07 Jan Visions with TDS' David Wittwer: Entertainment world will continue to lose control of content
Editor’s note: David Witter, president and CEO of TDS Telecommunications Corp., recently sat down for a second Visions interview with WTN. The interview will be presented in two parts, with Part I focusing on the progress of TDS’ transition from a phone service company to a broadband-enabled content provider.
WTN: A year ago, your predecessor, Jim Barr, said consumers and businesses were changing their demands for products and services faster than market research could fathom. TDS is transitioning from a traditional telephone company to an Internet and entertainment provider in the markets it serves, but has it been able to transition to being a broadband provider fast enough?
Wittwer: We have. We’ve done a couple different things that are reflective of that. One is that we have been able to continue to increase speeds at some reasonable rate to keep up with consumers’ and businesses’ demands. Obviously, the technology has also enabled that, so you need them both going in same direction. You need as much vendor support on the technology and you need a company that is committed to providing the service to the customer. And you need an engineering design that is scalable and growable.
At the same time, we’ve continued to reach out deeper and deeper into our market to allow more and more customers access. So it’s a combination of [speed and] accessibility. I think now we’re at about 86 percent of our customers that have access to broadband, which is up and it’s starting to get to be a pretty good-sized number. That’s a pretty significant improvement over where we were. Then speeds continue to rise. Now, roughly one-third of all of our customers are on our highest speed. Probably half of our new sales now come at the highest speed.
WTN: Are business customers necessarily the fastest to go for the highest speeds?
Wittwer: Not necessarily. I think you find that it’s going to depend. Many businesses are very data rich in terms of what they are. A lot of the customers that we serve are small to medium-sized businesses that may not have the same set of needs. Certainly, some consumers who are very video entertainment dependent will see more of the value in higher speed. The consistency, the reliability of the speed – that means a lot to a business.
WTN: When we spoke last year, you indicated that once you get robust broadband connections into consumer and business accounts, applications that ride the broadband network will start springing up. Have any new applications, perhaps ones that you did not envision, caught your attention in the past year?
Wittwer: Voice over IP [Internet Protocol] is probably the one that is most top of mind. Obviously, once the customer is connected, [VoIP] is the universal language for being able to connect the devices. But as an application, we have a relatively new service we call Managed IP. It’s a feature rich set of integrated voice and data services that integrate business customers’ Outlook calendar or Outlook toolbar with what we traditionally think about as their telephony set. It lets them do “find me,” “follow me,” simultaneous ringing. There is a whole number of very valuable feature sets that are included in that, and that’s only enabled with an IP connection. So that’s probably the most significant one in the past year.
WTN: Voice over IP has been around for a while, although deployment is picking up. Is there anything brand new?
Wittwer: No, and I think there are big distinctions in what I would define as Voice over IP. There is a lot of feature functionality beyond just delivering the voice. As an example, simultaneous ringing where services will ring both on customers’ home phone, their cell phone, their business phone, different times of day, all are enabled with this. Voice over IP has been around for awhile, but this kind of feature-rich functionality, which is available to smaller businesses, is what is new. That was available to very large businesses, but when you think about small and medium-sized businesses, that’s a big infrastructure investment they can’t afford to make and want to maintain. So what we do is we actually host that application for them so there is no equipment in their office at all, and we maintain that intelligence and we maintain that infrastructure, and they get all the benefits from the functionality.
WTN: How will you support a content model versus a service model, especially since that model will likely change over time?
Wittwer: It’s our believe that the entertainment model is changing more rapidly than may people believe. That’s demonstrated by customer’s desires to watch what they want to watch when they want to watch it, and they are not willing to just accept what’s available to them. They want to go out and get it. Whether you define that as video over the top or broadband – there are a lot of different terms people use for it – that’s coming very, very fast.
Reliability, good bandwidth, continue to improve, [and] all of those things enable that for the customer. I think where the transition is occurring is that much of that is still focused around the PC and not as much is focused around the TV set yet. But certainly the introduction of things like Voodoo and Apple boxes and a number of other things are the first starts at making it a much more pleasurable experience for the customer to get it via the TV set. I don’t care what the medium is to get it to me. We recognize that’s important, and we want to be there for those customers if that is the way they want to do it.
If you believe in this concept of the long tail, there will be a multitude of providers that will make content available to customers. In some cases, we’ll have partnerships with those content providers to make it even better for our customers; in other cases, we’ll just make those content relationships available to our customers. It won’t be as controlling as the traditional entertainment world has been in the past.
WTN: Now that movie and network TV producers have embraced Internet Protocol TV as a distribution channel, how is TDS going to integrate all the associated applications for consumers?
Wittwer: We have to two market trials underway today in Tennessee that are delivering to customers using IPTV, true IPTV services. We have some technologies to work through with the vendors. This is very new technology, and very new for not only the equipment providers and service providers, but also the content providers. If you think about the transition that occurred when companies introduced MPEG-2 technology compression, there was great deal of angst. Then when they went to MPEG-4 compression, there was a great deal of angst by the content providers to make sure that my movies aren’t compromised in some way. All those things have to be worked through and they are getting worked through.
So we are delivering that today. That integration of the content and digital rights management does occur with the service provider, but that’s in a traditional, controlled model where you are basically providing content from three different companies, you’re aggregating it and giving it to your customer. That will continue, but again the trend I think is going to be to more and more broadband video where customers are going to say, “Look, I want to get what I want to get, when I want to get it.”
When you look at the content that is being made available, even a couple of years ago people said, “ABC or NBC, they will never put prime time content online. It will just be kind of snippets and teasers and things like that.” The reality is that it’s not that way at all. Full-fledged episodes of Lost or Desperate Housewives are available. It’s real, it’s here, so we need to do both. In those markets where we opt to provide IPTV-like services to our customers, we will have to integrate. Certainly in other cases, the customer will need a reliable broadband connection. We don’t do any filtering or restrictions or anything else that has been rumored a bit in some other places. That’s just not what we do.
WTN: What do you make of U-verse, AT&T’s new video service, and the competitive threat it poses?
Wittwer: U-verse will be competitor, but not today where we operate. It depends on where AT&T goes with its next set of plans. Clearly, they are already a competitor in our [TDS] Metrocom markets for voice and data services, but U-verse is primarily focused on the consumer, and the majority of our focus in our Metrocom branch is on the commercial side, on the business side. So we’re very interested in continuing to watch their progress.
We like the fact that they are helping to drive standards in the vendor space. Scale helps on the vendor side, so the more vendors that understand how important IPTV is, the more that are enabling the equipment to work over telecom facilities, the better for the entire industry. That’s really important for us.
WTN: U-verse is a feature-rich service. Are you going to be able to compete when you bump up against it head to head?
Wittwer: The IPTV service we will deliver in Tennessee will be just as good, I’d like to think superior to, what AT&T will offer. I think we will be able to focus on local content more crisply than they can. Certainly, they have an advantage in scale in terms of market appeal, but what’s important to our customers, if you took Mt. Juliet, Tenn., is what’s going on in Mt. Juliet. That’s going to be more difficult for a larger carrier to focus on. We’re going to be able to focus on that.
So for example, being able to find ways to integrate [programming]. The classic example is high school sports. It’s not high school sports of the broader Nashville area, it’s high school sports of Mt. Juliet. That’s what’s important to those Mt. Juliet customers. We will have the ability to do that because that’s the market we’re focusing on. We’re not focusing on Nashville. It will be that local element that will be unique for us.