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Does Viable IPTV Need Channels?

Wall Street has reacted skeptically to FCC chairman Kevin Martin's expression of support this week for the concept of mandatory a la carte pricing for the cable TV industry. This isn't newsworthy. However, questions about the implications to the ongoing infrastructure investment for IPTV are clearly worthy of further reflection.

The a la carte requirement would hurt the financials of cable operators, telecommunications companies planning to compete with them in the video space and cable network owners alike, several analysts said, one factor that makes it an unlikely eventuality.

Prudential Equity Group analyst Katherine Styponias pointed out in research released Tuesday that regional bell telephone companies "are planning significant investments in fiber over the next several years partly based on the current economic model that exists." She added that "if that model becomes less profitable or more complex from a provisioning standpoint, it could become harder to justify fiber builds," thereby wiping out a possible new competitor for cable firms.

Ms. Styponias point actually raises an equally troubling issue -- what if the whole notion of "TV channel bundling" becomes less relevant by the time that the telcos complete their fiber network build-out? Does this possibility put the telco's multi-play business model in jeopardy?

With the exception of news, weather and sports related live content, is there any real reason why all other TV or video content shouldn't move to Video on Demand (VOD)? It's quite probable that consumers will continue to move away from the pre-scheduled, advertiser-supported, broadcast channel model -- in favor of a more flexible consumer-oriented just-in-time delivery model.

So, does this trend threaten the viability of the current telco thinking around IPTV? Perhaps not, because if only half-a-dozen live channels are typically worthy of a scheduled broadcast, then telcos can simply cut-back their headend and fiber related investments accordingly. Since most have barely begun to invest in fiber, this wouldn't be a problem.

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