Cable about to “get leapfrogged”

We’re playing offense, not defense when competing against the Bells,” says Brian Roberts, chief executive of Comcast, the country’s largest cable operator with over 21 million subscribers.
The technological arms race is further evidence that television is entering a new content- and feature-rich era. Early signs of this transition were the introduction of TiVo and other digital video recorders and video-on-demand services that enable viewers to watch shows whenever they want.
But many more new products and services are in the works by businesses using Internet technology to combine the functions of TVs, computers, the Internet and telephones. Cable has to make sure it doesn’t get leapfrogged. “This is about totally changing this industry,” says Lea Ann Champion, senior vice president of phone giant SBC Communications Inc.

Internet technology poses a challenge to cable primarily because it raises the possibility of virtually unlimited television content. The TV service that telephone companies like SBC Communications plan to offer will transmit channels the way Web pages are transmitted off the Internet; only those requested will be beamed to the set. Advocates of this approach talk of a day of massive amounts of content appealing to niche markets, like programs in numerous foreign languages and archived episodes of “My Mother, the Car.”
Cable systems, by contrast, typically transmit every channel they offer at once to every subscriber. The cable box, often built into the TV, acts as a filter to select which of the channels from this stream is seen on the set. If a certain channel isn’t part of the cable company’s feed, the customer can’t get it. Current technology limits this stream to about 400 channels, depending on how many are high-definition.
Internet technology, meantime, also promises to make it easier to combine features of the Internet and television, giving viewers the ability to, say, record shows on their home digital video recorders by clicking on a Web browser in their office.
The other threat to cable from the Internet comes from companies ranging from giants like Microsoft Corp. to start-ups like Akimbo Systems Inc. that are enabling consumers with high-speed Internet connections to download content off the Web onto computers or set-top boxes connected to their TVs. Here too, the amount of possible content is nearly unlimited. Computers with Microsoft’s Media Center software, for example, can show thousands of online movies on a TV screen from such online sources as Movielink and CinemaNow. Late last year, Akimbo began selling a set-top box with an Internet hookup that offers TV content from 125 providers in 50 categories, including video Web logs, or blogs.
So far, consumer response to these download services has been lukewarm, partly because viewers haven’t been bowled over by the quality of the content. But demand might pick up as more players start moving additional content from the Web to the TV, notably TiVo Inc.; a venture of SBC and satellite-TV company EchoStar Communications Corp.; and start-ups DaveTV and Brightcove Networks Inc.
Until recently, the cable industry has had the reputation of being a technological laggard. Satellite rivals were the first to introduce a wide range of products, including digital channels, high-definition programming and digital-video recorders.
But lately, as competition has intensified, the cable industry has become more innovative. Cable operators have sunk tens of billions into upgrades and were much faster than phone companies, for example, in launching high-speed Internet connections, which has turned into a huge business. Most major cable companies now are launching phone service, using Internet technology similar to what many phone companies are using to get into TV.

Source: Grant, Peter. “Cable Operators Rush Services To Keep Edge.” THE WALL STREET JOURNAL (July 21, 2005): B1 & B8.
URL for complete article:
http://online.wsj.com/article/0,,SB112191275980091783,00.html