Telco Power !
I was at the NXTComm conference (the US telco show) in Chicago last week - and the air of bullishness in the industry was inescapable. Starting with AT&T's Randall Stephenson's optimism-filled keynote driving mobility, to Verizon's celebration of customer delight, it appears the telcos are making all the right moves. Any cable operator executive at the show would have clearly felt intimidated with the strides that telcos seem to be making into video world. IPTV was everywhere on the exhibit floor - service providers, end-user device makers, enabling platforms, middleware and turnkey solution providers.
If anything struck me as odd, it was the rather weak voice that content providers had at the show. I would have thought that the telcos would be seriously courting the studios with some public displays of affection - but instead, I saw them touting more person-to-person communications (e.g. AT&T's videoshare) and personal convenience capabilities (e.g. Microsoft's 3-screen Telco 2.0 concept). In a world of converging quadruple-play, I guess differentiation beyond channel line-ups is important to highlight.
Another interesting observation at the IPTV displays was the way everyone was marketing their product using the ensemble. As a lay consumer, and based purely on what I saw at the show, I would have equated Motorola, Microsoft and AT&T as independent providers of an integrated experience ... though each came from a different perspective of how they understand me as an end-customer. The extent of collaboration required to deliver an out-of-the-world customer experience is amazing - perhaps why Cisco's John Chambers picked collaboration as the topic of his keynote. But, making collaborative structures work within the organization is one thing, making them work across organizations poses a new and interesting challenge for the largely monolithic aggregators. The iPhone release due this week will be a true stress test of such a partnership.
And I wont be surprised to see Google and Apple making a splash of their own at next years telco conference.
Comments
There is no doubt that "Content is the king" for the success of IPTV. However, IPTV content providers are having issues with the telcos on revenue-sharing models. This is the prime reason why the "public-display of affection" (I like the context this term is being used for) may not have happened.
Besides, the Telcos have incentives aligned not to let content-providers think that they are indispensible as it weakens the bargaining position for the telcos.
As far as I understand the dynamics of US IPTV market from my research last year and the folks who I talk to in this industry, IPTV implementation is currently becoming a pain for the US telcos from the delivery point of view. The dimensions of billing, provisioning, etc. are in a state of chaos, for lack of a better term. Also, the prime selling point and the true differntiator that IPTV promises is lack of delay in switching channels at same fees or lesser than those charged by the MSOs/Cablecos. As scaling up happens, this will be hard to achieve. The primary painpoint of the telcos arises from lack of system-readiness before rolling out the service. i.e. the promise is made and the idea is sold - now, is the time to deliver.
Goog freed itself the trouble of getting onto IPTV woes by acquiring Youtube last year. Youtube, in many ways, ensures that Goog gets a piece of the IP-TV cake. If you think about it, Youtube is IPTV and Goog provides it for free. Also Youtube has the same stickiness of that of a television. Besides, the worry for content is lesser as the spare time cycles of population are utilized to generate content.
Unlike the Telcos, Goog is NOT struggling with the billing system or Human-Machine Interaction, but they are struggling to strike deals with the organized content-providers in order to get them on board. Once again, the media industry threw its tantrums as they have always done - they know that Content is the king and there are only a handful of players, until now. Also, the media firms wanted to make such an acquisition and Goog beat them at it.
Right now, Goog is focussed on monetizing ads from lat/long information from services on a cellphone. So, if an iPhone rolls out, Goog is more bothered about how to present services to the iPhone users such that they will use Goog's services only or most of the times. Goog is taking the Telcos head-on. Net neutrality was the recent past affair....the recent affair includes services such as Goog 411 - a straight attack on a revenue stream for the telcos. Slowly, steadily Goog is creeping in on the telcos.
IMHO, IPTV is a fairly disruptive technology:
1. If content providers dont come to terms with other players in the value chain soon, they will find some of their market share being eaten up by the unorganized, niche productions.
2. Telcos are going to have a hard time to beat players such as Goog from eating up their revenues. They will have to eventually join'em. If I were a CSP, I would be cautious - esp, after the recent acquisition by Goog of Grand Central. Does that signal Goog's trying to make customers service provider independent? Telcos must work with the new players to come up with a revenue-sharing opportunity (similar to iPhone-AT&T case).
3. New players and alliances (never thought of) will emerge.
For instance, a Blinkx may easily replace Youtube's dominance. Apple dropped "Computers" from its name for a reason - it is re-inventing itself - that's a new player in a way. MS thinks that using the IPTV platform, they will collect rents from ppl as they did in Windows OS - however, they gotta be much more creative than that. Similarly, if Apple thinks that they can get ppl with their iTV box, they've gotta rework their strategy because AT&T owns a stake in 2Wire alongwith Alcatel and have least incentive to push for iTV box than the STB from 2Wire. Besides, telcos get to maintain the control. In that case, Apple may sell iTV through MSOs - who might need that help due to the cool features it will provide to woo more customers from the Telcos.
4. Cable cos or MSOs will be bought out by the PE firms (or may form strategic alliance with them) and then become formidable foes to the Telcos post-makeover.
5. For most of the times, the Asian economies such as China, South Korea,etc. alongwith the EU will drive innovations and standards in IPTV and not the US. This is because the manufacturers will recover their fixed costs earlier over there and will be able to move ahead in the learning curve earlier to conquer newer horizons.
The only way everyone will be able to make money is by acknowledging that this space is made of multi-lateral alliances and that its not a zero-sum game.
The only way US Telcos can stay on top is by attempting to improve their ACSI ratings and constantly stay on top like a madman towards keeping them the highest. Ppl are going to have choices and the only way Telcos can woo ppl is by having the best customer service. Current state of customer service needs improvement in everything from provisioning to call-centers.
Finally, the Telcos can realize the full potential of their power only if they have the best ACSI ratings.
Posted by: Manik | July 6, 2007 10:35 PM