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Cable Industry Wary of Internet Protocol TV

A Content Delivery Technology That Makes Television Interactive

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NEW YORK (AdAge.com) -- Will IPTV upend cable's distribution equilibrium? Or is it the Rosetta Stone that turns cable operators into phone companies? Could be both, as it turns out. But what does that mean for advertisers -- and why should they care?

The potential of Internet Protocol TV has seized the attention of cable TV system operators. The issue being debated is whether the new technology will be an lucrative asset or a fearsome competitor.
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One of the hot abbreviated buzzwords at the annual CTAM Summit this week, IPTV, or Internet Protocol TV, garnered as much discussion about what it is and isn't as it did about how it will affect the communications world. It was the subject of a packed CTAM session that included executives from Verizon, Cox, Microsoft, Fox and Akimbo.

A poor label
The group agreed IPTV is a poor label for what's really "next-generation TV." It's not actually distributing TV publicly over the Internet -- that's called streaming -- but turning TV signals into Internet protocol.

Turning TV signals into Internet protocol enables two-way communication, the kind necessary for video on demand, and means programs or channels can be distributed individually over a broadband network, freeing up bandwidth. It also enables VoIP, or voice over Internet protocol, which lets cable companies offer broadband-based telephony services.

If using other media analogies makes sense, look at what the Web, with its blogs and online news sites, has done for print, or what streamed radio, Internet-delivered radio, iTunes and Napster have done for audio content.

'Single biggest explosion for content'
"This is the single biggest explosion for content," said Josh Goldman, CEO of Akimbo, a company that delivers Web content to TVs and set-top boxes. "We've already seen it in print and we're seeing it right now in audio with MP3s. There's no reason to think that it isn't coming for the video world."

IPTV also creates a host of new entrants to the video-delivery field, a turf formally owned by cable operators and satellite TV distributors. Telecoms Verizon and SBC are spending millions building high-speed networks that will deliver video and are lobbying lawmakers to grant them reprieve from the traditional franchise rules by which cable operators abide.

Akimbo claims it's "agnostic to transport" but sees its role as an aggregator of a new class of content. Microsoft supplies cable operators, Web portals like Yahoo and other new video-delivery entrants with IPTV technology. Said Ed Graczyk, director-marketing for Microsoft TV: "Our job is to deliver the technology. ... We don't favor anyone."

Cable operators can bundle services
To be sure, IPTV doesn't spell extinction for cable operators, but rather enables them to offer a bigger vision -- they can use the same broadband wire to bundle voice, Internet and video services.

"Linear and non-linear content are complementary," said Lindsay Gardner, executive vice president of affiliate sales and marketing for Fox Cable Networks, who explains consumers want not only a personal experience, such as what the Web provides, but also a community-based one, such as what broadcast TV offers. "Now we're able to customize and personalize content we couldn't previously do with TV but it's been the province of consumer goods.

Akimbo's Mr. Goldman said IPTV's ability to offer a nearly unlimited cache of video content could, like VOD already does, provide a promotional vehicle for traditional broadcast-style TV. For example, if a viewer wanted to start watching NBC's The Apprentice halfway through the season, he could catch up on all the previous episodes.

"It's not which one will win but how we as an industry use the right tool effectively," he said.

Navigating limitless content
One of the major hurdles will be navigating the potentially limitless content. "How do you make Google work in a video environment?" asked Bob Ingalls, president of Verizon's retail markets group.

The implication for advertisers, of course, is being able to target to a TV's individual IP address -- making it as targeted an ad buy as the Internet is today. "There's no reason I'll ever need to see an ad for Craftmatic Adjustable Bed again," Mr. Graczyk said. "[Advertisers] will send one ad to the kids' bedroom TV that usually watches Nickelodeon and another to the parents' room that usually has Discovery on."

Added Dallas Clement, senior vice president for strategy and development for Cox Communications: "Advertisers and agencies see the built-in accountability and measurement of that two-say model."

Newfound competition
Of course, the panel couldn't let the question of cable's newfound competition go unasked.

Cox's Mr. Clement described his model as a "bricks-and-mortar business" and said the operators' goal is to "make it so [Fox's] Lindsay wants to market it through me, not around me."

Countered Verizon's Mr. Ingalls: "Our goal is to be the most effective packager and bundler."

"IPTV enables the ability for new types of aggregations," Akimbo's Mr. Goldman said. "AOL was the case study [in the Internet] and even it has brought the [subscription] wall down."

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