Good news, bad news

According to today's headlines, the telephone companies are doomed, and there's little they can do about it.

According to last week's news, they are still in control of their own destiny.

So which is it?

The broadband reality no doubt lies somewhere in the middle.

Today's excitement over Comcast's announcement of aggressive deployment of Voice over Internet Protocol has swung the forecast pendulum far away from the former Bell companies. Because cable has already invested heavily in upgrading its infrastructure, that industry is now poised to capture the voice market, using relatively simple and low-cost VoIP, further eroding the traditional Bell revenues. BellSouth, SBC Communications, Qwest and Verizon, meanwhile, must still invest billions to increase the bandwidth they can deliver in order to tip-toe into cable's income bastion, that of entertainment.

But if you believe last week's news of a new compression technique, from a Maryland startup called Qbit, then you have to think what a telephone company that harnesses this new technology could actually accomplish, in a relatively short period of time.

Long story short, Qbit claims to be able to achieve 10 to one compression of digital images with no loss of signal. Gerry Kaufhold, In-Stat analyst and longtime Qbit watcher, says the technology would enable telephone companies to transmit multiple HDTV signals into the home over standard 6 Megabit DSL lines, with capacity left to handle voice and high-speed data access.
Couple that thinking with SBC's announcement of its U-Verse services, a home entertainment package developed with 2-Wire and Microsoft, and it's not hard to picture serious two-way competition.

Comcast says it isn't just going to sell plain vanilla VoIP but add value in the form of videophone service, reliable backup service and more. SBC says it's going to make networking digital devices in the home a much easier process.

Both of these claims address the space that I think the real winner will occupy. The first company to develop a reasonably priced bundle of services that is truly easy to install and intuitive to operate will get the drop on the rest of the competition.

Comcast's announcement is a significant one, and if the company lives up to its television advertising as the new bastion of customer service, it may in fact create significant headaches for telcos. But Comcast is also raising rates at a time when many consumers are price sensitive.

Like Forrester Research Vice President Ted Schadler, author of "The Battle for the Digital Home," I believe the telephone companies that truly innovate can still succeed.

The question is, who will that be?

Email me at cwilson3@primediabusiness.com.