Telcos add more TV outlets to the equation.

Look out U.S. and international TV cable operators, 'cause here comes Telco TV. In pilot markets across the United States, AT&T and Verizon have begun offering hundreds of television channels via Internet Protocol. Whether called IPTV, Video On Demand, Triple-Play, iTV, Video-over-IP or Broadband TV, one thing is certain--there are more outlets for content owners to showcase their programming than ever before.

What remains to be seen is how to "monetize" these new TV outlets. Nonetheless, globally, broadband television is already big business. In Hong Kong, the NOW Broadband IPTV service (part of Telco PCCW) has garnered 100 channels and more than 500,000 subscribers--one-third of the total number of IPTV subscribers worldwide. NOW Broadband also proved that IPTV's digital rights management is secure enough to prevent piracy, so content from media giants like Disney and Time Warner, who had previously avoided Hong Kong, is now available via IPTV in the forms of ESPN, HBO, Disney Channel.

With the delivery of a live television service through a telephone line, this Telco TV market is about to heat up in the U.S. According to estimates from Convergence Consulting Group, the two major U.S. Telcos--AT&T and Verizon--will capture five percent of cable's current subscriber base in the next two years. In the pilot market of San Antonio, Texas, AT&T is offering over 200 TV channels. This includes mainstream cable networks like A&E, HBO, Discovery and ESPN, local channels and a variety of original programming. Amy Friedlander, svp of Programming at AT&T, explained, "because only one channel signal is distributed at a time, the digital video platform does not reduce bandwidth for additional channels. That means we can offer a wider variety of incremental content and more individualized and niche programming." Couch potatoes can rejoice, since IPTV gives them picture-in-picture functionality, which allows viewers to channel surf without ever leaving the show they're watching.

Verizon, the largest U.S. phone company, is piloting its own Fiber-to-the-Home television service, called FiOS, in Keller, Texas. According to Bernstein Research, Verizon's fiber investment could surpass $20 billion in the next decade. In terms of premium multiplex channels, Terry Denson, vp, programming and marketing at Verizon, "we'll be able to offer more content, which means more choices ... as many as we possibly can."

Finally, IPTV is also available in North America through smaller services like Akimbo and Dave TV. With the purchase of a $99 set-top box from Akimbo and a monthly $10 subscription fee, consumers can view over 100 VoD channels. But, while some of this includes behemoths like CNN and BBC, most of the content comprises original programming that, according to Jim Funk, Akimbo's vice president of Marketing, "is not otherwise available on television. We do not replace cable or broadcast TV," he stressed. "Our viewers appreciate niche programming like anime and short animation, foreign-language programming, fitness videos and short films."

Similarly, Dave TV is also looking for original, niche programming. CEO Rex Wong pointed out, "We have over 100 on-demand channels."

The business model for major cable nets on Telco TV is similar to cable and satellite, with each network relying on a per-month, per subscriber payment. In addition to major cable channels, Verizon and AT&T are particularly interested in programming that leverages the greater bandwidth of the platform, such as interactive features and high-definition television.

SureWest Communications, a small operator that launched IPTV in the Sacramento region about two years ago, now has about 11,000 IPTV customers and offers 12 high-definition channels. Emerging 24-hour, high-definition linear television channels such as INHD and INHD2 are banking on high-def technology's ability to bring in subscribers. In particular, Mark Cuban's well-funded HDNet not only creates and co-produces 1,500 hours of original high definition programming, but seeks almost as much in licensed content.

Given that Telco TV is still confined to pilot markets, the business model is yet to be defined. "There is no single way of doing deals," said AT&T's Friedlander. "We are doing FVoD (free video-on-demand), transactional, SVoD (subscription video-on-demand), revenue-share and free models."

Less-established content owners without an existing national audience can either package and sell their offering as a premium channel, or offer their content to viewers for free while selling their own ads and sponsorships. One example is Rocketboom, a satirical three-minute daily news sketch. Despite beginning as a Vlog (video web log), Rocketboom's distribution on Akimbo and itunes has given the program a significant national audience (with itunes being the key contributor of audiences). While CPM's are not comparable with cable television, audiences are: 215,000 viewers watched The Abrams Report on MSNBC last month and 200,000 watched streams of Rocketboom.

Another potential outlet for television content is mobile, and the Telcos are breaking into that business as well. After investing billions of dollars in advanced third-generation networks, wireless carriers in the U.S. have finally begun offering mobile television. While the subscriber base is small today, industry analysts such as Yankee Group and Ipsos Insight expect 40 million U.S. and 100 million worldwide mobile video users by 2010. Presently, Sprint offers three subscription VoD packages, priced at $10, $15 and $25. Jon Burris, svp of Multi-Media Services at Sprint, has called this need for programming, "an unprecedented opportunity for the little guys. The market is still undefined."

Similarly, Verizon Wireless has its own V-Cast package that includes a mix of streaming television from the major networks and video-on-demand. Content owners, such as NBC Mobile, CNN and Fox receive a monthly payment per each subscriber. Cingular Wireless, in addition to offering the 22 channels available from mobile video aggregator MobiTV, has an exclusive relationship with HBO for Sex & the City and The Sopranos on mobile. These premium channels, just like premium channels not included in the basic channels on other carrier decks, cost about $5 on mobile. So, as content owners explore new revenue streams, they would be wise to consider the long-term possibilities of the mobile and IPTV platform.