Loving the Telcos It’s a bit of a love-hate thing for cable content owners and programmers. After all, the traditional cable industry largely supported and funded cable programming in its infancy and even into its more mature years (perhaps with the help of DBS operators). But now here come the telcos. And they don’t appear to be messing around anymore. Verizon FiOS is on the march. And AT&T (finally) is coming on strong. Both are making big plays for video customers—both as a way to grow revenues and, perhaps equally as important, stave off the decline of data and voice lines by luring customers into bundled offerings. Everyone is, of course, playing the same game. And for content owners, this era has felt like being an arms dealer during World War III. Messy but profitable.

So while cable and satellite companies continue to wield the most leverage during licensing negotiations, research firm In-Stat has provided some evidence that the telcos are becoming big video players as well. Among the study’s highlights:

• The telco TV headend equipment market will grow to over $700mln by 2012.

• The upgrade to MPEG-4 encoding was strong during 2007 and 2008.

• Increasingly, headend functionality will be distributed to the edge and access network.

The bottom line is that so-called “telco TV” equipment is expected to grow substantially over the next 5 years. “For operators to generate significant profitability from telco TV and related video services, they must find ways for the network to add value,” said In-Stat analyst Keith Nissen. “This will dictate finding solutions to the challenges faced with personalized advertising, converged video services, and ultimately the integration of network and Web-based applications.” The report, titled “Global Telco TV Video Headend Update” (how catchy!), is available at www.instat.com. And it will cost you about $2500.

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