Thursday, January 28, 2016

Telco Success in New Markets Can Take a While

As mobile and fixed network telcos gear up for coming Internet of Things opportunities, it will be helpful to remember that success will take time. That same admonition applies for mobile video services or any other over the top efforts telcos ultimately will undertake.

Rarely do telcos achieve success right out of the gate. In fact, it can take a decade or two before it is clear they have obtained a sustainable position in a new market.

A few will remember the skepticism many had a few decades ago about prospects for telco to succeed in entertainment video, especially in roles other than as distributors of subscriptions.

The argument had been that telco ownership of content assets would not work well, as content was not a core competence. Skepticism about telco roles in the over the top app (OTT) arena are similar, and early efforts in OTT sometimes have suggested skepticism is warranted.

But it also is fair to recall that it has taken decades for telcos to position themselves for a leading role in linear video entertainment. There was no “overnight success.” In part, the reason was the need to upgrade a substantial percentage of physical plant to support quality video.

Many do not recall that US West, Pacific Bell, Bell Atlantic and AT&T once considered owning, or actually owned, major cable TV assets.

That those assets later were divested only shows how long it can take before a sustainable business model develops in the telecom business. BellSouth filed to operate a cable TV service in 1996.

Prior to that, PacBell, Bell Atlantic and Nynex had formed TeleTV, a business unit to create programming.  

And as many would attest, replacing copper access with fiber to home is a huge financial undertaking.

That alone, given the difficulties, would have been an obstacle.

But AT&T now is the single biggest distributor of linear video in the U.S. market. Yes, it relies heavily on former DirecTV assets, but its leading position is striking, for an industry not believed to be a serious contender in video, decades ago.

There has been even more skepticism about telco ability to compete in the video programming part of the business. But that might have been said about former cable TV operators as well, and that has proven a misplaced fear.

So long as programming entities are allowed to manage themselves, there has proven to be no serious impediment to cable TV operator success as owners of programming assets. Verizon hopes to prove that also is the case for telcos.

It has been two decades since those early forays, and telcos now are established providers of linear TV in the U.S. market. They now are positioning for mobile video and related businesses.

It might take some time. But there is no reason to believe telcos are incapable of success in video services or any of the related businesses. They just have to approach it the right way.

If history is any guide, it might take some time.

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