• by Wayne Friedman , Staff Writer, March 8, 2006

Do we really need to worry about the telcos getting into TV... again?

That's so 1990s.

Those crazy cable operators think so, as they are on the warpath again, concerned about the new merger of AT&T and Bell South. Cable operators are being attacked by satellite companies on one side and now, seemingly, telcos on the other. They are scared the new AT&T (the former SBC Communications) is on the verge of putting back the old monopoly AT&T.

AT&T's footprint is already bigger than the biggest cable companies, and the new company's market capitalization will be more than the entire cable industry combined. Cable executives warned that new IPTV technologies from AT&T, Verizon, and others will give them a stranglehold on video business--similar to what they had with the phone business up to the late 1970s, before the government broke up AT&T.

But the reality of today is--haven't we been through all of this before?

Wasn't it another bell, Bell Atlantic, going to take over video content with its proposed merger with the large cable system operator, Tele-Communications Inc.? In October 1993, Bell Atlantic said it planned to develop a full-fledged fiber distribution network, in the wake of its proposed $30 billion acquisition of Tele-Communications Inc.

What happened? The deal fell apart.

Then five years later, in 1998, another telco-cable deal stuck--sort of. AT&T bought the Tele-Communications, a deal valued at just short of $50 billion. Then AT&T was supposed to rule the video world. But it got out of the business because AT&T couldn't figure out cable's complex and sludgy financial scale--cable systems still being more a regional business than the national one that AT&T knows.

The lesson learned here is to look at media mergers in the same way one observes new consumer media technologies. In the 1980s, VCRs were supposed to rule the media world and make network programming schedules obsolete, putting the then-big network programming chiefs--Brandon Stoddard at ABC, Brandon Tartikoff at NBC and Kim LeMasters at CBS--out of business.

That never happened.

In 90s, AT&T and other big bell companies had similar opportunities with assets and cable holdings to leapfrog over other longtime media companies and truly dominate video and the pipes in which they ran.

People have hung up on the telcos before. With little track record, and slow IPTV development and rollout for these companies, this smells like the past all over again. The cards are in place for another massive disconnect.