Internet TV to the Rescue

Mar 13, 2006  •  Post A Comment

Smaller telephone companies, threatened by competition from giants including the expanding AT&T Inc. and cable providers, are betting Internet television offerings will help them keep pace with larger rivals.

The National Rural Telecommunications Cooperative last month hired Don Mathison, a 30-year veteran of the cable industry, to lead the group’s effort to help its members offer Internet protocol television. Before joining NRTC, Mr. Mathison ran a consulting firm that worked to bring IPTV to telecommunications firms in Europe.

Mr. Mathison will be responsible for educating the NRTC’s members about the technology and helping them implement Internet television offerings. Without a bundle of voice services, television and high-speed Internet, smaller phone companies risk customer defections to cable operators such as Comcast and larger phone rivals including Verizon Communications and AT&T. The decline of the wire-line phone business and explosive growth of cellular services and Internet telephony has added pressure on the smaller companies.

To help its members offer Internet television, the NRTC in November hired satellite services company SES Americom to develop an IPTV product for the more than 1,000 companies that belong to the organization.

“The telcos see the cable industry moving toward the triple play, which includes voice,” said Mr. Mathison, a former executive with cable companies such as Media General, Colony Communications and Warner Communications. “They fear a loss of customers if they are not in those businesses themselves. They will be at a competitive disadvantage.”

So far, none of the NRTC member companies are offering IPTV service, though a handful of smaller telcos have begun deploying the technology. One such company is SureWest, a Sacramento, Calif.-based company that serves around 131,000 access lines to commercial and residential customers. It has spent around $200 million building a fiber-optic broadband network with which it offers IPTV services as part of a triple play available for around $110 a month. It competes with AT&T and Comcast.

Some smaller phone providers trying to offer Internet television may have an advantage over larger companies that have to upgrade antiquated systems, said Braxton Jarratt, senior VP of marketing and business development for Tandberg TV, an Atlanta-based company that provides technology to cable, satellite and telecommunications companies.

Verizon Communications said it will spend upwards of $15 billion a year to upgrade its networks with fiber-optic technology that can deliver video, voice and data to residential customers at speeds many times faster than what cable is presently offering.

“The infrastructure upgrade is far more feasible than it is with the biggest telcos in the country,” said Joseph Laszlo, research director for Jupiter Research.

“It’s economies of scale working backwards,” he said.