Video moves to the back burner Has the flame under telcos' broadband plans gone out? >BY SHIRA LEVINE, New Media Editor

For telcos that had been eyeing the glamorous, potentially lucrative video market, last year's Telecommunications Reform Act meant that all obstacles to their grandiose entertainment services plans had finally been removed.

But many industry experts feel that with a few exceptions, telcos have been dragging their heels on entering the video market. For one, over the last year telcos have become disillusioned with both the technology for delivering video to the home and the consumer demand for these services, said Mike Huseby, partner at Arthur Andersen's global communications and entertainment group in Denver.

"Most of the telephone companies, with the exception of U S West, have focused on building their own networks, and those haven't proved to be very successful at this point," Huseby said. In addition to that, market tests have not shown that customers will support a range of products and services, he added.

Moreover, the threat of direct broadcast satellite services has prompted the cable industry to focus more on digital deployments and less on telephony services, giving telcos some breathing room, Huseby said.

But if the cable industry has slowed down its once-aggressive plans to enter the local telephone market, interexchange carriers have taken up the slack, forcing the telcos to concentrate on their core business, Huseby said.

"There's an overall refocusing not only on core products and services but also on the existing customer base," he said.

And looming local competition from IXCs has whetted the telcos' appetite for the long-distance market. Moreover, offering long-distance services is familiar ground for telcos.

"Long-distance is technologically not a challenge," said a Bell Atlantic spokesman. "We have the skill set, the management, the marketing and the technology to do it. It's our business.

Video is also important to Bell Atlantic, he said, but the delivery of video services over a broadband network is definitely on a different timetable than entering the long-distance market.

"Technologically, video has more delays and is more challenging," the spokesman said. "I would take issue with terms like 'back burner' because it implies that it's not important to us. But there are undeniably differences in our long-distance and our video schedules.

At least one analyst feels that approach is dangerously short-sighted.

"Telcos need to think about the long-term strategic importance of being in the broadband networking business," said Kevin McGilly, an analyst at Freedom Technologies in Washington. "Video is only one of a number of broadband applications that an advanced digital network could support, and these will be attractive services to deliver to the home. They're in danger of letting the window of opportunity of getting into these markets pass them by."

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