I recently wrote about Shaw Communications (News - Alert) and its upcoming entry into the Canadian mobile telephony market. This alone should be noteworthy for established telcos, but it's really just one aspect of what makes cablecos very strong competitors. Of course, what's happening in Canada is also happening in the U.S. and elsewhere, but things have been particularly active there lately, so I have another update that includes Shaw.
On June 18, Shaw announced their VoD - video on demand - service, anchored by an online portal. There's nothing really radical here, but it now means that Canada's top cablecos - Shaw, Rogers and Videotron (News - Alert) - all offer this type of service. Plus, just to make things interesting, Bell Canada's Bell TV has had a comparable service since late 2009, and the other major telco, TELUS (News - Alert), won't be far behind in joining them.
These services are all variations of TV Everywhere, the online video services being offered now by U.S. cabelcos. With so much activity coming from Canada, plus my recent focus on Shaw, I felt this was a good time to look closer at Internet television, and what it means to service providers. First, it's important to clarify that Internet television is not IPTV. Both modes deliver content over the Internet, but the viewing experience is fundamentally different. Cablecos don't really need IPTV, since they already reach your living room via coaxial cable. Telcos, on the other hand, need a different delivery mechanism, and they use a mix of satellite and IPTV.
Internet television is different in two basic ways. First and foremost, the viewing experience shifts from the TV in your living room to the PC - or most any broadband enabled screen. Not only does this create a new environment for accessing TV content, but it's more of a singular experience than a shared experience. Internet television is less social and generally appeals more to the younger generation, who has always lived with broadband.
The second point of difference with Internet television is the range of content. In addition to the same network TV content we see in our living rooms, there is a burgeoning world of content produced specifically for the Internet experience. YouTube (News - Alert) is the first thing that most people would associate with this, but there is also a stratum of professionally-produced content for the Internet. Long term, I think this will help establish Internet television as a legitimate alternative to conventional TV, but that's another conversation for future articles.
Why should all this matter to carriers? Well, let's come back to Shaw and the recent flurry of activity in Canada. All cablecos strike their own distribution deals with content providers like movie studios to make their VoD offerings enticing. Shaw has done this with the likes of MGM and Universal, but that's really just the beginning for them. They're also in the midst of acquiring Canwest Global, which would give them access to a rich catalog of existing and future television programs. With all this content, Shaw can make the Web a pretty attractive destination to watch TV, so to speak.
It's important to note that Internet television and TV Everywhere isn't meant to displace our regular TV watching habits. The collective lure of the big screen, HD and home theater is too strong for any PC to match, but as we've seen in the world of mobile telephony, convenience sometimes trumps the tried-and-true. The Internet is shaping our habits more than we realize, and there is no shortage of media research showing how the amount of time we're spending online rivals - and sometimes surpasses - sitting in front of the TV. As we know, conventional TV is a passive experience, but the Web is by nature interactive. The Internet generation understands this, and they seek out the higher-touch environment that simply is not part of the home TV experience.
This brings me to the second Internet television launch, which came a day after Shaw's news. I've written about Videotron before, and they would be Shaw's video counterpart in Quebec. Their version of TV Everywhere is called Illico Web. Like Shaw, Videotron has a large stable of content, much of which is in French, which endears them greatly to their served market. Of the 32 channels being launched, 24 are in French, and if you're familiar with the cultural politics of Canada, then you'll understand why this is so important.
As mentioned earlier, Rogers Cable also offers Internet television. What's most interesting is their latest twist, announced in late May, when the service came out of beta mode into full commercial launch. Their On Demand Online offering is available to non-subscribers, so if you just wanted to access some forms of Rogers content only on the Web, you can do that. Of course, the best content is only for subscribers, but it's a savvy nod by Rogers to get in front of people who don't subscribe to any form of TV service or rely on IPTV or satellite.
So, why are these cablecos doing this, and why is TV Everywhere coming into vogue now? There are two basic factors at play here. First would be attrition and the threat of subscribers flocking to the Web for their TV. While this is still just a small minority of the market, the scenario is exactly what telcos went through with VoIP. Early adopters were few, but they saw how VoIP could reduce or even eliminate their landline spend. Cable prices continue to rise, and with the economy still weak, consumers are looking for ways to cut costs. Premium cable packages are certainly vulnerable here, and with so much free content online, it's getting harder for some people to justify their cable spend.
The other reason is more defensive, and is particular to the video sector. Piracy is a major issue, not just for movies, but popular television shows as well. Many of these cablecos have major investments in content, and need to minimize the impact of piracy. This concern has given rise to sites like Hulu (News - Alert), which provide not just a legal way for people to enjoy this content, but also in a high quality environment. In Canada, both Shaw and Videotron are in the same boat, and for them, Internet television is a form of insurance to protect these assets.
Coming back to carriers, there are really two takeaways here. First, they need to learn how cablecos are embracing the Web and incorporating it into their overall value proposition. They all know that Web viewing will continue to rise, and needs to become part of the distribution model. Furthermore, viewing habits are changing, and people want to do more than just watch a program. As such, these cablecos have added social media elements to let viewers share their thoughts in real time as well as rate the shows, which creates a valuable feedback mechanism for the networks.
The second takeaway is the simple fact that video is a stronger driver of value today than voice. With mobile broadband exploding, it's just a matter of time until both the TV and PC experiences can be largely replicated on mobile devices. This is why I wrote about Shaw's recent entry into mobility, and I've long believed this is Videotron's endgame for doing the same. Carriers are responding in various ways, and IPTV will be a big part of their future. However, for operators who remain tied solely to voice, the outlook is less promising, and when their demise comes, we'll likely be hearing about it on the Web.Jon Arnold, Principal at J Arnold & Associates, writes the Service Provider Views column for TMCnet. To read more of Jon's articles, please visit his columnist page.
Edited by Juliana Kenny