bijan:

Cable companies have been doing a lot of things over the past 10 years as they made the switch to digital to make sure that they don’t become a “dumb pipe”. Thats a phrase you will hear over and over again if you have spent any time talking to any MSOs.

The telcos have been investing big time as well and want to make sure they also don’t become a “dumb pipe”. One bit of humor is that the “dumb pipe” description is really in reference to the POTS business and common carrier but that is for another post.

Cable companies and telcos have been investing and it shows. It’s easy to make fun of these companies but we are getting better and better products & services. Faster internet connectivity, telephony, VOD, DVRs, packaging, bundling, you name it. They have also been buying or investing in digital channels as well as needed or warranted.

But, I’m afraid that really isn’t enough.

Consumers are spending more time watching Hulu, downloading video from iTunes, streaming from Amazon, YouTube, Veoh and Netflix. All of it online. And while AppleTV, Roku, MediaCenter PCs, et al may not be the ultimate internet player today, the trend is undeniable. In 5 years (or sooner) video consumption online vs broadcast is going to flip on its head. Evolution.

If I were running a major cableco or telco I would do 2 things:

1. Buy Tivo. Forget that Tivo has patents. Tivo has a retail (no subsidies), cablecard friendly DVR that offers home networking, mobile access, expandibility and streams online content. Imagine the advertising capabilities. Imagine building FirefoxTV, imagine offering a TV version of search. Imagine launching the Tivo App Store and an SDK where a thousands developers could create a zillion apps. Game changer. The alternative is for cable and telcos to continue to hash it out with their current technology & set top suppliers Motorola & Cisco (formerly Scientific Atlanta).

2. Buy a video site and video search engine. YouTube is now in Google’s hands. So that’s out. But they could buy another popular service and deliver a bigtime consumer branded experience. Hulu is the studios & networks attempt to control distribution and go around cable and telcos. Cable and telcos need to fight back and own one of these sites. Building one from scratch is one approach or they could probably buy one faster and easier.

So which one of the major telcos or cable companies will do this first and put a real stake in the ground? Some will be leaders and some will continue to hope that their current vendor relationships will help them figure it out.

Bijan,

These aren’t bad ideas, but they might be different if they took two factors into account:

1. Most internet runs at about 1.5 Mb/s. The average network channel runs at 38 Mb/s. The internet simply can’t keep up with the sort of bandwidth that cable guarantees (especially HD). I watched a few YouTube videos the other day and had to wait for them to load at a few intervals (not by much, I am on a dual T1 office line). When is the last time you had to buffer live TV? I have had internet since it was command line centered and thought 9600 baud was a huge leap for mankind. In the 15 years since then, it still isnt coming close to the sort of bandwidth that cable gets, on a controlled network. With television, you don’t have to worry about uptime, plugins, video cards, browser compatibility, etc. You broadcast and go.

2. the amount of Hulu/YouTube/GoogleVideo/whatever that occurs in the workplace. A quick look around the office will support this, as will viewer numbers for popular prime time series. Watch the average American office on a Friday morning. What are many of them doing? Watching outtakes/extras from last night’s The Office, trying to forget how real it is to them.

I would never knock ideas without an argument of my own. What should cable networks do?

1. Invest in platform extension and application development for their managed networks that are already racing into our home. There is so much room for applications that could increase the social aspect of cable TV, or could bring viral video into the home that is not being developed because someone is trying to figure out how to squeeze more pixels through a 1.5 Mb/s line. Rather than uploading video (extremely slowly, I might add) to Hulu and Youtube and such, put that content on Free On Demand (or charge for it, natch) and let the viewer flip right over after the show to watch.

2. Work harder on centralizing DVR - Once all DVRs are stored remotely, they can easily port small web videos into their cloud, so that I can send a web video from my browser to my DVR space to pull out for the punch line at my next house party. Seems like given the opportunity to crowd around my 13” MacBook screen or my 46” LCD hanging on the wall, I would always choose the LCD.

Social use of video has yet to even begin - Why shouldn’t I be able to share a favorite episode of Dexter (in HD) with a friend of mine who accidentally forgot to record it? With centralized DVR, this isnt a matter of sending someone large files through a network, it simply points them to the content that I saved on the Comcast/Cox/Time Warner server.

to wrap this up - I’ll re-use your final paragraph - it still applies.

So which one of the major telcos or cable companies will do this first and put a real stake in the ground? Some will be leaders and some will continue to hope that their current vendor relationships will help them figure it out.