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August 15, 2004 Provided by System Dynamics Inc.

Telco Video Services: Maybe this Time?

Those with some history in broadband may remember the on-again, off-again behavior of the US telcos with respect to providing cable-like video services. Their forays included Bell Atlantic's video push in the late 1990s, Pacific Bell's MMDS-based service in San Jose, BellSouth's launch of digital wireless cable service in Orlando, plus ones from SNET and Ameritech using HFC. Well, it's deja vu all over again (to quote Yogi Berra). Might it have some staying power this time?

Outside the US it is already happening. We've covered some of the deployments in previous reports, including Fastweb in Italy ( and the MTS deployment in Manitoba (

Here are some signals that show this time it could be real in the US:


  • DSL improvements--like ADSL2 and VDSL--plus fiber rollouts are improving telco's available bandwidth.
  • Advanced video compression using H.264, Microsoft Windows Media 9 Series or Real Video 10 is significantly lowering the amount of bandwidth needed to deliver video (standard definition video at 1 to 1.5 Mbps, high definition at 5 to 6 Mbps).


  • IP settops are being manufactured by an increasing number of companies at affordable prices.
  • Thomson has expanded its activities in North America, including its IP video settop.
  • Boxes like 2Wire's Home Portal residential gateway ( are intended to make the consumer experience of telco video the same as that from cable companies by integrating satellite broadcast and IP video on demand.

Content and DRM

  • Companies like Movielink and CinemaNow are aggregating movie rights for IP delivery
  • The major US telcos have made deals with satellite services for delivery of broadcast TV
  • Digital rights management solutions such as Microsoft's Windows Media Digital Rights Management Software are being adopted by companies including Disney, America Online and CinemaNow.

Companies doing it

  • Many smaller US telcos have led the way in deployments of video services. Examples include companies you probably haven't heard of such as Heart of Iowa Communications Cooperative, James Valley Telecommunications and Matanuska Telephone Association.
  • Verizon has announced their fiber deployments are underway in Texas, California and Florida (see "Heard on the Net") and has indicated it plans to offer a video service in 2005 as an alternative to cable TV.