To fight back, the largest cable operators have improved customer service and added features such as multiple HDTV channels, DVRs, and a wide range of video-on-demand programming. To improve their offerings, Dish Network and DirecTV are switching to the MPEG-4 compression system, which will dramatically increase channel capacity, giving both the ability to offer many more HDTV channels, including the HD feeds of local independent and network stations. In early 2006, DirecTV will introduce a home media center that allows customers to record HDTV and transfer programming, music, and photos throughout the house.

So how will the telcos fare when they begin to battle against the entrenched cable and satellite offerings? It may depend on whom they’re fighting. “They could be very successful against some cable companies,” says Adi Kishore, an analyst with The Yankee Group research firm. “But other cable companies like Comcast and Cox could be tough. Within five years, the telcos will still have less than 5 percent of U.S. households subscribing to their video services.” The determining factor will be whether people are fed up with their cable or satellite service, says Michael Arden, principal analyst with ABI Research.

For the telcos to succeed, it’s imperative that they deliver great customer service right away. As new competitors in a crowded market, they have no margin for error. “When the telephone companies give an eight-hour service window and no one shows up, that is going to be much more impactful than if a cable or satellite company did the same thing.”

But even with great customer service, a business that offers mediocre programming or service that is not any better than the competition is not likely to seduce many. Even if you don’t like your cable or satellite company, there’s always something comforting about the devil you know. Especially if learning how to use all these new features is your idea of television hell.