While all-IP networks may be attracting all the attention, OpenTV, for one, is not ready to cede the market to pure-play providers. The interactive television and advertising company is confident that hybrid set-top boxes (STBs) are not going anywhere and that telcos are better served not going it alone. Tracy Geist, senior VP of market development for OpenTV, said that sticking with a hybrid STB gives telcos — both new entrants to the IPTV market and the early pioneers — the best of both worlds.

“Telcos never win trying to do everything themselves,” Geist said. Considering that it is a new market for telcos, and one in which the plant remains the same, her advice for the most optimal use of all pieces is to leverage the broadband pipe and do the rest on their own. “Service providers don’t have to carry the burden of having to deliver things like four simultaneous HD streams over a telephony infrastructure,” she said.

This is essentially a partnership like OpenTV customer EchoStar has with AT&T, providing satellite TV services with AT&T’s own terrestrial services including video-on-demand (VOD). This is the only pure model of IPTV on the market today, Geist said, and it utilizes hybrid STBs and a partner. That being said, AT&T is not a customer OpenTV is interested in – at least not anytime soon.

“We try to stay away from AT&T, because they are tied up with Microsoft and will be for awhile,” Geist said. “It may come unwound at some point, but not for awhile.”

For AT&T, which offers both the EchoStar-enabled Homezone and U-Verse, a pure-IP play, one will not necessarily make the other obsolete. If anything, Geist believes EchoStar’s relationship with AT&T will only serve the telco better as it grows its U-Verse service. Having the pre-existing partnership with the satellite company will help to strengthen AT&T’s offering; otherwise, doing both services for too long could result in wasted money for the telco, she said.

While the Microsoft connection undeniably works for the telco giant, she said that Microsoft couldn’t always scale down, leaving the rural market open for a partner that can provide content they can afford to maintain their typically loyal customer base. That’s why when it comes to a desirable customer base, OpenTV is more interested in targeting the tier two and tier three space. These telcos, however, still have a ways to go in building a subscriber base and achieving scalability. As such, a pure-IPTV play service makes even less sense for these smaller providers that can leverage their existing infrastructure instead. Geist pointed to Verizon, a fiber-to-the-home (FTTH) provider, as a model for the only company right now that is really positioned to give the “cablecos” a run for their money.

OpenTV, which works with all the TV players, has software integrated into more than 100 million devices worldwide. The company is focused on balancing technology between the set-top box and headend. On the cable side of business, advertising has been a huge revenue machine for the company, Geist said, noting that an ad being addressable is a really important concept, but they are still working on figuring out where it makes the most sense for that to happen — in the STB or at the headend. Right now, most of the work is centering on the STB level, but Geist believes that the headend is the most logical place to enable the technology to target ads. At the STB level, it becomes a bandwidth game — something all players in the TV space are looking to avoid at all costs. This is the one area where telcos, partnered or not, do have the significant advantage over their cable and satellite competitors.

“Real one-to-one addressability down a unicast pipe is the most effective way to do targeting,” Geist said. “Telcos are actually positioned to do it better [than cablecos] because of the one-to-one addressability they have.”