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Phone, cable companies embracing Web 2.0

As cable and telephone companies increasingly offer the same services, some are turning to Internet collaboration to set themselves apart.

Homemade videos appear to be the latest "killer app" from cable television operators and telephone companies.

On Tuesday, The Wall Street Journal reported that Verizon Communications was in "advanced" talks to bring video on the popular YouTube site to mobile phones and TVs. The news follows the Monday launch of a beta version of a new Comcast Web site where users will be able to offer up homemade videos that could eventually end up on Comcast's video-on-demand service.

"We're living in an age of great innovation...And it's going to be great for consumers, because these companies through their experimentation will be able to figure out new business models," said Dan Scheinman, senior vice president of corporate development at networking giant Cisco Systems.

"The vast majority of people are satisfied watching programming they get from their service provider on an actual TV."
--Todd Chanko, Jupiter Research analyst

It increasingly appears the telecom giants' latest innovation is Web 2.0-style collaboration. As phone companies such as Verizon Communications and AT&T enter the TV market and cable companies like Comcast and Time Warner sign up more telephone customers, the line between cable company and phone company is blurring. As a result, some operators are starting to experiment with unorthodox services to differentiate themselves from the rest of the crowd.

Take Verizon. For more than a year, the telecom has slowly been rolling out a TV service that operates over Fios, its multibillion-dollar fiber network. At the end of the third quarter, Verizon said it had 522,000 customers for its fiber-based Internet service and 118,000 TV customers. Right now, however, the Fios service doesn't vary much from offerings from other cable operators. It offers a standard bundle of channels and video on demand, just like its competitors.

But that's starting to change as Verizon uses its network as a foundation for new services. Last week, the company announced that it's working with chipmaker Intel to offer the Verizon Games on Demand service (which was already available on PCs) on TVs. It relies on Intel's Viiv technology to help connect the PC to the TV.

A deal with YouTube, which Google intends to buy for $1.65 billion in stock, would offer Verizon yet another opportunity to make interesting niche content available in different ways.

"Whether or not the mainstream public will watch YouTube clips on their TVs is uncertain," said Michael Cai, director of broadband and gaming for the research firm Parks Associates. "But it could find a place with early adopters and viewers with special interests like ethnic programming."

Verizon declined to comment on the YouTube speculation. But according to The Wall Street Journal article, the company plans to offer YouTube video clips through its on-demand service. Subscribers would likely buy access to top-rated YouTube videos for a small fee.

In addition to offering the service on TVs, Verizon Wireless, which is jointly owned by Verizon and European cell phone carrier Vodafone, is also expected to offer YouTube videos on cell phones through the company's V Cast mobile video service, according to the article.

Contests too
But Verizon isn't the only service provider experimenting with user content. This week, Comcast launched the public beta of Ziddio, a user-generated video portal. Comcast is currently : Users are being asked to submit videos for a Star Wars-inspired contest; another contest, sponsored in conjunction with the Style Network, is searching for the messiest house for a home makeover. If the videos are good enough, they will be offered as part of Comcast's video-on-demand service.

Comcast wouldn't officially comment on the new site, but it's likely to be out of beta testing by the end of the year, a spokeswoman said.

Comcast is also creating niche Web sites using produced content to attract users. On Halloween, it , a site targeted at horror movie fans. The site offers a slew of scary movie titles and other content from Sony and Lionsgate on the Internet as well as through its video-on-demand service. Users can rent or buy movies on the site and download them onto their computers. They can also buy ring tones and wallpapers for their mobile phones. FearNet also has developed a user community that allows fans to chat in open forums, create Web pages and post pictures. Eventually, they'll allow fans to post their own short videos.

Still, there's a big caveat to this enthusiasm for user content--experts say these new services aren't likely to influence how mainstream consumers buy their TV service. While user-generated videos are hot among the cyberset, most consumers haven't widely embraced downloading or streaming video--nor have they watched lots of TV on their phones.

In a Parks Research poll conducted in July, about 31 percent of respondents said they had watched a streamed video from the Internet. Only about 18 percent said they had downloaded a short video clip from the Internet. The numbers are even more dismal for people watching TV on mobile devices. According to a recent JupiterResearch poll, an overwhelming 88 percent of respondents said they had no desire to watch TV on a portable device.

"You'll always have a core group of early adopters that are interested in trying out new technologies and new platforms," said Todd Chanko, an analyst with JupiterResearch. "But the vast majority of people are satisfied watching programming they get from their service provider on an actual TV."

But Parks Associate's Cai warns that television providers risk losing customers if they can't also offer new services that serve niche audiences.

"The video market is becoming fragmented," he said. "And if the cable operators and phone companies don't pay attention to what their customers want to watch, they risk leaving money on the table because people will go other places to get it."