There's absolutely no doubt that tier one communications service provider executives "fear" Google more than they fear competition from cable operators. For the most part, the concern is that Google (and other Web contestants) have the ability to "suck the air out of the room" as far as creating value for end users that translates into revenue and creates business models.
Nor is there much doubt that communications and media are ceasing to be two distinct businesses, already overlapping and in some cases destined to merge. Add in consumer electronics and you have a volatile and unstable business environment.
Volatile in many ways because traditional industry and segment boundaries are being erased. There's little argument to be made that Google is part of the media ecosystem, for example.
The tough part is figuring out the extent to which Google itself has become media. It's a hard question to answer because Google now has operations in the ad placement business (Web, newspapers, radio), which makes it part of the classic "ad agency" business, owns YouTube, which makes it part of the video business, and blog hosting, which makes it a distribution channel, akin to a magazine, radio or TV station or programing network.
That's the broader problem service providers grapple with as well. It is hard to see how far network-based businesses can move in the direction of becoming media. It is hard to foretell how much "over the top" distribution will displace any existing distribution method and business model. And it is hard to estimate how network services providers will be able to create new revenue out of relationships with Web-based services and applications.
The monetization issues Google is having with YouTube, and the relatively small sums it now generates in the newspaper and radio ad placement business, mirror the steps network service providers also are taking to capture space in adjacent markets such as video distribution.
This is more like a 10-year process than a five-year process, one suspects. And though advertising today represents a relatively small proportion of cable operator revenues, at about four percent of total revenue.
You might wonder why cable operators now are spending so much time on targeted advertising efforts, then. The thinking is that global ad spending is going to keep shifting, towards the Internet and mobile formats. Of the current $510 billion spent on advertising, there is general consensus that newspaper share, 15.9 percent or about $132 billion, is highly vulnerable, as share has been shrinking for more than a couple of decades. The other big bucket of spending is television, which gets 37.6 percent of all ad spending, or about $192 billion.
Cable operators now are thinking they can grow a new ad format by taking share from newspaper and other TV media. As TV and newspapers between them represent $324 billion, or 64 percent of all advertising, you can see the attraction.
To the extent that network service providers more familiar with voice and data also are in the entertainment video game, and also have the same targeting opportunities as cable operators do, it is fairly easy to predict growth in targeted ad capabilities at some point.
Google is media. So, ultimately are telcos, in their roles as video and Internet service providers. the only issue is how much in that direction telcos will move.