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Viodi View Newsletter - January 19th 2004 Issue

Indie Telco Local Content Workshop Advertisement

SBC & Microsoft @ Digital Hollywood CES

By Ken Pyle, Viodi, LLC

CES is a show that telcos should be attending. At CES, the competitors and the opportunities of tomorrow are to be found in booths both big and small. CES is so huge, that it could take a day to plan out a schedule for seeing the show. Instead of making that effort, I figured it would be better to walk from booth to booth and see what caught my eye. My only planned event was to make it to the Telco-Video Entertainment panel, which was part of the Digital Hollywood track.

Jonathan Hurd, of Adventis, started the panel by pointing out that, unlike ten years ago, telcos’, “revenues are at risk.” He cited one study that suggested a combined telco revenue loss of $14 Billion by 2010. While traditional revenues may be decreasing, he suggested that there is an “expanded wallet”, in terms of consumers shifting their buying from the real-world to an online experience.

BT (what used to be known as British Telecom) has gone one step further and has actually moved into new ways to make revenue. They are a major supplier of back-haul transport services to entertainment companies, like E!. Getting closer to the entertainment community is exactly what Derek Kuhn of Alcatel and Chairman of the Broadband Services Forum is trying to do. Kuhn explained that the BSF is focused on bridging the Hollywood and vendor communities.

Jonathan Symonds of ICTV explained how interactive television is one of the content services that will help differentiate a provider from the satellite competition. He explained how 82% of subscribers on the Grande system have interacted using the ICTV’s interactive television platform. He suggested that is very important for telcos to be able to break down the silos between their different products to allow better applications (e.g. being able to program the Digital Video Recorder from an online account page).

Microsoft’s Phil Corman said that telco’s real differentiators will be found when they can start with the idea that they are going to make, “better television and new television.” He said Microsoft’s efforts are not about browsing the web on television, but are about adding value to the existing television by inserting interactive elements in the right context. For instance, he showed an example of a baseball game that would include stats and, maybe, highlights that could be integrated into some sort of “fantasy baseball” package. Corman showed a very impressive demonstration that featured virtually instant channel changes. If reality is near what the demo showed, then this could be a very interesting product.

One of Microsoft’s first customers for this product is SBC and Jeff Weber of SBC discussed their plans to move into interactive television. He mentioned that reselling Echostar’s DishTV product has been a good way for SBC to learn the business and they are very encouraged by the results thus far. His comments made me wonder if Echostar might be an interesting acquisition target for one of the former RBOCs. At its current market cap, it looks like it would fetch approximately $2,000 per subscriber and would give an RBOC instant presence in the video business.

Weber stated that more bandwidth is the key to meeting customer expectations. He described SBC’s widely reported plans to deploy fiber to the neighborhood to 17 to 18 million homes and fiber to the premise to another, mostly Greenfield, one million homes over the next three years. He suggested that they will have to offer a product that will be competitive with cable. At the same time, he hinted that they would be looking at different content business models.

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