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Thinking about the future of cable & telcos

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 investments are delivering all sorts of new products. It’s easy to make fun of these companies at times but we are getting  better products & services. Faster internet connectivity, telephony, VOD, HD, DVRs, packaging, bundling, you name it. They have also been buying or investing in digital channels as well as needed or warranted. All of this in an effort to stay competitive. And to avoid being the “dumb pipe”.

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 popular video site. 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 which would be 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.