GTA TeleGuam announced the pending launch of IPTV service, which will compete with the local cable company. GTA TeleGuam is utilizing CSI Digital and the Avail Media IPTV platform to bring digital TV services to its footprint. The service is scheduled to launch in June 2008. The launch is expected to include VOD and HDTV services.

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.

Avail Media and Motorola announced a partnership to integrate Avail’s content transport solution and Motorola’s MWAVE IPTV portfolio. MWAVE provides set-tops, encoders, systems integration services, and program management for video hub office components, including third-party middleware and digital rights management. MWAVE will integrate with Avail’s Avail Connect to create a “hosted” head-end solution. Servicoe providers can also utilize these services to build their own head end.

The march to video distribution over the Internet that rivals traditional subscription pay television continues. TiVo announced an agreement with YouTube that will bring YouTube content directly to the television through a TiVo DVR Series 3 set-top-box or better. In addition to viewing YouTube content, YouTube users will also be able to log on to their account through a TiVo box. The YouTube agreement expands TiVo’s Internet video content strategy, which also includes Amazon Unbox movie downloads and a variety of other content from various sources. TiVo is trying to position its solution as a gateway to web based content, in addition to a leading DVR solution for traditional linear television content. “Being able to make available YouTube videos to the TiVo subscriber base using one device, one remote and one user interface is another major step in our commitment to combine all of your television and web video viewing options in one easy to use service,” said Tara Maitra, Vice President and GM of Content Services at TiVo Inc.

One trend that is worth observing over the coming months and years is applying the “cut the chord” mentality to cable or IPTV services, where consumers decide they don’t need cable anymore because web distributed content is enough. As more and more compelling web based content makes it to the TV in acceptable formats and viewing experiences, many consumers will surely decide that their monthly video subscription bill may not be worth it. It’s definitely having an impact on the roll out of IPTV. I’ve personally spoken with several telephone company executives who have decided to stand on the sideline and observe these trends a little more closely before deciding to pull the trigger on IPTV and triple play. This is a complicated issue, and a variety of factors come into play that will impact these decisions, including HDTV availability, sports programming, etc. It's hard to imagine Internet video distribution completely replacing the subscription pay TV model. But it is pretty clear that any converged entertainment strategy needs to address web based video. In my humble opinion, “the genie is out of the bottle” with web based video and service providers and the vendors who serve them need to find a way to weave web video options into their entertainment packages. The experience that ultimately wins will probably offer a compelling mix of both traditional and Internet delivered content. At least until the day when it will be impossible to tell the difference. That day is coming too, we just don't know how far off it is. Any guesses?

AT&T announced that the University of Houston will be installing 1,000 U-Verse connections at a new student housing facility being built near their campus. The new facility, Calhoun Lofts, is part of a major expansion by the university and will contain more than 700 one- and two-bedroom apartments. While not a huge deployment in the context of AT&T’s national rollout plans, this development has to be seen as positive by AT&T in the light of competitive positioning. The multi-dwelling unit (MDU) market has historically been the domain of cable MSOs, and more recently DBS providers. It represents a great business development opportunity for any service provider, even with the regulatory scrutiny it has been receiving of late. Acceptance by a high profile customer like the University of Houston will help AT&T make headway into the competitive and lucrative MDU sector.

According to recent Yankee Group research entitled "From Gorillas to Guerrillas, IPTV Changes Everything," IPTV is a “game changer” and will fundamentally change the video subscription business and the telcos who provide it. Among the report’s many predictions is the view that IPTV will change the culture of telcos. “The phone company of the past--the 800-pound gorilla--is dead,” says the report. In order to effectively compete with cable on a local level, telcos will have to abandon their long practiced centralized management structure, and shift decision making to the local and neighborhood level. Other interesting predictions include:

• IPTV will create micro-markets of intense local competition in the United States, balanced by large swaths of the nation unaffected by the new technology
• IPTV will change the way applications are developed for television
• IPTV will force the cable companies to evolve into more dynamic and responsive organizations
• IPTV will open one of the last vestiges of the closed, legacy telco and cable service environment

Yankee predicts 9.8 million IPTV subscribers by 2011, representing about a 9.6% penetration nationwide. But Yankee also says you must look a little more closely at the penetration numbers. They postulate that telcos are shrewdly targeting high value/ARPU customers with IPTV – homeowners with good credit who are less likely to move, and more likely to subscribe to a triple play bundle. They peg that number of households to 34 million, of which IPTV will actually have a 29% penetration by 2011, creating some real pain for their cable and DBS competitors. They identify micro markets of hyper competition where telcos and cable companies will profusely battle it out on a local, and even neighborhood level, to gain the business of those 34 million high value customers.

Yankee also sees bandwidth and middleware as the defining factors that will differentiate IPTV from cable. Their thinking suggests that the larger the pipe into the home and the more control on middleware development, the better. They point to early success that Verizon is having utilizing FiOS as a competitive weapon (unless of course, you're Cablevision), particularly using faster Internet speeds as a differentiator over cable. Differentiation powered by middleware applications has been slower to arrive, but Yankee predicts that IPTV will eventually have some inherent advantages over its cable competitors, particularly with interactivity and introducing social networking capabilities into the entertainment experience. The report is well worth a look.

CES has started, so expect to see a flurry of these types of announcements during the week. The first noteworthy one is that Microsoft has secured some significant content licensing deals from MGM, ABC, and Disney. Microsoft will make more than 500 hours of ABC and Disney content available to Xbox Live users, in both standard definition and high definition. Some of the most popular content around will be available, including ABC’s Lost, Grey’s Anatomy, Ugly Betty and Desperate Housewives and Disney Channel’s Hannah Montana and High School Musical. Many of the television programs will not be available until after the day they air on television. Microsoft says when this new content is added to its existing library, its 10 million Xbox Live subscribers will have access to 3,500 hours of on demand content. This development contributes to the trend of premium content availability outside of the traditional pay subscription TV model.

Makes you wonder how consumers will begin to interact with these broadband based on demand content offerings. Are we approaching a tipping point where some consumers begin to say there is enough content available through these types of sources that I no longer need a cable/DBS/IPTV subscription? I suspect that current triple play providers may be most vulnerable to this possibility with the population represented by Xbox Live subscribers. Young, engaged, and technically savvy. We may soon see this demographic leading the charge away from traditional video providers, much the same way they led the charge away from traditional telecom providers using wireless as their substitution method of choice. Is video next? Stay tuned.

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.

Qwest CEO Ed Mueller isn’t interested in gambling on IPTV. The going IPTV ante for a company of Qwest’s size is in the billions - a little too rich for Mueller’s blood. Rather than Qwest learning the video business on the fly and paying handsomely for it, Mueller prefers to partner with companies who know it best and have already invested those necessary billions. Mueller is already taking some heat for this decision, but I think it’s too early to judge this fiscally conservative move. Arguments can be made on both sides of this "should we launch IPTV" equation (I would argue that Qwest’s real long term concern is wireless, not IPTV - but that’s the subject of another post). Anyone who plays poker knows that a fold can either be the smartest or the dumbest move you can make. It all depends on how the subsequent cards fall.

Mueller argues that their partnership with DirecTV still affords them a competitive triple play offering. You can’t really argue with that. They’ve announced a FTTN initiative that will provide 20 Mbps to select markets. They’ll spend less than 1/10th of what AT&T is spending on U-verse, and less than 1/60th of what Verizon is spending on FiOS. Maybe Mueller will get the last laugh. He can still extract some margin from the DirecTV partnership and not risk substantial investments in an IPTV network. I’ve seen some financial analysts scratch their heads at most telcoTV business plans that have five to seven year payback periods, while DBS partnerships can extract positive cash flow on day one. Maybe these moves will put Qwest in a better financial position than their competitors and peers – a position they may be able to leverage for competitive advantage. Or maybe this strategy will handcuff Qwest and not allow them to leverage a true triple play experience. Which strategy puts a company in a better competitive shape? Hard to say. But thanks to Qwest, we’ll have a better barometer to measure telecom’s long term competitive health. Bet the bank on a facilities based telcoTV network, or go it safe (fiscally anyway) and let your video expert partners do the video heavy lifting for you. Who will be able to extract the most value and exploit their competitor’s weaknesses? Stay tuned.

AT&T announced they will stop selling DirecTV subscriptions, beginning in 2008. They will continue selling DISH Network subscriptions throughout 2008, and will then evaluate their long term strategy for DBS resale partnerships at the end of the year. AT&T was selling DirecTV in the former Bellsouth footprint, and DISH in the former SBC footprint. The news comes on the heels of AT&T’s affirmation of U-Verse future growth plans. Has the time come when AT&T no longer needs DBS partnerships for triple play bundles?

Probably not. AT&T still needs their DBS partnerships (and so does Verizon), which has yielded them 2 million video customers to date. Even with their ambitious U-Verse plans, they still only plan to reach about 50% of their residential footprint by year end 2010. That’s a lot of homes left to the triple play competition. DBS is their only answer, unless they plan to concede those homes to the likes of Comcast, Cox, and Time Warner. Highly unlikely. Comcast already has over 3 million phone customers today, while AT&T is predicting 1 million U-Verse video subs by year end 2008. Comcast’s phone customers are acquired primarily through triple and double play bundles. In order to keep up, AT&T will have to counter with their own bundles, and the only way they can compete across their entire footprint is through a DBS relationship.