Seizing control of the remote

It's called convergence, but it's really the great tech squeeze. Technology is driving content, hardware, software and telecom firms onto each other's patches. The big question for telcos is whether they can resist the push to displace them from the living room.

Telcos weren't in much evidence at the Consumer Electronics Show (CES) last month. To be fair, consumer electronics firms weren't necessarily the main attraction either; only one of the five keynote addresses was actually delivered by an electronics firm, with Sony chief Howard Stringer sharing the spotlight with Microsoft, Intel, Google and Yahoo.

Each of those five is coming to market with a different take on the same theme of integration of content or connectivity.

These are direct threats to broadband carriers. Take TV. Just as telcos are rolling out IPTV, we see Microsoft, Google and Yahoo offering new video through either the PC or the set-top. Google is offering downloads of premium TV shows like CSI for as little as $2. Yahoo is offering a TV screen software plug-in. Microsoft and Intel are promising to connect PCs and TVs.

Telcos don't contain the skillsets to meet these challenges on their own. But they should use their position as trusted providers to the home to partner with those who do have the right smarts.

But the broadband players can take a leaf out of the mobile guys' book. While broadband players are just dipping their toe into TV content, cellcos have been partnering in a major way with application and handset players for some years.

Their customer base and local loop presence are the biggest strengths of broadband carriers.

They're vulnerable, though, because of their high fixed costs. Even in the age of softswitches and NGN, telcos have huge capital deployments and widely-dispersed customers. Software firms' costs, mostly R&D and marketing, are offset by an advantage no broadband provider enjoys - namely, global scale.
But just as telcos are constrained by their legacy voice business culture, so their rivals are captive to the success of their own established practices.

Nicholas Carr on his blog (www.roughtype.com) criticizes Microsoft for its focus on adding more features to the PC, as though it is still a clever, standalone box.

He devastatingly mocks the notion of the 'digital lifestyle' that IT firms insist that we want. Human beings want lives - not the sterile lifestyle advocated by Gates as CES, which Carr dismisses as 'just another big pile of software features that we have to sort through and make sense of.'

Customers want simplification and integration, not more features. Geeks are already happily swapping MP3 files between devices and posting their photos online. The rest of us want digital entertainment to be as simple as turning on the TV or playing a CD.

Telcos are admirably placed to serve that need. They can step between the squabbling IT and Internet guys and play to their strengths as trusted provider.

Two more points are worth remembering in the digital home argument.

First, there is precious little upside to consumer spending on communications and gadgets.

 

After the boom in the past decade, where individuals have kitted themselves out with cellphones, music players, Internet connections, PCs and other gizmos on a scale unimaginable a few short years back, there is no appetite to spend more.

As the one segment with a continuing billing relationship with consumers broadband ISPs have a more precise idea of spending patterns than their rivals.

Finally, and also in the telcos' favor, is the power of the inertia factor. Even after years of voice competition, most customers in most markets still use the incumbent. If a telco is delivering seamless voice and entertainment services to the home, why change to Sony or Yahoo‾

Telcos that play properly to their strengths will be able drive off their challengers to take control of the digital remote. Just don't sell it as a 'lifestyle'.

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