Will Small Telcos Fan the Cord-Cutting Flames?

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Tier 1 telcos like Verizon and AT&T are heavily invested in their pay-TV businesses. But what about everyone else?

With TV subscriptions on pace to hit $200 per month by 2020, according to NPD, it’s no wonder that smaller telcos are looking at cheaper alternative video offerings — including delivering free, over-the-air TV melded with over-the-top video.

Check out BTC Broadband, which serves about 10,000 phone customers in Bixby, Okla., with a fiber-to-the-home network. It actually sells pay TV in part of its service area.

But the telco is using Entone’s FusionTV solution, which includes a set-top box and managed services, to deliver a video service in areas where it doesn’t offer IPTV. The BTC hybrid video package provides live local broadcast TV programming with DVR capabilities, along with access to Vudu’s streaming library of 50,000-plus titles and more than 50 online applications, such as photo-sharing sites Flickr and Picasa and social media services Facebook and Twitter.

The idea isn’t necessarily to position this “broadband TV” as a competitor to cable TV. Instead, the telco is bundling it with Internet service, as a way to increase customer loyalty by enhancing the value of broadband — all without the price tag associated with conventional subscription TV.

“Our FTTH deployment is a key technological differentiator for our services,” says Scott Floyd, BTC’s director of sales, product development and customer services. “With a product like Entone’s FusionTV, we can leverage our high-speed network to bring next-generation, broadband-centric services to market while also increasing our overall customer satisfaction with a rich and compelling TV service.”

Entone CEO Steve McKay says telcos like BTC are looking to hybrid-video services to increase the “stickiness” of broadband, as well as offer a cool video package to middle-class American consumers for whom cable TV is simply too expensive.

“My hometown is in rural Michigan where the average household income is about $32,000 per year, pretax,” McKay says. “Take away food, housing, energy and taxes, and asking someone to pay $1,000 a year for TV is a lot.”

Bonus: By delivering a no-charge OTA service, the telcos don’t have to pay retrans fees. “They just pick up the signals over the air at the set-top,” McKay says, adding that Oklahoma’s flat terrain is ideal for receiving broadcast TV signals.

Meanwhile, it’s worth noting that Verizon is getting into the over-the-top game, in partnership with Coinstar’s Redbox — and that service might have a live TV component as well (see Verizon’s Internet-Streaming Service Could Include Live TV).

Granted, IPTV is still Entone’s core business, with more than 100 telco customers worldwide, McKay notes.

But, he adds, “thousands of operators still have not deployed IPTV.” Entone has three or four deployments of FusionTV currently, with a target of 10 this year and 25 by the end of 2013, McKay says. ”They see this opportunity to marry the pristine HD of over-the-air with services like Vudu and present a pretty rich online offering,” he says.

Cupertino, Calif.-based Entone, which has about 90 employes, is backed by venture capital firms including Menlo Ventures, Scale Venture Partners and Coral Group. The company was formed out of an IPTV deployment at Hong Kong’s PCCW.

Others have tried — and failed — to make a go of delivering an over-the-top solution through telcos, including Sezmi and ZillionTV.

To McKay, the insurmountable hurdle for them was trying to be both technology suppliers and content aggregators rolled into one. “Unless you’re Apple, no one has successfully been a device maker and a content provider,” he says.


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