Five out-of-the-box telecom competitors

Category:
Over-the-Top Video Services

Competitors:
User-generated video from YouTube; pure-play aggregators like Joost; video-delivering Web sites such as NBC.com or ESPN.com

Line of Attack:
Consumers like watching video online. And not just YouTube clips – they have started watching full TV shows online too. According to an October survey by The Conference Board, 16% of American households use the Internet to watch TV shows online, double from a year ago. Internet video startups like Joost and Babelgum are trying to build a business out of it while TV network Web sites like ABC.com and NBC.com are experimenting with catch-up broadcasts and other ways to take advantage of online video viewing.

As service providers roll out cable-replacement and IPTV services like Verizon FioS and AT&T U-Verse, they are literally in a race to determine whether more interactive video experiences will take place on the TV, the PC or some combination of the two. The challenge for service providers is being a partner in the Internet TV market and not just a naked DSL line provider enabling others to deliver video – and collect revenue – via their networks.

A further challenge is presented by consumer electronics companies, which are increasingly delivering devices that offer route-around capabilities to a telco-provided set-top box. Microsoft’s Xbox offers built-in chat and soon IPTV capabilities; Apple’s AppleTV box lets users route movies and TV shows purchased online to their set-top box; newer competitors like Vudu combine local storage of movie clips with over-the-top bandwidth to offer video-on-demand boxes.

Best Defense:
There are a variety of ways that service providers can combat, or even benefit from, the over-the-top video threat.

The first is to partner with over-the-top providers, either by delivering Internet video via a broadband portal or as a selection on a telco TV platform, “essentially an extension of their channels given the limited space in the [system] head-end,” said Joe Trainor, vice president of sales at NarrowStep, which builds Internet TV systems for Web, cable and carrier customers.

Service providers must also be aware to compete with the * experience *of Internet video, which not only has a broader array of content but thanks to search engines, tagging and other technologies delivers a much less channel-driven approach to video content.

"Imagine if the state-of-the-art merchandising platforms on the Internet today -- iTunes, Netflix and Amazon -- were translated appropriately to the TV viewing experience," said Jonathan Hurd, director at telecom consulting firm Altman Vilandrie & Co. "They would be personalized, more graphical, helpful -- “if you liked that, then try this” -- and organized by program or actor rather than channel."

Savvy service providers will also push their set-top partners to out-innovate consumer electronics competitors, building in raw capabilities (storage, processing power) and unique services (callerID on screen, TV-driven social networking) while keeping box prices low (versus $500-plus for gaming systems, etc).