• United States

Saved by bad movies?

Jun 02, 20033 mins

An old dream seems to be resurfacing. CNET had a story on May 23 that said “major U.S. telephone companies have plans to pump video and TV services into homes via their lines, countering recent moves by cable providers to sell ‘Net-based phone services over their system.” What is it about moving pictures that make normally sane phone people become Hollywood squares?

The motion picture business is not a small one. According to the U.S. Census, the motion picture and video business was worth $57 billion in 2001. But this pales in comparison with the $367 billion telecom business in the same year. For comparison, cable TV was at $74 billion and pay-per-view was only $1.9 billion, which was less than cable-based Internet access services at $2.1 billion. (A random data point is that total Internet access services was about $15 billion, with $12 billion of that being residential.)

In trying to expand into video, telcos are chasing a very expensive paper tiger. It would cost many tens of billions of dollars and many years of effort to put the systems and technologies in place to start to challenge the cable companies. And there is no reason to think that the cable companies would sit still long enough to let the phone companies get a foothold.

Even if the telcos could get half the video business – an almost inconceivable feat – what would that actually mean in terms of profit?

One would expect the cable companies to fight back with a price war, leaving the telcos with the prospect of spending tens of billions and finding paper-thin profits, if any, at the end of the rainbow. This is far from the first time that the telcos have lusted after this rainbow, and I don’t understand why they don’t seem to learn.

I also don’t understand the telecom industry’s fixation with the concept of a single bill. The CNET article mentions that cable companies are now putting cable TV, Internet service and phone service on one bill and implies that the phone companies think that not being able to do the same is a competitive disadvantage.

One telecom company was running some remarkably dumb radio ads about the same thing in the Boston area a few months ago. I fail to see the carrier’s advantage in making it crystal clear to you how much you are paying for all of this, nor does it seem to be a big deal to write an extra check or two. These folks have an avowed goal of getting you to double or triple the amount you spend each month on telecom. I would think the last thing they should do is put it all in one place – even the Salad Shooter-type ads on TV break things up into multiple “easy payments” to disguise how much the thing costs.

Disclaimer: Breaking up Harvard’s student bill would not disguise much, but the university has not commented on telco logic.

Bradner is a consultant with Harvard University’s University Information Systems. He can be reached at