Cable Cos Preempt Telcos' IPTV '4-Play'

Verizon, BellSouth and SBC are madly developing IPTV to, among other things, compete with cable companies, whose bundled Internet, phone and TV "triple play" is siphoning away telephony and potential DSL customers. While most IPTV services have been delayed or have yet to roll out, one of the telcos' hypothetical advantages is that they could bundle wireless phones into the telephony, Internet, TV mix of services — a "quadruple play." (What about "quintuple," "sex," "sept" and "octuple"?)

The cable companies have sought to add wireless to their portfolio to preempt that advantage. And Comcast, Time Warner Cable and Cox have apparently reached a deal with Sprint Nextel to offer co-branded wireless services to cable customers.

Why do we care at TKG about IPTV (and the evolution of TV generally)?

The Kelsey Group believes on-demand cable, online video search and IPTV will accelerate the fragmentation of the TV viewing audience that began with the introduction of cable television. In one version of the future, which National Public Radio€™s Bob Garfield has called €œthe chaos scenario,€ the entire economic model of television is undermined. In another version, which we explore in a forthcoming report, the increased consumer choice and selection of of content by viewers offers enormously valuable targeting and contextual advertising opportunities for marketers and, potentially, new types and quantities of ad inventory.

These and other factors will combine to create a tremendous opportunity for national €" and potentially local €" advertisers to produce geographically and demographically relevant campaigns that are potentially targeted down to the set-top box level. Indeed, on-demand programming and related interactivity make IPTV much more like a directional medium such as classifieds, search or Yellow Pages and thus a potential distribution platform for the content that now appears in those media.

And when the Internet€™s targeting capability is married to the emotional and dramatic power of video/ television, the result is much more powerful than either by itself.