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Telephone Companies Add TV Service to Compete With Cable

Posted on: Thursday, 28 July 2005, 00:00 CDT

Jul. 28--With cable television companies such as Time Warner Cable offering phone service, telephone companies are preparing a counterattack -- TV service with new bells and whistles.

It's a defensive move that will give the phone companies another weapon in their battle against cable, which competes head-to-head for both phone and Internet customers. And it's potentially more lucrative than the phone companies' current strategy -- partnering with satellite TV companies.

"It's essential for the phone companies to be able to compete with the cable companies," said Neal Page, CEO of Inlet Technologies. The small Raleigh company is developing a product that phone companies could use to compress video before sending it over phone lines.

In most of the country, getting TV over phone lines is years away. And to make it happen, the phone companies must overcome technical and regulatory hurdles. They also would have to acquire the rights to a wide variety of programming to compete with the offerings of the cable and satellite companies.

The video features that phone companies are talking about offering in the future include:

--A wider range of programming on demand. More movies and TV shows would be available when you want to see them. You could, for example, choose any previously aired episode of "The Sopranos."

--Multiple pictures on your screen. The ability to watch four or five shows simultaneously is in the offing.

--Camera angles. Imagine picking your own camera angle when watching a ballgame or other sporting event.

--Instantaneous channel-switching. You know how your TV screen goes blank for a moment when you switch channels? That would be history.

--Instant messaging. Yes, you could simultaneously watch "Lost" and chat about the show with a buddy on the West Coast.

--Ultra-remote control. No more worries about forgetting to set your digital video recorder to record a season finale. You'll be able to do it by cell phone.

--Interactive on-screen program guides. You'll be able to arrange programs by genre, regardless of the channel.

"It's not just TV as we know it today," said BellSouth spokesman Brent Fowler.

But whether the reality can live up to the hype is no sure bet.

Trial projects are under way. But Maribel Lopez, an analyst with Forrester Research, doesn't expect the major U.S. phone companies to offer TV service over their phone lines until at least next year. (Some phone companies, such as BellSouth, are in the cable TV business. BellSouth offers digital cable service in 14 markets, but not in North Carolina.)

Lopez wrote in a recent report the phone companies "are long on promises and short on details. É [They] can't articulate what programming they will offer, what features will be available," and what they will charge.

Moreover, Lopez doubts that the phone companies' TV offerings will be sexy enough to lure hordes of cable and satellite subscribers to make the switch.

In addition, cable and satellite companies are likely to find ways to match any of the new features that prove to be popular, said Bruce Leichtman, president of Leichtman Research Group, a New Hampshire market research firm.

There's no telling when Triangle phone companies will plunge into TV. None of the three major phone companies in the Triangle -- BellSouth, Sprint and Verizon -- have announced definite plans to offer new-fangled TV service locally. (They all have deals with satellite-TV companies to sell satellite service, but that's past-generation TV, not next-generation.)

But all three phone companies definitely have video on the brain.

Verizon is the furthest along.

It intends to distribute video via technology that's similar to cable, but over higher-capacity fiber-optic lines that would extend all the way to your doorstep. The greater capacity would pave the way for more programming choices and greater interactivity.

To make that possible, Verizon is investing billions to improve its telecommunications network in parts of 15 states, giving it the capacity to handle video by year's end. But North Carolina is not among those states. A nationwide upgrade would take 10 to 15 years, said spokesman Bob Elek.

But delivering the service depends on resolving regulatory issues, Elek said.

Verizon is seeking -- unsuccessfully so far -- federal or state legislation that would permit it to sell TV service without seeking approval from each municipality, which is what cable had to do.

The alternative, if Verizon offered TV service in every market it now offers phone service, would be to negotiate with more than 10,000 municipalities, said Elek. To put that in perspective, Time Warner Cable serves nearly 3,000 franchises in 27 states.

BellSouth, meanwhile, has been testing another technology, first in the laboratory and then in customers' homes, although it won't say where. The technology is called Internet protocol television, or IPTV. Rather than delivering all channels to your home all the time, IPTV sends only the channel you select at any one time.

Despite its name, "IPTV does not equal Web TV" and doesn't mean that TV programming is delivered over the Internet, said Charlie Guyer, spokesman for telecommunications gear maker Alcatel. Instead, it involves delivering video over a proprietary network -- such as phone lines. Alcatel's Raleigh office, which has 315 employees, is involved in designing and developing products for IPTV.

BellSouth hasn't disclosed a timetable for completing its testing, but BellSouth's Fowler said results have been encouraging.

Still, BellSouth hasn't made a commitment to get into the video business. Nor has Sprint. Sprint spokesman Tom Matthews said the company is exploring different video technologies, but he declined to provide specifics.

Even customers who are content with their current cable or satellite TV service have a vested interest in seeing the telephone companies enter the market. Forrester's Lopez predicts that, in areas where phone companies start video service, the competition will force cable and satellite companies to rein in price increases.

Indeed, she expects the phone companies to match the competition's price, or undercut it, to make inroads with customers.

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Source: The News & Observer

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