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The Telco's New Star

Written By Brian Hicks

Posted June 26, 2007

Like most Americans, Rich and Marjorie Bayer of Massapequa, NY, love their television. But their television is radically different from the one that’s probably on all the time in your house. Unlike your set, the Bayer’s is wired to the Internet, and it is nothing short of a glimpse into the future.

A "huge TV family," the Bayers were Verizon Communications’ one-millionth fiber-optic broadband customer, according to CEO Ivan Seidenberg, speaking at last week’s NXTcomm conference in Chicago.

More to point, the Bayers also joined the nearly 500,000 subscribers to FiOS TV, Verizon’s internet TV service that has been rapidly expanding for the past 20 months and is now available to almost three million households in eleven U.S. states.

"You can really see the difference in picture quality from what we had before," said Mrs. Bayer, "on regular channels and especially on high-def."

An all-fiber network, FiOS achieves what other IPTV (Internet Protocol Television) networks have so far failed to do: it delivers a fiber optic cable to each home, eliminating the longtime problem of delivering high speed broadband services over plain old telephone (POTS) lines.

A similar effort by AT&T, called U-verse, uses fiber only to the neighborhood node, limiting its bandwidth potential–which is important given the relative size of video files.

Bandwidth, as always, still rules.

According to Seidenberg, a single video requires 1,000 times the bandwidth of an audio file, and a high-def signal requires up to 10 times the bandwidth of a normal video.

That means that the size of "pipe" bringing all of that content into your home needs to be big enough to accommodate those massive files. It’s a "final mile" upgrade that Verizon believes will pay big dividends in the future.

Verizon hopes to extend its fiber-optic broadband and television network to cover nine million homes by the end of this year, and 18 million by late 2010.

But Verizon and AT&T are hardly alone.

In fact, when it comes to the Telcom world, it’s no longer conversations that have these communication giants falling all over themselves to earn a buck. It’s the prospect of taking a chunk out of the cable industry with Telcom TV.

In all, Telcom companies will spend over $70 billion dollars this year alone on network infrastructure improvements, and that’s just here in North America.

Driving all of these dollars, of course, is the combination of competition and the ever-changing consumer landscape.

On the one hand, there is the high stakes game between the cable companies and the Telcoms. Both wish to provide "triple play" services (video, voice and data) to consumers, earning greater market share of one of the biggest consumer pies in the nation.

On the other hand there are the consumers with broadband connections and the growing desire to "pull" customized content like they have become accustomed to doing on the net, rather than have it "pushed" to them, as is the case with the traditional TV model.

In fact, it’s the confluence of both of these trends that has so many people excited about the fast-growing worldwide industry.

Some have even gone so far as to call it a "game changer," and the most recent global subscriber and revenue forecasts would seem to back that up.

According to Multimedia Research Group’s global forecast, the number of global IPTV subscribers will grow from 14.3 million in 2007 to 63.6 million in 2011, a compound annual growth rate of 45 percent.

On top of that, their data show that global IPTV revenue will be $3.6 billion in 2007, growing to $20.3 billion in 2011. That’s a compound annual growth rate of 71 percent.

It’s that type of growth that has drawn the attention the Telcoms and the cable companies. Over time, both industries expect IPTV to become the way all TV is delivered.

"IPTV is definitely the end game," said Mark Wegleitner, Verizon’s senior vice president of technology. "I expect to take broadcast video to IPTV in 18 to 24 months and by three to four years maximum."

That makes the Bayers and families just like them today’s "early adopters." Millions more will follow, making IPTV a trend to be reckoned with.

Wishing you happiness, health and wealth,

Steve Christ, Editor