video service and that of their cable and DBS competitors. Otherwise, all you have is a “me too” video service, with very little distinction from what’s already available in the marketplace. With that in mind, AT&T announced the launch of AT&T Online Photos from Flickr, which allows the viewing of Flickr based photos and slideshows on the AT&T U-verse platform.

According to AT&T, they are “the only video service provider to offer an integrated online photos channel... at no extra charge." The photo service channel is located on channel 91 of U-verse’s channel line-up. AT&T also offers a variety of other differentiating applications, including AT&T U-bar, which provides customizable weather, stock, sports and traffic information; YELLOWPAGES.COM TV, which lets customers search for local businesses and other information via their TV screen; and AT&T Yahoo! Games. Of course AT&T is not alone with this strategy. DirecTV has offered differentiated programming offers with interesting applications, particularly with sports programming. Their NFL Sunday Ticket and NASCAR Hot Pass programming and feature packages create considerable differentiation, and thus competitive advantage with select audiences. Cable has their fair share of differentiation attempts as well. It all adds up to an interesting experiment in trying to create the right mix of features/applications, pricing, and customer service that creates a compelling experience. The right experience drives positive retention, expanding growth, and growing ARPU – a winning proposition for any competitor.

BroadbandTV will deliver the a la carte programming nirvana that consumer’s desire, and it will do so at the subscription pay TV model’s peril. That’s according to this recent BusinessWeek article, Winning the Broadband TV Game. The authors postulate several theories which suggest that consumers will adopt broadbandTV to gain access to the content model of "give-me-what-I-want-when-I-want-it,” and reject the current model of “take-what-we-offer-you.” They also suggest that 40% of U.S. consumers will have some way of connecting their TV displays directly or indirectly to the Internet within 3 years. By five years, that number will grow to 70% and represent a true mass market. The tipping point is well on its way because televisions are now shipping with Ethernet ports and broadbandTV enabled gaming consoles will be in one third of all U.S. TV households by 2010. The implications suggest that cable, DBS, and telcoTV providers are in trouble. “The barriers that have long inhibited Internet-based TV are beginning to crumble. The TV manufacturers will win; the gaming companies will win; the best new platforms blending personalized and branded content will win; Hollywood will win; and consumers will win. And, unless they find ways to adapt very quickly, telecoms and cable companies will lose.”

To be fair, the BusinessWeek article is authored by Herve Utheza and Gary Morgenthaler, both of whom are heavily invested in the broadbandTV space. But they bring up some interesting issues. The reality of broadbandTV today is it’s simply too complicated for average consumers to install, find, and watch content consistently. Should those barriers be lowered through things like broadbandTV enabled set-top-boxes, game consoles, and even the televisions themselves, the story could change. If broadbandTV does truly become plug and play, we may very well see some Utheza and Morganthaler broadbandTV predictions come true. Cable and telcoTV providers may be challenged to adapt their business and revenue models to ensure they don’t concede their subscription TV business to the burgeoning broadbandTV ecosystem. DBS may feel the broadbandTV pinch more, because they don't have broadband connections to the home, making a broadbandTV strategy somewhat more complicated for them.

Verizon announced today that they now have over 1 million FiOS TV customers, which by our estimation, puts them among the top ten cable companies by subscriber count. In fact they hold the tenth spot, behind Insight Communications. Depending on your perspective, Verizon might even be in the ninth spot, since Insight sold much of its cable assets to Comcast last year, and could be counted as a part of Comcast. It’s a significant milestone for a telecom company, although not as significant as Comcast holding the fourth spot among the top ten telephone companies in the U.S. The Verizon news came from their 2007 4th quarter earnings report, where it cited adding 226K FiOS TV customers. If you count Verizon’s DBS customers (as a result of their DirecTV partnership), they have over 1.8 million video subscribers. Verizon also reports pentration rates for FiOS TV and FiOS Internet in markets where it is available of 16% and 20.6% respectively.

In-Stat, an Arizona based market research firm, reports that its most recent cable MSO survey reveals 54% of cable operators face competition from telecom operators in the form of telcoTV. TelcoTV doesn’t always equate to IPTV. Verizon FiOS uses the same technology as cable companies for the video portion of their triple play, but delivers it over FTTH architecture. In-Stat postulates that this increased competition is driving cable companies to invest more in their networks and offer more competitive features. For example, In-Stat says that 90% of the cable companies participating in the survey report offering HDTV.

AT&T provided a glimpse into the future of IPTV at TelcoTV today. Peter Hill, AT&T’s vice president of video and converged services for AT&T Labs demonstrated several applications that could prove to provide competitive differentiation over cable and satellite. IPTV’s knock lately is that despite the hype, it’s been a “me too service.” Should some of the applications demonstrated today prove commercially viable, the aforementioned IPTV knock may begin to change.

Some of the more interesting applications include the integration of wireless services, including video sharing and Family Finder. Video sharing allows subscribers to share live video being captured by a video phone with a television utilizing a U-verse connected set top box. The television displays the video being captured by the phone. The integration of an application like this with social networking may have promise. Another interesting application, Family Finder, demonstrated the ability to remotely "track" an AT&T wireless subscriber. Family Finder displays on a television, the location and movement on a map, of an AT&T wireless subscriber who has a GPS enabled phone. The obvious application is to “track” family members, namely children. The privacy concerns withstanding, seems like a very compelling application. Hill demonstrated other applications and offered insight into many more. It’s somewhat refreshing to see some of these applications live at a conference like TelcoTV. Often times conferences are too much talk and too little demonstration. I certainly recognize that a demonstration is a long way from a commercial launch. But IPTV proponents have been somewhat starved for applications that will provide true differentiation. Perhaps the news from AT&T today will begin to change that.