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Wall Street Journal
April 18, 2005
PORTALS
By Peter Grant
"Merger of TV and Web
May Hit Cable Industry Before It's Prepared"
INTEGRATING THE computer, television and phone experiences was the mantra two weeks ago in San Francisco, where 17,000 cable-TV executives gathered for the industry's national show. Displays at the Moscone Center forecast a future in which callers' phone numbers will flash on TV screens and people will program digital video recorders from their cellphones and computers.
"This is about the cable industry and the content industry collaborating around technology to do things that people really want," said Glen Britt, CEO of Time Warner's cable business, during one of the keynote panel discussions.
But there is one thing many consumers want that the industry is in no hurry to deliver: an easy way to gain Web access from their TVs. While gadget freaks can already do this, most cable operators would prefer that the Internet and TV remain two separate experiences—and revenue streams—for everyone else. For programmers, total integration would open the door wider to file swapping and piracy. For cable operators, it raises the specter of viewers going directly to content providers for shows and films, bypassing the middleman.
But the Internet is coming to TV whether cable companies like it or not. Phone giants like SBC Communications and Verizon Communications, which are racing to offer TV over the new fiber networks they're building, plan to deliver their signals using an Internet technology known as IP TV. While cable companies broadcast all their channels at once to the TV, blocking those that aren't paid for, with IP TV, SBC and Verizon will deliver only programs that viewers request. That essentially makes a limitless amount of content available, just as there's no cap on the number of Web sites.
FOR NOW, PHONE companies are planning to tightly control their networks. Like the cable companies, they're concerned about piracy and making sure consumers pay them for programs and movies rather than using their pipes to go directly to content providers.
But because of the breadth of the Internet, IP TV presents intriguing ways for phone companies to distinguish themselves from cable companies. Individuals are putting up more and more unconventional content on the Web using such vehicles as video blogs. Phone companies could easily make this content available on TV. While most of it will be pretty boring, with the right search engine, it could turn into the ultimate reality show.
Start-up businesses like Akimbo Systems are already planning ways that wannabe producers can upload their videos and even share in the revenue when TV viewers buy the content. "It will do what eBay has done for retailing," boasts Josh Goldman, Akimbo's chief executive.
Will cable operators respond to this threat with a comparable service? If history is a guide, the industry will probably wait to see how IP TV works out for the Bells. Most cable operators are notorious for being technology followers rather than leaders. The most notable advances of the past decade, such as digital channels and digital video recorders, were pioneered by satellite TV businesses.
Certainly there was little sign at the Moscone Center that cable operators are worried about phone companies leapfrogging them in the TV business. Most cable companies plan to switch to IP TV technology eventually because it's a more efficient form of transmission and will combine more easily with their Web-based phone and broadband services. But clearly they're in no rush.
MOTOROLA, A BIG provider of cable-network infrastructure, showed some equipment that's being prepared for the IP TV transition. But most of its display area was devoted to devices like video phones and home-security devices that can be monitored via the Web. Scientific-Atlanta, another big infrastructure company, put little emphasis on the cable industry's long-range IP TV plans in its presentations.
In the cable industry's defense, it can hardly be accused of slouching when it comes to girding itself for new competition. Operators have spent over $90 billion since the mid-1990s on upgrades. The show was packed with the broad array of new services that companies are rushing to market, including phone, high-definition TV and video-on-demand. The industry's strategy reflects its strength as the dominant provider of TV and high-speed Internet hookups, well positioned to muscle into the phone business much faster than the phone companies can expand into TV. Executives are confident subscribers won't defect as long as companies keep loading them up with new services.
"Fiber optics is not what's going to win. It's what you do with it," said Brian Roberts, Comcast's chief executive, during a panel discussion. "If we innovate I think it's ours to win."
The danger, of course, is that IP TV gives phone companies the tools to innovate better. A few speakers did predict that rapid technological advances would create unprecedented challenges for cable companies. But not surprisingly, many of these warnings came from executives at companies that work with both camps.
"There's no question SBC and Verizon are very clear about their aggressive plans," said Rob Glaser, chief executive of RealNetworks. "It's a race, and it's a much more competitive market than anything the cable industry has ever seen."
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