The phone companies are spending large amounts of money, in business investment and lobbying in order to enter the video business. In Texas, SBC just won a victory that lowers their cost compared to cable television by allowing them to start out with statewide franchises, instead of negotiating with each city.
The phone companies have been eyeing ways to diversify away from phone service for decades. In the 80s and early 90s, AT&T made a series of disastrous attempts to enter the computer business after the anti-trust settlement with the US department of Justice.
Video distribution seems a better fit than PCs. It’s a familiar business model, where where a being an oligopoly owner of a distribution channel makes you the leading provider of a service. Owning big servers and pipes is surely a competitive advantage, as is managing an itemized billing service.
The phone companies know they need to slug it out with the cable companies with price wars and features. But cable won’t be the only competition. The market is also seeing entrants with new distribution models.”Long-tail” business like Amazon, Netflix, Yahoo, and Google have the ability to leverage big servers, ecommerce and ad platforms, search and recommendation engines to become major distribution channels. Peer to peer distribution is becoming a notable alternative to get video, and ad models are emerging for p2p. Content providers like the Comedy Channel can host Daily Show clips themselves. The low cost of video is starting to create a generation of video podcasters. Services like Ourmediaare emerging to host amateur audiovisional content.
This is going to make the video business much less of a comfy oligopoly. The phone company will have to fight for the market.