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Telco Challenge - Broadcasting & Cable

Telco Challenge

Video services get hotter
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Telco TV is a growing market segment: Telcos like Verizon claim
they'll attract hundreds of thousands of video-services subscribers by the
end of 2006—and it's more than an idle threat. Verizon, which begins
test-marketing next year, already has ESPN, CNN, Fox and HBO in its lineup. But
are the telcos overreaching? Steve McKay, CEO of Entone Technologies, a
supplier of home-networking and on-demand technologies, talks with
B&C's Ken Kerschbaumer about what lies
ahead.

What will a video-services rollout
cost?

It depends on whether you're talking to an operator thinking about
offering video services vs. one already offering them. For the former,
they'll have a number they need to meet on a per-household basis. The average
household will have three TV sets that will need three boxes at $150 each. You
also need a DSL or ADSL modem if it's over a copper phone line; another $75.
Plus, a big spool of Ethernet cable to wire the home. So it's about $600 per
home. It's still too high for a telco.

What does the cost have to drop to?

Certainly below $400. But the big issue is that you require one set-top
box per TV. Those costs will go up even more for a five-TV household.

Is that where your product fits in?

Yes. Telcos can use our Hydra gateway to serve multiple TVs, and it
costs less than $400. It's about the size of a DVD player. But it also brings
the installation cost down because it uses the home's existing coaxial cable
to deliver signals. Then, you just plug the TV into the outlet.

Why is that important?

If the telcos are going to succeed, they need service parity with cable
operators. But when their service person spends all day nailing up new wiring,
it's an inferior offering to cable. That means one installation a day, and
that's a huge issue.

Is it a matter of survival for the
telcos?

The triple play is a matter of survival for everybody. It used to be
cable having the franchise for video, telcos having the franchise for voice,
and the two fighting it out for data. But now someone is going to own the
customer relationship for multiple services.

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