Cable operators and large telcos face threats from nimble Web 2.0 companies that may be more grave than their competitive rivalry with each other, according to Brian Cappellani, CTO of Sigma Systems, at the VON Conference & Expo. Speaking on a panel entitled “New Competitors: Rise of the ISP, the MSO Challenge, & Others,” Cappellani said that the cablecos, or MSOs, and the major carriers share the same long-term fear of commoditization as consumers and businesses turn to innovative IP-based services deployed over their “dumb pipe” networks.
“They may have a common enemy as opposed to seeing each other as enemies,” Cappellani added. “They might get identical capabilities out there, but both may lose.”
New entrants such as hosted VoIP providers and third-party developers running applications over Google Talk find it “much easier to get in the market,” agreed Joda Schaumberg, senior director for enterprise network services at Global Crossing Ltd. (GLBC).
"We have to understand how we position ourselves against that type of competitor, or we will find ourselves relegated to being pipe providers," said Schaumberg.
Comcast is now the third-largest provider of voice service in America, pointed out Cappellani, while small local and regional ISPs with loyal customer bases are moving up to offer triple-play residential services. How these forces will play out is unclear, but it's obvious that competitive service providers and nontraditional telecom players, from Microsoft (MSFT) to Google Inc. (GOOG) to Skype, are adapting and creating new business models in a challenging economy.
Cable companies have made inroads into traditional telecom turf, observed Cappellani, by “doing it the way the telcos used to”: specifically, by establishing industry-wide standards, such as DOCSIS, that have enabled the rapid deployment of new services that have found favor with customers.
The cable industry is also moving ahead with a new generation of targeted advertising, based around a standard known as SCTE 130 that will provide “a whole new architecture for addressable advertising,” based on specific user behavior or broader demographics, added Cappellani.
Ultimately, the real threat to the established telecom and TV establishment may come from companies that a few years ago would not even have been seen as competitors, said Kelly Anderson, senior strategist at the Customer Experience Forum.
“These are significant shifts that could happen quickly,” Anderson warned, “unless the cablecos and the telcos figure how to counter them.”