Thursday, December 15, 2005

Telephone in the 21st Century

There’s an interesting article in this week’s Television Week magazine about SureWest, a local telephone company based in Roseville, CA, just outside Sacramento. The company is offering its subscribers IPTV with 260 channels, and is about to launch 17 HD channels. SureWest has 85,000 telephone subscribers, of which 20% (approximately 17,000) are taking the video service. SureWest is offering a package of telephone service, DSL and video for $110/month, about 15% less than AT&T/SBC and Comcast.

What’s interesting about SureWest is not only that it’s offering IPTV video in the first place, but that it’s got 17,000 subscribers. AT&T has only a few dozen users of its U-Verse service in a test market, and Verizon has a few thousand users of its FIOS service right now, although it predicts that it will have 400,000 subscribers by the end of 2006. (Verizon is also far ahead of AT&T in development and deployment.)

SureWest’s service is highly competitive with that of Comcast, although Comcast boasts that it has 2,200 hours of video-on-demand (VOD) content available, whereas SureWest has only 400 hours. However, the size of SureWest’s library is only a temporary disadvantage as more content providers offer VOD programming. SureWest also beats DirecTV and Echostar; those companies offer less expensive video packages, but their services are inherently one-way, so they can’t offer much in the way of data services and no real-time VOD.

SureWest’s engineering approach is dramatically different than that of the traditional cable operators, which typically purchase both set-top boxes and headend (the cable operator’s central distribution site) equipment from the same company. If they’ve got a Motorola headend, they use Motorola STBs, and the same goes for Scientific-Atlanta. By comparison, SureWest has gone for a “best of breed” strategy, where it’s installed what it thinks are the best products in each category. For example, SureWest uses IPTV STBs from a UK-based company called Amino, which I’d never heard of before I read the TV Week article. Amino has a range of STBs with a variety of features and price points, as well as a PVR, all of which are about the size of a paperback book. SureWest also uses equipment from BigBand Networks, Irdeto, Kasenna, Minerva and Cisco in its network and headend. It’s not locked into any single vendor or technical approach, because all of its vendors’ products conform to industry standards.

AT&T and Verizon have to eventually support millions of subscribers, so they’re going to get most of their technology from a single supplier. Installing and supporting a nationwide network of “best of breed” equipment would be a nightmare for them. However, that enables the smaller telcos like SureWest, as well as cable overbuilders like Grande and RCN to add services and respond to market demand faster than the behemoths.

In short, if you want to see the future of video distribution today, take a look at SureWest. It’s already played host to over 100 companies that want to learn about deploying IPTV. I suspect that quite a few companies will be going there for an education.

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