Come again? One is an RBOC the other is an Internet company.
Ten years ago SBC competed with AT&T. They won and bought them. Three years ago they started competing with the cable companies who annoyed them by selling voice. Now, in retaliation SBC is building fiber around the country to sell video. I was at the TelcoTV conference last week, and according to SBC, major rollouts are due to happen in 2006. SBC is delivering IPTV to you with the help of Microsoft who is delivering the software. By the way, if Microsoft delivering the software, I doubt there will be room in it for Google. Hold that thought.
Let's talk about IPTV for a second. IPTV is the "third platform." The fist was the PC and created massive amounts of wealth around it. The second is the handset, where applications on this platform are exploding today. I think tomorrow, it's IPTV. The definition is nebulous, but you can think of this platform as your TV, or entertainment center. Once the TV is hooked on IP, then it can receive all sorts of applications, only one of which is broadcast video. Your new on demand karaoke machine is another application, as is your new video enabled yellow pages.
To create this platform you need the network, end device, and operating system. SBC controls both the network and end device, Microsoft delivers the software. So how can Google come in?
I claim that it's not a big deal in terms of money to build the network and deliver the end devices.
It's easily doable by a company which generages $500M free cash per quarter, and has shown the ability to think big. Enter Google.
Why are they buying dark fiber, and why are they wiring SF with WiFi? Do the math. If you look at what the nationwide WiFi providers are estimating for costs, and if you look at what the Wimax forum is calculating for deployment costs, you'll come out with a number in the $8-9 range per home passed in the US. That's $1B to blanket every household. That's the network cost.
What about the end device? Is it a $400 TV, or is it a $200 STB with a hard disk? It's neither. Wake up everybody, the new generation isn't watching TV on their TV. They are getting their video on their computers. The end device is a PC or wirelessly connected laptop. The consumer either already has it, or there are cheap ways being developed. Check out the $100 laptop project at MIT here. If you had to give this $100 laptop to 50M people that's only $5B. OK, maybe this laptop won't have all the video capabilities you need, but soon enough it will. We can stipulate that.
Now you got the network and end device for anywhere from $1B to $6B (the latter if you had to eat the entire cost). This is same amout SBC says it'll spend for fiber. But where does the software come from, the software that Microsoft intends to provide SBC? It comes from the network, through http://video.google.com. With Google video, you don't need middleware, you don't need PVR, you don't need video on demand. You search for what you want and you get it. Google's video service is a place where anybody can upload their content (including big name content owners) and either give it away free or sell it. Is this network of content real, is it big, who can it reach?
It's big and reaches everwhere because it empoweres both professional and user-generated content to be democratized. I'll give an example. Have you seen the video of the two asian kids lipsynch the backstreet boys. You can get it here. It's a silly video going around VC circles that's 3 minutes long but funny only for the first 10 seconds. The interesting thing here is that, this video has been downloaded more than 1M times. Two kids make a home video in Asia and it gets downloaded 1M times around the world including on Sand Hill road. I'd say the network is big enough and ready (by the way, I am envious of those two kids. I made better videos than that with my brother 20 years ago, but they are rotting on video tape at my parents house, and these clowns get 1M+ downloads.)
Need more convincing that Google will take on the RBOC's and cable MSOs? Google announced a deal that they will air episodes of UPN's comedy "Everybody Hates Chris", details here. They also hired Internet guru Vint Cerf, as underscored by Scott Bradner here.
Net net, the RBOCs and cable companies may think that there is victory after their battle, but they are about to be washed away by a Tsunami.