Telcos gear up for TV business in 2005

While cable operators such as Time Warner eye the mobile phone business, telephone companies are eyeing what they consider as greener pastures in pay television. In fact, if everything goes as planned, the telephone industry will be all about television in 2005.

Not only is TV slated for delivery over the traditional home phone line, but video programming is already being targeted to mobile phones.

The Associated Press reports that wired and wireless telco companies are intent on moving beyond simple phone calls, a business where revenues and customers are being lost to price wars and new rivals — especially with the arrival of low-cost voice-over-Internet phone services from cable TV companies, AT&T and dozens of smaller players.

While the strategy includes video games and other interactive offerings, the biggest revenue target is the cable TV market: In 2004, consumers paid more than $36 billion for their cable TV, and that programming generated nearly $19 billion in ad revenue, according to the National & Cable Telecommunications Association.

Verizon and SBC, two of the largest regional telephone companies, are expected to introduce TV services in at least a few markets by mid-year. What’s not known is whether their version of TV will differentiate itself enough from the usual cable fare to lure customers away from traditional providers of such programming.

Both telcos, however, have said that they’ll be very competitive on price — a promise that bodes well for attracting customers, but not so well for a speedy recovery of the billions of dollars it will take to upgrade their networks and buy programming from cable channels, movie studios and other content providers.

Cell phone TV, on the other hand, faces multiple barriers. Although mobile service providers are rolling out next-generation technologies that are speedy enough to deliver a TV signal, there are limits to how much network capacity they can divert away from phone calls and wireless Internet access. And just as they interfere with calls, gaps in network coverage may disrupt a TV feed.

On the device side, while screen quality has improved, TV presents a challenge in terms of battery life, processing power and storage capacity.

And then there’s the question of whether people want to watch TV on a tiny screen and would be willing to pay extra for it.

Nevertheless, the buzz on cell TV has been coming from multiple fronts, with many proponents pointing to strong demand for mobile video services in South Korea. Usage became so heavy on one Korean carrier’s network that it withdrew an all-you-can-eat pricing plan and switched to a pay-as-you-go approach.

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