THE CABLE PIPELINE

Apple (Nasdaq: APPL), led the way with the $.99 download price for your favorite iTunes rather than purchasing a CD with one song you really liked, and eleven others that could be thrown away, in want for a better excuse to use them. It then went on the create iPhone, and with a mind-set to share knowledge, created an Apps Store to build function and connectivity in what customers wanted from their mobile experience.

Cable/Telco and DBS companies have long used the model, more is better, and delivering customers a bundled package of mass channels at, an economy of scale price, is a good model. Depending on what consumers want to watch, one particular channel could cost you the price of many channels. That model worked fine in the past since prices were relatively cheap and channel quantity was high. Today, prices and channel availability are high all supporting high infrastructure and programming costs.

Now Google (Nasdaq: GOOG), is set to introduce a new Android based TV UI software at its upcoming Developer Conference in San Francisco which promises to lead the way in how consumers connect to their favorite TV programs. In addition, Google will be partnering with Sony, Intel, and Logitech to introduce Google TV, a web based platform to offer all the applications consumers want in a TV/Internet marriage.

What does this mean for the Video Industry? It confirms that competition is beginning to emerge from some of the giants in Internet proliferation who understand that a market does exist for Internet based TV. That market differentiates itself from the traditional bundling and mass distribution of linear programming which the Cable TV Industry has developed and distributed so well.  

Google TV will be joining the ranks of Apple TV, Netflix, Roku, and others who have struggled to carve out an alternative niche in Internet TV viewing. And it will all come down to a Set-Top-Box delivery system along with serious applications giving consumers a wide variety of experiences over this venue.  Currently, BluRay, Xbox, Roku, Apple TV and others have STB’s which will need to be upgraded and refined to compete with the formidable Cable Industry which has been developing their unique boxes for years.

This marks the spot where real competition will begin within the marketplace. As Google, Apple and others enter the Set-Top-Box market, only needing a high-speed broadband connection to operate; the game may change in favor of more choice and less mass bundles to offer consumers what they really want from both Internet and video.

Goggle has previously announced its intention to build a one-gigabit enable broadband pipeline in various test markets to indicate a belief that fiber-to-the-home is feasible and economically viable. But there continues to be unanswered questions regarding this initiative, mainly whether the revenue Vs cost models will hold up under their own weight.  Verizon (NYSE: VZ), has also tested these waters with FIOS, and is now halting all new market construction in favor of concentrating build-outs of existing commitments. Sufficed to say, the economics are still yet to be determined over the long haul with such a high build-out cost on the front end of FTTH.

The bright side of the equation is that Set-Top-Box’s and associated applications have potential in creating more of a competitive landscape in traditional video markets, but does not necessarily correlate in the build out of more infrastructure other than in underserved markets, which fall under the Broadband Stimulus Plan. Traditional Telco’s have the best chance of competing with infrastructure based competition with their existing Telco based parallel lines with Cable. However, all companies competing for the video customer realize that applications based competitiveness is a must in this changing arena.

Related articles by Zemanta

• Report: Google Will Soon Unveil Android-for-Television (wired.com)
• Google reportedly preparing to intro TV software next month (arstechnica.com)
• Google and Partners Seek Foothold in the Living Room (nytimes.com)