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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

February 7, 2012 at 10:42 AM

Canadians testing Apple TV, hints at the revolution?

Apple’s new TV is being tested in the labs of two Canadian phone companies, according to a report in the Globe and Mail.

The story offers new clues about Apple’s strategy for its first TV, a gadget that hasn’t been confirmed or seen publicly but has been speculated about for months. Some enthusiasts and pundits are already predicting that it will revolutionize the category.

The Globe and Mail reported that the TV will be launched with a select group of telecommunications companies that already have customers paying for wireless and broadband service.

“They’re looking for a partner. They’re looking for someone with wireless and broadband capabilities,” a source told the paper.

Canada’s Rogers Communications and BCE are in talks to be “iTV” launch partners and are testing the sets in their labs, the story said. It cited a Monday report by Jefferies & Co. analyst Peter Misek suggesting that Apple will partner with Verizon Communications and AT&T in the U.S.

Hmmm.

Perhaps the revolution that Apple’s bringing to the TV is less about its interface and more about changing the business arrangements required to buy and use the hardware.

Apple could be repositioning the TV as a hardware device that’s purchased in tandem with a contract for broadband service, similar to the way its smartphone was initially only available with a data plan.

It’s not clear whether Apple’s marketing force will overcome consumers’ resistance to having the TV become another gadget bound to a monthly carrier bill.

TVs have always been a product that you buy and operate free and clear, without monthly obligations if you’re satisfied with broadcast content. Most people now rely on cable service but the notion of TVs being an autonomous device continues, as evidenced by perpetual frustration with cable services, enduring interest in “cable cutting” and policies mandating free digital broadcasts.

Giving up this sort of liberty would be a high price to pay for the promise of an improved design and user experience.

But selling TVs like cellphones would help Apple overcome what’s likely to be its biggest challenge in the TV business — pricing.

Apple’s TVs are expected to be dramatically more expensive than similar-sized TVs from other manufacturers.

Yet if they’re sold through carriers and bundled with multi-year service plans, the hardware cost can be spread over the life of the contract. That’s what made the iPhone affordable to consumers who are willing to pay the $200 price subsidized by contracts.

Carriers could also entice consumers by bundling the iTVs with packages of video content, such as AT&T’s U-verse streaming service or the video streaming service that Verizon’s developing with Coinstar.

It would get really interesting if the carriers also streamed live cable video content to the sets via the Internet, extending their cable businesses nationally. But licensing arrangements with ESPN and others would likely prevent them from leapfrogging cable franchise areas this way.

Apple TV sets will have other improvements that will seem especially dramatic if you haven’t bought a new TV recently or followed the industry’s hardware advances.

TVs are basically morphing into large computer displays. Processors that run games, applications and video services — plus wireless radios to connect to home networks and nearby devices — are either being built into the set or connected via peripheral devices such as the Xbox 360 and PlayStation 3.

It’s not a stretch to imagine a chipset similar to the iPad’s appearing in a large-screen display. Apple has a knack for releasing new products just as a wave of new computer hardware is cresting, and TV makers are beginning to put multi-core smartphone-type processors into their sets.

Apple TVs will be controllable via iPhones and iPads, a capability that’s now available with connected TV sets and applications from Comcast and other companies.

Apple sets are also likely to use voice and perhaps gestures for input, similar to what Microsoft, Panasonic, LG and others have been doing with the Kinect and other new interface systems.

All new connected TVs connect to app marketplaces similar to iTunes and offer roughly the same core set of video rental and service applications.

Bundling this all together in a sleek package with the latest tiny processors inside is what every TV maker is trying to do nowadays. The trick is keeping the price down.

So what’s left to be revolutionized? The business arrangement.

I’ll bet that was the TV puzzle that was finally “cracked” by the ailing Steve Jobs, according to his biography. The solution: Start selling and servicing TVs like iPhones.

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