Several blogs including EngadgetHD and UverseUsers.com are reporting on AT&T launching two streams of HD for U-verse subscribers in the St. Louis market. These U-verse customers can receive 2 HD and 2 SD streams, for a total of four streams. Most people who follow DSL powered IPTV recognize that HD is a challenge because of its bandwidth intensity. Most of us also realize that offering HD is a competitive necessity. IPTV providers who utilize DSL as their access technology are at somewhat of a competitive disadvantage against cable and DBS over HD.

Never mind the costs associated with encoding HD content (which, for everyone further down the food chain than AT&T, is a challenge), the challenge with delivering a single HD stream over ADSL2+ (or even VDSL) is significant enough. But in order to compete with cable and DBS, who currently have multi-stream HD capability, delivering two streams (and some would argue even more in the future) is ideal. We are progressing towards HD ubiquity. We’re certainly not there yet, but we will be soon. The concept of multiple HDTV’s in the home, or the desire to watch one HD program while recording another, will become commonplace, and sooner than DSL IPTV providers wish it to. AT&T’s move into two stream HD over their FTTN/VDSL architecture provides a glimmer of hope, It’s too early to tell if they can scale that solution and match their competitors offer. But for them, and for those who look to them for guidance, it’s a start.

Verizon announced the expansion of high definition VOD service to eight additional states. With the expansion, Verizon’s HD VOD service is now available in California, Delaware, Florida, Indiana, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Texas and Virginia. Verizon says they will average about 1,000 HD VOD titles per month. Verizon joins other "terrestial" video operators trying to leverage HD VOD against the perceived HD advantage for linear channels offered by DirecTV and DISH Networks.

RCN, a Herndon, Virginia based triple play provider, announced a dramatic increase in its video on demand portfolio, “almost doubling” its content library. RCN is also upgrading its VOD technology platform to allow new VOD choices, including HD VOD, an intuitive on-demand portal and “virtual on-demand.” The upgraded platform will be available to RCN’s digital customers in Boston, Chicago, New York, Penn. and D.C. by June.

RCN is following the lead of other multi-channel video operators who see VOD as a competitive necessity, and in some cases, an advantage. VOD is an “Achilles heel” for DBS providers, because their satellite technology prevents a two way interactive session, which is required for VOD. Cable and IPTV providers are leveraging VOD for this advantage and increasingly putting emphasis on high definition VOD as a counter to satellite’s linear channel HD advantage.

Both DirecTV and DISH ran into major HD setbacks this week. A new satellite that DISH planned to use for HD channels encountered a problem after its launch and its future is uncertain. The SES AMERICOM AMC 14 satellite was unable to get into its proper orbit after launch. DISH was planning on leasing the satellite for HD capacity, specifically for local HD channels. In another unrelated setback, DirecTV’s latest satellite launch has been delayed. They had scheduled a launch for Monday of this week, but it is delayed indefinitely. DirecTV plans on using this latest satellite for HD capacity as well, hoping it will help them achieve their promised 150 HD channel line up.

These delays put a cloud over both DirecTV and DISH, considering HD is seen as a competitive advantage for DBS over cable and IPTV. Most likely the setbacks are temporary ones. Perhaps they will give competitors some time to play catch up. The news looks worse for DISH. If the AMC 14 issue can’t be positively resolved, DISH will face major setbacks with its HD strategy. Even if they manage to get the satellite into its proper orbit, it will burn precious on-board fuel, significantly reducing its service life. Whatever the outcome, DISH’s HD strategy will be impacted, and not positively.

Comcast announced that they will begin offering certain HD video on demand titles the same day those titles are released on DVD. Comcast joins other operators, including DirecTV, which are experimenting with same day VOD (or PPV in DirecTV’s case) releases. These developments are shrinking typical release “windows,” which normally have a 30 to 45 day delay between DVD and VOD/PPV releases. Hollywood studios and their content distribution partners (Comcast, DirecTV, etc) are experimenting with same day releases to figure out the impact on revenue models. Studios have historically made the lion’s share of their motion picture release revenue from DVD sales and rentals. They now want to find out if they can match (or hopefully exceed) DVD release revenue with VOD and PPV revenue. Hence the release experiments.

Should these release experiments prove successful, there is even talk of theater and VOD releases happening simultaneously. In this possible future scenario, consumers could go to the theater for $10 to watch a new movie release, or they can order the new release on demand for viewing in their “home theater” for $30. We’re a long way off from that, but these shrinking release windows are pointing in that direction. There are competitive implications hidden in these experiments as well. Vertically integrated media companies like Time Warner for example, may have the opportunity to provide Time Warner Cable with blockbuster releases on better terms (or windows) than Time Warner Cable’s competitors. Or maybe Comcast’s market power allows them to negotiate better release window deals than their competitors. Telecom competitors like Verizon will have some negotiation leverage as well. Their vast wireless distribution network gives them an advantage over cable competitors. Movies are extremely valuable in the multichannel subscription video competitive landscape. All service providers should watch these developments closely.

Charter is the latest video service provider to join the announcement parade for HD channel growth. Charter says they are aiming to offer at least 40 HD channels by year end 2008, doubling their current HD capacity. Charter is also joining some of its cable MSO brethren by utilizing switched digital video technology to achieve their 40 channel HD goal. But will 40 HD channels by the end of 2008 be enough?

With DirecTV and DISH both claiming over 70 HD channels now, and Verizon FiOS announcing a goal of 150 HD feeds by year end 2008, you have to wonder if 40 will be enough. The jury is still out on exactly what competitive advantage HD brings. There are passionate arguments that suggest HD is a defining competitive differentiator, but HDTV penetration in the U.S. is still below 25%. Perhaps Doug Ike, vice president of advanced video engineering and applications for Charter is right when he tells Multichannel News, “We’ll stay competitive with our peers.” Perhaps 40 will be enough, especially in Charter’s smaller markets where they compete with small telcoTV providers who have their own HD challenges. HD proponents argue that despite the minority penetration numbers, HD subscribers are high value/margin subscribers, and should be aggressively pursued. The current holiday season will impact this debate. Holiday HDTV sales will be a leading indicator for the growing demand for HD and its competitive implications.

P.S. As I write this post, I’m watching Monday Night Football in HD, and I have to admit, it’s a differentiator for me. It's one of those services that once you get a taste, you never want to go back!