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Can Telcos Extend Wireless Success to IPTV?

The surviving telephone companies from the old U.S. Bell system are sometimes dismissed as "dinosaurs." They are accused of riding their traditional fixed-wire voice into oblivion, and face an uphill battle with new video services against entrenched cable TV operators.

However, the skeptics fail to appreciate that over the years some of these telcos re-invented themselves as wireless network operators. Kagan Research notes the wireless businesses added almost $7.5 billion in revenues over the past two years to earnings at RBOCs Verizon, BellSouth and AT&T (formerly SBC). In Q4 05, wireless generated about 45 percent of Verizon revenue. At BellSouth, the figure was 40 percent. AT&T's wireless revenue accounted for just 16 percent, but that's up from 10 percent in just seven quarters.

AT&T's pending $67 billion merger with BellSouth accelerates the trend, since they jointly own cell phone giant Cingular. "Via the merger, AT&T will have increased exposure to wireless and one-third of total 2007 revenues coming from Cingular," notes Kagan.

Mobile wireless voice � which dates back to 1984 � is today maturing but still a cash cow. Wireless Investor calculates the cell phone industry sported a robust 36 percent cash flow margin in 2005, putting cell among the leading profit segments of the media world.

Of course, wireless carriers are also at risk as they push into a broadband/video space with new broadband wireless technology competitors like the planned Wi-Fi/WiMax combo networks. Expect RBOC wireless divisions to try to co-opt these as companion networks, aiming to give their customers abandoning RBOC fixed-line voice networks yet another reason to go totally wireless. Wireless-only phone customers � mostly in the coveted youth demographic � will grow to an estimated 10 percent of the voice market by year-end 2006.

AT&T, currently with the lowest wireless revenue percentage, has an opportunity to catch-up by creatively integrating capabilities from its U-verse IPTV platform into its mobile service offering, and thereby enable innovations like content subscription roaming. It's the concept where remote access to multimedia features and programming available at home follows the consumer wherever they go via their mobile handset.

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