• Telephone companies lay fiber lines for expanded offerings.
• Companies using DSL or QAM delivery systems for video.
• Companies team with software developers for video applications.

Competition from cable TV operators and pressures to derive more revenue from fixed lines are encouraging leading telephone companies (telcos) to adopt new technologies to move beyond the bounds of offering only voice and digital subscriber line (DSL) broadband Internet access to include digital TV services over DSL and fiber networks.

Source: In­Stat/MDR, 1/05

Improvements in the data rates and reach of DSL will help telcos reach more customers with the right amount of bandwidth. At the same time, new video compression systems are reducing the amount of bandwidth necessary to deliver quality television services over multiple video streams. The 6 Mbps needed for a single standard definition video stream plus voice and data will be reduced to less than 4 Mbps in 2005. New video compression schemes also are making possible the delivery of high-definition streams over DSL, as the once necessary 15 Mbps bit rate needed for a single HDTV stream shrinks to 8 Mbps.

Some telcos are eliminating the bandwidth issue by running optical fiber lines directly to the home. In the U.S., BellSouth, SBC and Verizon, are laying fiber lines to many of their territorial neighborhoods. In some cases the fiber lines run right up to each premise; in other cases fiber lines run to centralized nodes, which started twisted pair copper lines running the rest of the way to home.

In cases where fiber to the premise (FTTP) runs, telcos are opting to deliver video in a method similar to that used by digital cable services. Other systems require the use of Internet Protocol TV (IPTV) systems dependent on DSL pathways. The IPTV approach has some disadvantages. Due to the bandwidth constraints, only the requested channel is sent over the service at one time, making channel changing slow. The cable approach allows making all channels available at one time, which speeds up the channel changing and allows for picture-in-picture applications.

The new video activity led to 255,000 U.S. households adopting digital TV services directly from telephone companies in 2004, according to an In-Stat/MDR study. The number will grow to 497,000 in 2005, and 1.4 million in 2006. This doesn’t include customers currently receiving satellite television services through joint telco/DBS provider marketing arrangements. Most telcos are expected to continue to employ satellite TV packages to offer TV services to customers living in neighborhoods that cannot be reached by new fiber or DSL lines. 

Telcos Team with Microsoft for TV Services:
In 2005, Verizon is teaming with Microsoft to bring TV services to its service packages. The new TV service will use Microsoft’s electronic programming guide (EPG) as part of the video service that will launch on Motorola digital set-top boxes around the middle of the year. Verizon, which has been laying fiber-to-the-premise (FTTP) lines, also will use the QAM modulation scheme used by cable TV operators to deliver digital video. Currently, the service (called FiOS) delivers three levels of broadband service to consumers: 5 Mbps, 15 Mbps and 30 Mbps. In 2005, the company will add FTTP services in 12 of the 29 states it serves, including California, Florida, Indiana, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island, Texas and Virginia. SBC also has signed a deal with Microsoft for IPTV and BellSouth has been conducting trials with the software giant. While the multi-billion-dollar product upgrades being undertaken by Verizon, SBC and Bell South are getting attention, the smaller telcos quietly are expanding their business.

SBC to Launch U-Verse Service:
In 2005, SBC will launch its U-verse service offering a suite of IP-based products and services. This will include integrated interactive TV, super high-speed Internet access and voice over IP telephony services. The service is enabled by a network of fiber to the node and fiber to the premise lines that are being installed under SBC’s Project Lightspeed initiative. This will reach approximately 18 million households across 13 states by the end of 2007.

For those homes not reached by fiber, SBC will offer EchoStar’s DISH Network satellite TV service and Internet access through an integrated set-top box, including digital video recording and video-on-demand. That product is being developed for SBC by 2Wire Inc. and is slated for a mid-2005 roll out.

Smaller Telco’s Step Up:
As the largest telephony companies begin plans with Microsoft, some of the smaller companies already are offering IPTV services. Consolidated Communications, the 15th-largest telco servicing areas of Illinois and Texas, offers video services running Myrio’s IPTV system, and has added on video-on-demand services similar to those offered by cable companies.