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Telcos Turn Copper into Digital TV

Posted: 10/1999

Telcos Turn Copper into Digital TV

Remember the information superhighway–the broadband fast lane telephone companies
planned to pave past every American home, delivering voice services, high-speed Internet
connections, video-on-demand and other digital delights? Was it just a high-speed fantasy?

The information superhighway may not be universally deployed, but the promise of
residential broadband is stronger than ever. With new solutions that can turn copper
networks into sophisticated, full-service digital television (DTV) platforms, there’s
never been a better time for telcos of all kinds to jump on the bandwagon.

Opportunity

First, for any company looking to capitalize on the online boom, broadband represents
overwhelming opportunity. With the explosive growth of the Internet bringing more than 5
million new U.S. households online in 1998, consumers are craving faster, more robust
online connections. This means broadband.

Although consumers may first choose broadband to boost their Internet cruising speed
and capabilities, industry observers believe the next step will lead from the desktop to
the living room. According to Forrester Research, Inc., Cambridge, Mass., 75 percent of
U.S. households will subscribe to increasingly interactive cable TV services by 2005. As
consumers go broadband, content providers will develop even more advanced video services
that can play on TV or PC, e-commerce, interactive gaming, home security and surveillance,
and more.


Graph: Interactive Digital TV at Work

If opportunity isn’t enough, there’s another compelling reason for telcos to brush up
their broadband strategies. Broadband soon may become a prerequisite for playing in the
increasingly complex communications game.

Forrester expects demand for simple dial-up Internet access to flatten in 2001 while
broadband solutions will grow to capture 27 percent of all online subscribers in 2003. In
short, in an online world where faster is better and the latest interactive advantage is
just a download away, dial-up won’t do anymore. Companies capable of connecting consumers
to high-speed broadband and the services it delivers will be able to tap vital new revenue
streams, which will be particularly important as traditional sources dwindle in the heat
of competition. The question is, will those companies be telcos?

Bundling

With their installed video networks and existing customer bases, cable companies
already have a platform from which to launch their next broadband salvo, and they’re
poised to use it.

However, trend watchers believe the next round won’t be won with any single product or
service. Instead, they say bundles–competitively priced and value-packaged, with the
convenience of a single bill–will be key to winning and keeping customers connected.

Companies such as TCI Ventures Inc. and Media One Group, both of Englewood, Colo. (and
now owned by AT&T Corp.), already are working on the overlap between voice, data and
video, moving into telco territory with product suites that integrate phone service,
Internet access and cable TV. They stand to gain big. According to research by Forrester,
by adding Internet and phone services to video, the U.S. cable industry is expected to
double subscriber revenue to $60 billion in 2005.

However, when it comes to bundling, telcos are the companies uniquely positioned for
success. Local and long distance services, high-speed Internet access, billing expertise,
service savvy, strong consumer relationships–telcos already have the basics of a sound
bundling strategy. All they lack is the broadband delivery system that would enable them
to complete their bundle of services and reap the revenue as consumers plug TV, PC and
phone into a single, cost-effective network.

Network

Fortunately, the basic tools for broadband connection are close at hand, and unlike
yesterday’s information superhighway, they don’t require telcos to pave the world with an
entirely new network. With some 750 million copper phone lines installed worldwide, a
global broadband delivery infrastructure is already up and ready to go.

The telco key to more sophisticated connections is capabilities like digital subscriber
line (DSL), offering phenomenal download speeds over traditional copper wires with no
connection time. Although telcos have been slow to roll the product out and pricing
remains at a premium, consumer interest is burgeoning. All that’s missing for most telcos
is a strong business case for investing in broader deployment of DSL.

Potential Benefits of Interactive Digital TV

Interactive
digital television (IDTV), delivered over a copper network enhanced with broadband
capabilities and the right software solution, offers significant benefits to telcos and
the consumers they serve.

Benefits for Telcos

* Provides cost-effective way to diversify–tapping new and growing revenue
streams.
* Generates revenue that justifies broadband deployment.
* Creates more robust network without investment in fiber infrastructure.
* Supports rapid speed-to-market for related services.
* Leverages telco strengths–existing copper network and technologies, customer service
and billing, strong consumer relationships.
* Supports telco evolution into full-service provider offering compelling product bundles.
* Provides platform for delivery of increasingly sophisticated interactive services.
* Has the ability to track consumer viewing habits and offer market research services to
advertisers, creating revenue opportunity.

Benefits for Consumers

* Telephone service, high-speed Internet access, digital TV–over existing
telephone lines, from a single provider.
* Cost savings through purchase of bundled services.
* The convenience of a single bill for multiple services.
* Ability to view programs, surf the web, send e-mail and more from TV or PC.
* Unlimited digital TV choices–broadcast, cable, pay-per-view, video-on-demand,
customized program packages.
* Easy-to-use program guide.
* Access to seven days of channel line-up–current, future and previous broadcasts.
* Access to emerging services–gaming, e-commerce, home security and surveillance.

Thanks to solutions emerging from companies, telcos now have access to an application
that can justify investment in broadband: interactive DTV (IDTV). Software created by
iMagicTV, Saint John, New Brunswick, for example, can help turn any asymmetric DSL (ADSL)
or voice over DSL (VoDSL) technology into managed, IDTV service that opens new revenue
channels, offers subscribers new feature sets and puts telcos in capable competition with
cable and satellite companies.

By supporting the delivery of TV over Internet protocol (IP), telcos can open a new
world in which anyone can become a broadcaster, offering revolutionary entertainment
concepts. Through unlimited digital TV channels, interactive applications, video-on-demand
and other services, these software solutions give consumers greater control over what,
when and where they watch, on their televisions or their PCs. Add telephony, high-speed
Internet access and web-based email, in a competitively priced package with a single bill,
and you have a compelling value proposition.

Perhaps most importantly, these solutions operate over infrastructure telcos may
already have in place.

Pioneers

Powered by software, two companies already are starting to use installed copper and DSL
as a cost-effective, competitive bridge to broadband revenue opportunities. In New
Brunswick, NBTel Inc. has chosen iMagicTV’s DTV Manager for a network delivering broadband
multimedia services, including broadcast programming, to homes in its service area.

NBTel’s new interactive entertainment service, in trial since October 1998, is set for
launch this year. It will be integrated with Vibe, the company’s extreme-speed Internet
and e-mail access product. However, this integrated service will resemble nothing
consumers have seen before, with more than 100 channels including digital TV channels and
audio services, local content, interactive channels and more.

Meanwhile, across the Atlantic, Kingston Communications (HULL) plc is using the same
software to deliver interactive TV to an area of 170,000 customers in the United Kingdom.
DTV channels, high-speed Internet access, web-based email, e-commerce and banking
channels, web-browsing, video-on-demand–these are just a few of the capabilities Kingston
delivers to residential set-top boxes, all over DSL-powered copper wire.

By adding IDTV to their menus, these companies are among the first to pit their bundled
solutions against the offerings of cable and satellite companies. Their experiences will
test industry watchers’ predictions that consumers will go where they can get the richest
package, the best deal and the best service.

At the same time, companies like NBTel are maintaining a vanguard held by telcos since
the advent of Alexander Graham Bell’s invention. The telephone network has always brought
innovation into the home, introducing people to extraordinary capabilities. Once again,
telcos are in position to pioneer the electronic world, reshaping the ways people
communicate, entertain themselves and share information. Using the same copper-based
technology that carries their phone calls, consumers will be able to watch a
thought-provoking program, discuss it in an online chat room, then search the web for more
information–all on a TV or PC. Meanwhile, in the next room, the telephone will still
ring.

Telcos that take on the challenge of broadband will move their industry forward and
speed their own evolution into competitive, next-generation providers. In the process of
going interactive, they will help make the television more than a box you watch–just as
they made the telephone something more powerful than a box that talks.

Marcel LeBrun Marcel LeBrun is president, CEO and co-founder of iMagicTV, Saint John, New
Brunswick. He can be reached at mlebrun@imagictv.com

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