The Digital TV New Technologies

What would you call a television system that lets you watch hundreds of channels whenever you want? A system that lets you start a show in the living room and pick up where you left off in the bedroom? A system that would pause when a telephone call from a friend came in, but not when a stranger phoned? A TV that could show a baseball game from a multitude of angles, on demand?
 
Would you call this type of service television heaven, or would the plethora of choices make you go insane?

TELCOS are investing billions and using IPTV, or Internet Protocol standards to get their television services to people’s homes.
 
Starting next year, many Americans will get the chance to find out. That’s when this new type of TV service will launch; it will come not from a cable or satellite provider, but from your local phone company.

Wow! Buying TV from the phone company? As weird as that might seem, phone companies have moved far beyond just selling local and long distance calling. With calls to the U.K. as low as 2 cents per minute, there’s no money left in voice. Telephone calls will soon be as important to the phone companies as telegrams are to Western Union. They’ve been picking up the slack with other products like high-speed Internet access and cellular service.
So TV is just one more potential revenue stream, but one that some of the big players, like BellSouth, SBC, and Verizon think will be a key part of their success. And with cable companies selling their own telephone services, the Baby Bells need to strike back on the cable and satellite turf.

“The phone companies can only play defense for so long with no offensive thrust,” said Ian Olgeirson, an analyst with Kagan Research,in Monterey, Calif.
 
The phone companies’ strategy is to sell consumers a “triple play” which includes voice, data, and TV services in one package, with one bill. Consumers should like the convenience assuming the features and performance are compelling.

The telcos are investing billions and using a variety of technologies to get their services to homes. SBC and BellSouth are developing Internet Protocol TV, or IPTV, a system that uses Internet standards to deliver a wide range of channels and advanced interactive services.

Using the Internet as a delivery system is not as dicey as it may sound. The channels won’t be like the jerky, pixelated images emanating from some news websites. Rather, the new IPTV systems will use dedicated, high-capacity lines to bring in hundreds of standard- and high-definition channels, with picture quality as good as the best seen on satellite television. And unlike Internet movie download services like Akimbo, CinemaNow, and MovieLink, these pictures do not have to be recorded first; they can be viewed in real time with no delay, just as if you were watching over a cable system.

IPTV has already taken off in countries such as China, Korea, and Norway, among others. And a handful of small IPTV systems are now operating in Georgia, Oklahoma, and California.

In Sacramento, Calif., for example, 18,000 people get IPTV from SureWest Communications, and receive hundreds of channels via fiber-optic cable that comes right into the house. An added benefit is super-fast broadband DSL—up to 10 times the speed of standard DSL services—which is a great benefit for online game players. “The whole beauty of IPTV is the ability to offer advanced services in the future,” said Bill DeMuth, a SureWest vice president and chief technology officer.
 
But the big push will come next year when SBC begins to offer its version of IPTV, called U-Verse. At January’s Consumer Electronics Show in Las Vegas, SBC demonstrated an early version of the concept, with all the bells and whistles they could muster.

Unlike regular cable and satellite TV, U-Verse’s IPTV system sends only the channel that has been requested to a subscriber’s IPTV tuner. (Cable and satellite systems send all channels down their transmission lines, and the tuner then displays just the one channel the customer selects.) By only transmitting the needed channels, the system can devote more bandwidth to other services.

The Las Vegas demo offered multiple camera angles of an event, thumbnails of multiple channels, and telephone caller ID information across the screen. If the customer wants to take an incoming call, whole-house DVR functionality pauses the live TV program. Once the call is finished, the viewer can transfer the program to another room and continue watching where they left off.

The company says it will also offer a wide variety of video-on-demand programs, too, accessed through a customizable program guide. With all programming residing on the company’s servers until requested, the amount of video on demand it offers is limited only by its computer capacity. SBC won’t say which services it will provide upon launch, now scheduled for early 2006.

Because everything will operate through the IP network, many devices will easily talk to one another, according to Jeff Weber, vice president of product and strategy at SBC. For example, a consumer can take a picture with a Cingular (an SBC company) picture phone and that photo will automatically be transmitted to the Yahoo! Photos website. Then, the customer can transmit the photos via the IP network to any TV in the house. Similarly, the user can download music and then, as in any networked home, transfer it to any room of the house.

Cell phones will become an integral part of U-Verse, as they could be used to remotely program various aspects of the U-Verse home network, or even display video programs that are part of the subscriber’s package. To make all this happen, SBC is spending $4 billion to extend fiber-optic cable to 50 percent of its voice subscriber households, or 18 million homes. For its investment, the company will create a system that can deliver at least 20Mbps of data to the home. Using the MPEG-4 compression standard, that’s equivalent to three simultaneous standard-definition channels, plus one HD channel.

Multiple HDTV set owners are out of luck. SBC decided that delivering one HD feed at a time should satisfy 99 percent of its potential customers. But Verizon isn’t so upbeat about that lack of HD delivery capacity. That’s one reason they wrote off the IPTV route, and decided to offer a video service more akin to systems used by traditional cable TV companies. Verizon is laying fiber-optic cable directly to a customer’s home, not just to a central neighborhood node. By doing so, the company says it can offer much greater and more reliable capacity than an IP-based system. “There’s a risk in the IP approach,” says Shawn Strickland, vice president for Verizon’s FiOS TV initiative. “That platform is not mature.”

TELCOS have a tough battle against cable and satellite TV service providers ahead of them. How they fare will depend on their service.

Verizon will offer a hybrid approach when it launches its video service; fiber will give the system enormous capacity, but it will deliver its services the traditional way—downloading every channel to the home, with the consumer’s tuner selecting which ones to display. With the FiOS system, transmitting multiple HDTV channels is no problem, Strickland says. When they become available, “we can support 3D TV and 1080p broadcasts.”

While FiOS could include caller ID and e-mail on the television screen, the company is not likely to offer those features. “We are not so interested in providing those things, even though technically we can,” Strickland says. “PC penetration is high. They don’t need a TV to do that. We want to enhance the viewing experience without hyping it up.” Verizon will launch its video services later this year. The company has secured franchise agreements in eight different locations with another 15 soon to be signed.

The easiest way for any of these new video entrants to compete would be on price. But that’s a dangerous road to follow, because someone can always undercut you. “We do not want to compete on price,” Verizon’s Strickland says. “So that leaves a few avenues: leading edge video and audio signals.”

SBC says it also won’t play the pricing game. Service, it says, is its trump card. “We have a long heritage of taking care of our customers,” says Weber. If that’s how customers perceive the telcos, they have got a great advantage against some of the cable operators, many of whom are regarded as being about one step above Enron in their business practices.

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.