Mixing satellite TV into the wireline triple-play

For AT&T, that on-demand content is stored on its own video hubs, called Internet data centers. In the STB, the video content is kept separate from the linear streams of channels. When the customer selects a video, it is delivered over AT&T’s private network, rather than the public Internet, and down to the STB. Despite the delineation of content, Brett Anderson, AT&T’s director of IP video and broadband said the user interface for HomeZone is a unified and seamless process for the consumer. In alignment with Mastrangelo’s specifications, the service does have only one remote, one customer service number to call and one bill. The in-home hardware, however, includes a STB, as well as the 2Wire home networking gateway – purchasable through AT&T – that integrates the HomeZone receiver with a consumer’s home computer.

While AT&T may well be the best example of this type of hybrid service in the U.S. to date, Mastrangelo pointed out that it hasn’t been making news lately. Whereas early last year, marketing and media coverage was prevalent, that has since faded. The whole company has opted to focus on its IPTV service, U-Verse, instead, she said.

“It has always been a question from a marketing perspective: How do you co-market these two services against each other,” Mastrangelo added. “It is very confusing. We’ve asked this question about the marketing, and they’ve never answered it and didn’t seem to think it would be a problem. But as U-Verse gets more sophisticated and they add more and more features that are unique to U-Verse, I would think customers from HomeZone would start to say, ‘Well why can’t I get U-Verse? I want that feature.’”

From this perspective, telcos face competition not only from their cable and satellite competitors but also from other telecom providers going either the all-IP route or partnered approach. Qwest is another company deep in the planning stages of deploying video offerings overbroadband to deliver a wide range of VOD offerings, including high-definition video. Rather than deal with the expense of IPTV, the phone company plans to earn its return on investment selling high-bandwidth services to consumers and capacity to content developers while allowing its customers to seek out HD VoD from the Internet. “In video, the world is going from three broadcast channels to 500 cable channels to customized delivery of just what you want,” Qwest CEO Ed Mueller told Telephony in January.

But he is still looking for the best user interface to tie services together in the home. “The home interface is still yet to come, but this is where I want Qwest to play,” he said.

With the infrastructure already in place, bringing this type of system to fruition is not unfeasible. Despite the cost savings in infrastructure, the challenge providers – typically small or rural ones – still must conquer revolves around scaling the service in a cost-effective manner. Operators late to roll out VOD generally just opt to offer DVR, since it is less expensive than installing new hardware in consumers’ homes. After that hurdle is reconciled, telcos like Qwest must be able to scale that service over their small base of initial customers to justify the cost.

“Outside of major operators, can a small operator [scale] who is starting from a base of zero? That would be pretty difficult,” said Bruce Leichtman, president and principal analyst at the Leichtman Research Group. “Also, one would think the first people who would want to do that--and who are to some degree--are DirecTV and EchoStar. DirecTV has been looking at integrating a broadband offering of on-demand into their satellite offering. So to me, [interest] comes more from DirecTV than from a local carrier.”

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