Summary
It is a Fool's Errand to compete with a "me-too" service A better approach is to offer truly high speed ISP service.
Analysis
Despite the fact that Verizon and AT&T u-Verse may be adding video subscribers faster than the CATV industry, their focus on the “Triple Play” is a Fool’s Errand. Ultimately the consumer will place a higher value on the availability of truly high speed Internet service comparable to what is offered in South Korea. By contrast, the “Triple Play” is a “me-too” strategy that is accompanied by unacceptable marketing costs.
Instead it is important to note that a significant disruptive change is in progress this year that enables viewers to get Internet-Video-to-the-TV. Specifically, it is the use of a laptop computer as an Internet Gateway for the TV. Almost by accident, consumers are discovering that the laptop computer and flat panel TV have common connection sockets permitting the TV to function as a giant monitor for the laptop. For example, a single HDMI cable enables a laptop to display High Definition programming on the TV screen. Given the onboard WiFi the laptop connects to the home network and thence to the Internet. This enables users to go anywhere on the Web and watch any videos they want to see on the TV screen.
Over one third of U.S. homes already have a flat panel TV and the figure is projected to rise to nearly 90% by 2011.
There are four reasons why the laptop will become the device-of-choice for getting Internet Video to the TV this year.
First, it provides unlimited access to all websites unlike competing appliances such as Apple TV that are limited to a Walled Garden (Walled Prison?).
Second, it is commonly available.
Third, new HDMI laptops are cheap ($400) by comparison to appliances that provide only limited Internet access, especially considering the general purpose characteristics of the laptop.
Fourth, instead of being a cumbersome interface, the consumer is comfortable when a browser appears on his TV screen. He knows what to do and can enlarge the text if needed. With a remote mouse and keyboard he gets unlimited Internet Video on the TV screen in a lean-back viewing experience 15-20 feet away.
In sum, the best strategy, particularly for Verizon given its fiber-to-the-home, is to merely focus on providing high speed Internet service at data rates comparable to South Korea. That way the consumer gets Internet Video on the TV the way she wants it and will have a decided preference for Verizon ISP as compared to Cable ISP. Additionally, this will remove Skype as a competitor since it will merely be an application that runs (even better) on the telco’s broadband ISP connection.
This is Third Generation Television.
