The Bells will find the sledding so tough in IPTV that they may bow out, according to three analysts speaking at this week's Next Generation Networks 2005 conference in Washington, DC.
After sinking billions of dollars into fiber facilities to offer video to homes and businesses to better compete with cable companies offering VoIP, RBOCs such as BellSouth, Verizon and SBC will find that their efforts are too little, too late and too expensive, analysts say. They'll end up gradually backpedaling away from these ambitious and highly visible efforts, and perhaps revive partnerships with satellite TV companies after realizing they can't catch up to cable companies and other video entertainment providers, they say.
Asked during a panel session at NGN whether IPTV will sink carriers or allow them to swim, CIMI Corp. President Tom Nolle replied, "Neither. They're not going to do it. "It's not economically viable, they're never going to be competitive" with cable or satellite TV providers, he said. "They've got to do something in the broadcast space to reach parity" even though the TV market is embracing video on demand, Nolle said. "They'll back away near term from the IP model" due to cost.
SBC is sinking US$6 billion into its Fiber-to-the-Node (FTTN) effort, which extends optical fiber to neighborhoods to support high-speed copper DSL loops into homes for IP video. FTTN will pass 18 million homes by year-end 2007, SBC has said.
Verizon will have spent about $2.5 billion to extend fiber to 3 million homes by the end of this year. BellSouth passes about 1.1 million home with its Fiber-to-the-Curb deployments, and could potentially pass 3 million homes with 12-24M bit/sec ADSL2+ copper and bonded copper loops this year for about $700 million.
Even with these apparently significant investments, "the Bells are five years behind the cable companies," says Scott Cleland, founder and CEO of research company Precursor Group.
"We have a cable industry that's fully built out," Cleland says. "Bells are a fourth entrant with three formidable players" in video entertainment.
Even though Nolle believes the RBOCs have to catch up in the broadcast TV market, CIBC World Markets Analyst Steve Kamman says there's no interest or demand anymore in broadcast TV with the advent of Digital Video Recorders and Video on Demand. "The vast majority of TV will be downloaded onto a hard drive," he says. "(The Bells are) firing an artillery shell at a moving target."
"There's a lot of room for improvement in TV entertainment," an SBC spokesman said. "We're looking to fill a niche with IPTV. There's a market for this. The capabilities of IPTV and switched video far exceed what's available today with cable. We've got local (telephony), long-distance, wireless, broadband, Wi-Fi and soon VoIP... We're going to integrate these services and change the realm of communications."
BellSouth and Verizon did not return calls for comment by press time.
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