General

Predicting the Shape of TV Over IP

TV over broadband is coming, but it could manifest itself in any of several different forms, with significant consequences for ISPs large and small.

by Gerry Blackwell [June 18, 2004]

Whether it's downloading or streaming or traditional broadcasting, television service has not yet arrived in people's homes. Before it does, ISPs—even small independents—are trying to suss out how they can get a piece of the action, or at least avoid being left in the dust or out on a limb.

In the first in this occasional series on video over the Net, we talk to two small ISPs who are carefully watching the brave new world of broadband video unfold—and taking some baby steps.

Fletcher's quiver of services
Fletcher Kittredge is CEO of Great Works Internet in Biddeford, Maine, one of the oldest ISPs in the country. As reported here earlier this year, Kittredge made his first move by investing in ADSL2+ network gear from Lucent (see GWI's Big Lucent Buy).It supports data speeds up to 27 Mbps, which is not much more than he figures it will take to do video properly.

Kittredge won't make any other moves towards offering or supporting video over broadband on his network for a while. He's waiting for the dust to settle on a religious war he sees unfolding.

"The jury is still out—but is going to report soon," he says, "on whether one of two models for TV over Internet will prevail."

In one, broadcasters—including, possibly, ISPs—will use the Internet as a transport medium to offer content direct to customers using TV set-top-boxes. Viewers will tune in to conventional television channels. They'll just be delivered over the Internet instead of traditional networks.

The other is the one we've seen emerging for some years—content providers posting content on the Internet that can be streamed on demand to a PC or specially-equipped TVs, or downloaded and stored on a hard drive for display later.

Which way will it go? "It's really uncertain," Kittredge says. "If you're an ISP looking at this, now is not the time to make a big bet on it. Not yet. But it's going to be really big in 2005."

That said, Kittredge thinks he knows what's going to happen. "My gut—and this is religious—is that I think the TiVo model will win. It can be the equivalent of VoIP. People will be able to get video so much cheaper by going this way that it's really going to take the cable companies off at the knees."

There is mounting evidence that Kittredge is right. TiVo, the influential maker of a popular personal video recorder (PVR) product and service that currently works with satellite and cable TV, announced a new service that will allow users to download full-length feature films and other content from the Net to their PVRs for later viewing.

The company hasn't announced launch dates or prices, but says the Internet download capability will be built into all of its next-generation PVRs.

TiVo is not alone. In fact, the timing of its announcement at the beginning of June may have been designed to steal RealNetworks' thunder. The streaming video software and services company has just announced a movies-over-the-Internet service with partner Starz Encore Group LLC, a cable/satellite network. It's available now.

Other companies are exploring the same approach, including Netflix, a DVD-rentals-over-the-Internet subscription service, and Blockbuster, the very vulnerable video rental industry giant.

Microsoft has demonstrated its similar IPTV technology and is currently running small trials in Switzerland and Canada. Akimbo has an Internet PVR product on the market and its web site lists over 30 existing TV over Internet sites where users can download content—though it's mostly egregiously awful content.

If Kittredge is right, it's good news and bad for ISPs. The good news is that they won't have to compete in the dog-eat-dog world of cable television, where knowing how and being able to negotiate for content is crucial, and where little guys don't stand much of a chance.

"In cable television now there's a real drive for scale," Kittredge says. "The bigger you are, the better the deal you're going to get. If you have 10,000 subscribers, you'll get one deal with Disney. If you've got 100,000, it will be somewhat better. If you've got 10 million subscribers, you'll get a great deal from Disney."

It also means ISPs won't have to invest heavily in video servers, streaming technology, and other infrastructure to get into the TV-over-the-Internet game. This is good news because, "in the ISP business right now, you want to spend as little on capital costs as you can because everything is changing so rapidly," Kittredge says.

Go to page two: ISPs bulk up >