But note that the ILECs are now fighting to go into the only competitor they have now: cablecos.
Why telcos are wooing the television business: TELECOMMUNICATIONS AND TELEVISION by Mark Halper: 'Content is king' was always the multimedia mantra - now the telcos are acting on it
Financial Times; Jun 20, 2001
By MARK HALPER
If any one moment encapsulated the strategic future for telcos, it was the announcement by British Telecoms (BT) that Sir Christopher Bland, the BBC's chairman, was to become its chairman instead.
It was no coincidence that a stalwart telco hired top expertise from a stalwart broadcasting company. Telcos are charting a business course that steers them squarely into the TV industry, so having a seasoned broadcaster on hand should certainly help BT.
Sir Christopher's contacts and insights could prove invaluable as BT tries to buy and partner its way into the TV business. Recent reports have suggested that BT and Sir Chris are indeed chatting with broadcasters including Carlton and Granada.
Now more than ever, telcos are finding it imperative to cross over into the broadcasting business, as they are under assault from cable companies and in desperate need of a strong new revenue stream.
Management appointments such as BT's, along with strategic investments and alliances are likely to become more commonplace as telcos try to build high-speed phone networks doubling as broadcasting conduits, and as they try to collect line fees and commissions from viewers purchasing goods and services through increasingly popular interactive television.
Sir Christopher's appointment underlines a convergence trend. Spain's Telefonica owns a controlling interest in ViaDigital, the Spanish satellite broadcaster, and last year acquired Endemol, a Dutch production house,
France Telecom, which already owns its eponymous France Telecom Cable and has a 16.7 per cent share of satellite TV firm TPS, has bought into myriad European cable firms, including NTL in the UK and Casema of the Netherlands.
Telecom Italia might have sold its share of satellite broadcaster Stream in May, but it is buying a controlling interest of TMC, an Italian terrestrial station.
In the UK, Energis has established a presence on BSkyB's satellite service with its Bright Blue interactive TV shopping portal.
Many of these investments are motivated by the very real threat to the telcos from cable companies. After years of investing huge sums running fibre networks near millions of homes, cable companies are now rapidly signing up customers by offering them not just TV, but phone and internet service as well - all over the same fibre.
This all-in-one service over connections that are generally ten times as fast as the standard copper lines that telcos run near homes is what jargon fans call "broadband". Cable's recent success at delivering it has telcos shaking.
"Telcos have got to do something," says Shirley Brown, an analyst with Ovum, the research company. "They can't just hand over all the broadband business to cable."
Not least among telcos' concerns is that the cable companies are marching right into the core of traditional telco business: phone calls. The UK's two top cable firms, Telewest and NTL, both count more telephone customers than TV viewers among their subscribers. Telewest says that of its 1.7m subscribers, 1.1m purchase only phone service, while 153,000 take TV only. Another 440,000 subscribe to both TV and phone. NTL and Telewest fibre passes nearly half of all UK homes, posing a serious defection scenario to BT.
Compounding the teleco's problem is that in their generally strained financial state, it is difficult to raise money to invest in infrastructure and alliances. Indeed, just a few weeks after the announcement of its new chairman, BT said it was selling its 19.9 per cent share in satellite broadcaster BSkyB's Sky Interactive unit - a casualty of BT's heavy debt burden.
One hope for telcos is that their own high-speed networks could serve as a broadcasting stream, while also running phone calls and internet access. But unlike cable firms, telcos are not spending to build fibre out closer to homes and businesses. Rather, they are turning the slow copper wires of the so-called "last mile" into a fast connection through the deployment of DSL (digital subscriber line) technology, which has had chequered success across Europe.
Some smaller telecommunication service providers have started to broadcast over their DSL lines. The UK's Kingston Communications and Norway's Telenor both provide television services, and others could follow suit this year or next.
"The larger telcos are being more cautious and want to see how the others do," says John Rand, senior director of European operations for iMagic, a company which sells software that supports DSL broadcasting.
Short of actually broadcasting, telecom companies will benefit from providing the connections to and from digital set-top boxes that satellite broadcasters such as Sky and Telefonica's ViaDigital use to support interactive services.
Although BT is selling its stake in Sky, it nevertheless will continue to provide phone lines that carry customer orders as well as betting, game playing and e-mail traffic from the viewer to the merchant.
Betting and game playing are starting to take off on Sky and other interactive platforms, and that is good news for BT revenue. Sky is charging a premium of 25p to connect to some games, like its popular new Tetris, and sharing it with BT. Sky is also making more use of its BT phone connections to transmit information to viewers, because the cost of transmitting additional information by satellite is too expensive.
But for all of this promising outgoing and incoming set-top box traffic, it behoves telcos to quickly implement DSL or an equivalent broadband technology that keeps pace with cable speeds.
One potential asset that telcos bring to either their own or their partners' broadcasting services is the ability to implement customer and billing systems that support targeted advertising and cross marketing.
David Brodwin, a San Francisco-based partner with Accenture, the consulting company, notes that as broadcasters plunge into interactivity, they will have to change their advertising approach. One advert for millions of viewers will no longer suffice. Rather, he says, advertisers will want to tailor their ads for demographic niches, such as "women between 30 and 45 who earn between Dollars 75,000 and Dollars 150,000 and commute to work."
Telcos, whose computer systems have historically recorded every phone call, have the technology to support that shift by recording who is watching what and when, and applying that knowledge with targeted promotions across TVs, PCs and call centres.
This sort of customer information integration will eventually lead to what many think will be the nirvana of TV viewing - the so-called personal TV channel that delivers the programs viewers want when they want it, with targeted advertising.
"Each industry is fighting to control access to the consumer, and each is faced with destruction if they don't win this battle," warns Mr Brodwin. There's nothing bland about that.
Copyright: The Financial Times Limited |
